EXPLAINER: Was the Minister of Finance right to question the CBN Gov over Naira redesign?

Traditional media and social media were driven into a hysterical mood last Friday when Zainab Ahmed, the Minister of Finance, Budget and National Planning, said the Central Bank of Nigeria (CBN) did not consult the ministry before it announced the redesign of some of the naira notes.

Godwin Emefiele, the CBN Governor, had earlier on Wednesday of the same week announced at a press conference in Abuja that the country’s apex bank has redesigned the N200, N500 and N1000 denomination notes. According to Emefiele, “we (the CBN) have finalised arrangements for the new currency to begin circulation from December 15, 2022”. He stated that the bank has the approval of President Muhammadu Buhari and added that the new legal tender will continue to circulate and exist with the existing one, which shall cease to be legal tender from 31 January 2023.

But when asked by the Senate Committee on Finance about the short and long-term implications of the redesign of the aforementioned naira notes, Ahmed stunned her audience, saying: “Distinguished senators, we were not consulted at the Ministry of Finance by CBN on the planned naira redesigning and cannot comment on it as regards merits or otherwise.” The minister subsequently urged the senators to “invite the CBN governor for required explanations” concerning the proposed policy.

Expectedly, the comments by Ahmed elicited varied reactions from Nigerians. Many Nigerians lambasted Emefiele and President Buhari for taking such a decision without informing the Finance Minister, who, by virtue of her position, heads the country’s fiscal management. Some commentators, especially on social media, claimed that the CBN Governor acted ultra vires (beyond his power) and that the president supported him (Emefiele) in breaching the relevant laws.

Well, the Nigerians who blasted the President and CBN Governor may be forgiven for their outbursts as they have witnessed the dichotomy within the current administration. There have been documented instances of officials and agencies of some agencies doing something and their counterparts from other agencies working at cross-purpose and countering them in public, thereby portraying a picture of dysfunction. Therefore, the tongue-lashing and queries by Nigerians are only natural.

However, many Nigerians seem not to read enough about the laws and regulations of the country and, therefore, ignorantly enounce uninformed comments and pass them on as logical interventions in the public space. While it is true that Ahmed, as Finance Minister, sits on the board of the CBN via the ministry’s Permanent Secretary, the Minister or the CBN Board are not constitutionally empowered to make any binding decision on the country’s legal tender, the Naira.

As Emefiele stated at his press conference, the management of the CBN (Governor and the four Deputy Governors) drew its power to redesign the selected Naira notes through the CBN Act, 2007. The Act provides that the CBN shall be a fully autonomous body in discharging its functions under the Act.

Emefiele announced sections 2, 18 and 19 of the act as the statutory provisions of the Act that empowered the bank to make the decision. A detailed look at some of the mentioned provisions and other provisos of the law should unequivocally clear any misconception regarding who is responsible for announcing the launch of currencies in Naira and issuing them.

Section 2(b) of the Act states that:

The principal objects of the Bank shall be to –

…(b) issue legal tender currency in Nigeria

The CBN is, therefore, the sole authority empowered by law to issue the legal currency of Nigeria. The apex bank is administered by its management, comprising the Governor and the four Deputy Governors, as stated in Section 7 of the Act.

Some commentators have been superficially harping on the latter part of Section 7, which states that the Governor or one of the Deputy Governors assigned for the day-to-day management of the bank’s operations “shall be answerable to the Board for his acts and decisions”. But who are the members of the board? Section 6(2) stipulates who they are:

The Board shall consist of –

(a) a Governor who shall be the Chairman;
(b) four Deputy Governors;
(c) the Permanent Secretary, Federal Ministry of Finance;
(d) five Directors; and
(e) Accountant-General of the Federation.

But see what Section 6(3) states about the functions of the Board.

The Board shall be responsible for –

(a) the consideration and approval of the annual budget of the Bank;

(b) the approval of the audited and management accounts and the consideration of the management letter from the external auditors;

(c) the formulation and implementation of exchange rate policy;

(d) making recommendation to the President for the appointment of auditors in accordance with section 49 of this Act, the provision of the necessary facilities and the rates of remuneration;

(e) the establishment and closing of branches and currency centres; and

(f) carrying out of such other activities as are necessary and expedient for the purposes of achieving the objectives of the Bank.

Having perused this quoted section, it is not mentioned anywhere that the board shall or must, as a priority, have the final say on the redesigning or issuance of the Naira.

Section 18 is another interesting section for Nigerians to look at. This section reaffirms its stance of Section 2(b) that the apex bank is the only authority licenced to print and issue Nigeria’s legal tender. It states:

The Bank shall –

(a) arrange for the printing of currency notes and the minting of coins;

(b) issue, re-issue and exchange currency notes and coins at the Bank’s offices and at such agencies as it may, from time to time, establish or appoint…

Section 19(1) is the area where the faux economists, corporate governance experts and public commentators have raised a hullabaloo. They insist that this section of the act states that the CBN Governor and the bank’s management should get the approval of the bank’s board. But is it so?

19 (1) The currency notes and coins issued by the Bank shall be –

(a) in such denominations of the Naira or fractions thereof as shall be approved by the President on the recommendation of the Board; and

(b) of such forms and designs and bear such devices as shall be approved by the President on the recommendation of the Board.

One does not need to be a Professor of English to understand that this section does not mandate the CBN management to get the express approval of the board before deciding to change the currency. The word “recommendation”, according to the English dictionary, is “a suggestion or proposal as to the best course of action”. The word, at most, suggests a piece of advice, counsel, proposal or guidance that the board could provide, but not an approval.

Section 20 of the act virtually negates the argument by the Finance Minister and her horde of supporters. It states:

20 (1) The currency notes issued by the Bank shall be legal tender in Nigeria at their face value for the payment of any amount.

(2) The coins issued by the Bank shall, if such coins have not been tampered with, be legal tender in Nigeria at their face value up to such amount or amounts as may be determined, from time to time, by the Bank.

(3) Notwithstanding subsections (1) and (2) of this section, the Bank shall have power, if directed to do so by the President and after giving reasonable notice in that behalf, to call in any of its notes or coins on payment of the face value thereof and any note or coin with respect to which a notice has been given under this sub-section, shall, on the expiration of the notice, cease to be legal tender, but, subject to section 22 of this Act, shall be redeemed by the Bank upon demand.

This section does not, at any instance, mention the board, and going by the explanation of the CBN Governor that there is a “large volume of money outside the banking system”, it means that the face value of the currency has depreciated as there is a significant hoarding of banknotes by members of the public, which may lead to an increased risk to financial stability if not tackled.

It is on this premise that the CBN Governor and the bank’s management team invoked their constitutionally-granted powers to write and seek the President’s approval to redesign the specified denominations of the Naira. So, while as a duty of courtesy, Emefiele ought to have informed Ahmed of the apex bank’s decision, he or the bank is not obligated to inform her under the law.

And who else to buttress this point other than Professor Kingsley Mogahlu, a former deputy governor of the CBN? As he explained, there are three issues under the CBN Act, which allows the bank to seek the approval of the President directly.

Finance Minister Zainab Ahmed’s comment to @nassnigeria that she was not aware of the Naira redesign by @cenbank should not mislead anyone into thinking the CBN owes her that kind of information. The Bank only needs the approval of President @MBuhari for this particular exercise.

— Kingsley Moghalu (@MoghaluKingsley) October 29, 2022

It received that approval. There are only three issues on which, in the CBN Act of 2007, the Bank should obtain external authorization, and only from the President of Nigeria, for its operations: 1. Any alterations to the legal tender (the Naira); 2. any investment of the Bank’s

— Kingsley Moghalu (@MoghaluKingsley) October 29, 2022

funds outside Nigeria; 3. the Bank’s annual report. Outside of these, the only approving authorities for CBN operations are its Committee of Governors (note the “s”) consisting of the Governor and the four Deputy Governors , and the Board of Directors of the CBN, which includes

— Kingsley Moghalu (@MoghaluKingsley) October 29, 2022

the Governor, the four Deputy Governors, and 7 external members which include the Permanent Secretary of the Federal Ministry of Finance (😀) and the Accountant-General of the Federation.

— Kingsley Moghalu OON (@MoghaluKingsley) October 29, 2022

President Buhari then literally quashed the argument of his chief fiscal officer. Speaking in an interview with Hausa language radio journalists over the weekend, he confirmed that he approved the CBN’s request to redesign the notes for purely economic reasons.

“People with illicit money buried under the soil will have a challenge with this but workers and businesses with legitimate incomes will face no difficulties at all.” — President @MBuhari

— Presidency Nigeria (@NGRPresident) October 30, 2022

Ignorance, the popular proverb says, is bliss.