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IMF warns against stripping CBN of its autonomy


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Image:The International Monetary Fund (IMF) Logo

 

May 25 2012

 

 

The International Monetary Fund (IMF) on Thursday added to views of many experts in advocating the complete autonomy of the Central Bank of Nigeria (CBN) without which the apex bank would lose effective control over the management of monetary policy.

The institution cautioned that the planned move by the National Assembly to strip the apex bank of its current independence would particularly mean inefficiency in discharging its responsibility of maintaining price stability and therefore not in the best interest of the Nigerian economy.

The lawmakers have commenced the amendment of some portions of the CBN Act 2007, which confers operational autonomy on the apex bank with the bill to this respect already scaling through the second reading at the House of Representatives.

But many experts have strongly opposed this move, arguing that removing the autonomy of the apex bank portends danger for the economy and falls short of global practices.

W. Scott Rogers, IMF Country Chief/Senior Resident Representative for Nigeria, cautioned on Thursday that Nigeria has been able to enjoy robust monetary policy due to the independence of the apex bank that allows it to respond quickly to managerial policy.

Rogers spoke at an interactive session with the media on the recently published IMF’s regional economic outlook for sub-Sahara Africa which noted that the region has so far maintained strong growth in the face of a hesitant world recovery, albeit with differences in performances among country groups.

His words, “The IMF has always argued for strong independence of the central bank. It provides them with the autonomy to depoliticise monetary policy actions. Without a strong central bank you will not have an independent monetary policy. Everything then depends upon the budget alone and as you can see now, without the central bank’s ability to do what it is doing, the results you are seeing won’t be there. It is primarily because of the central bank’s ability to tighten monetary policy which is the right thing to do.

“It is important for the central bank to have the autonomy to hire the people they need and to undertake modernisation that they need in order to manage payment system effectively. They should be able to do that without the fear of being penalised because they took an unpleasant decision on interest rate policy or because they decided they needed to close a bank. Those are decisions they need to take constantly”.

On economic performance of sub-Sahara Africa region, he observed that the regional output rose by 5 percent in 2011 with an anticipated slight growth in 2012.

It noted that the rise in global food and fuel prices contributed to inflationary pressure in many countries, but added that food prices across the region were significantly affected by local supply conditions.

For Nigeria, IMF Country Representative advocated a combination of fiscal tightening and structural reforms to achieve the desired economic growth.

“With fiscal tightening and structural reforms, Nigeria can simultaneously achieve low inflation, low nominal interest rate; rosy international reserves and fiscal exchange stability”, he stressed.

 

 

 

Article credit: BUSINESS DAY Newspaper

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