Naira Notes

During the foregoing week, the House of Representatives Committee on Banking and Currency joined the debate on the proposed restructuring of the national currency. Unlike in the past, the lawmakers refrained from taking a position on the controversy and instead chose to hear from the apex bank first.   Onwuka Nzeshi examines the new approach and the likely reason for the  approach

The Central Bank of Nigeria (CBN) recently unveiled plans   to restructure the Naira and introduce a new N5000 banknote into the economy. The proposed   high denomination   banknote, according to the CBN, would bear the image of the National Assembly on one side and the portraits of three heroines of Nigeria’s struggle for independence and democracy on the other side.

As expected, the   new policy has generated a lot of debates from a cross section of the public. The Nigerian populace   has become polarised as many individuals and groups have pitched their tents on different   sides of the policy.

Special Adviser to the President on National Assembly Matters, Senator Joy Emodi was among the first prominent Nigerians to endorse the project. Emodi, who hailed the bid to restructure the nation’s currency, described it   as a boost to democracy and gender equality in Nigeria .

According to her, the inclusion of the National Assembly in the design of the new banknote was an eloquent testimony of the importance the current administration attached to the parliament.

“The National Assembly of Nigeria is not only the symbol of democratic governance in the nation but is indeed a micro-Nigeria in composition.

“The representation of the National Assembly on the new currency is a further confirmation of Mr President’s continued recognition of the parliament as the embodiment of the people’s sovereignty exercised through their elected representatives. This also shows that Mr President appreciates the efforts of the National Assembly in deepening democracy and boosting the social and economic development of Nigeria,” Emodi said.

On the inclusion of the portraits of Mrs Funmilayo Ransome-Kuti, Madam Margaret Ekpo and Hajia Gambo Sawaba on the proposed new banknote, Emodi said the three women deserved the honour having contributed immensely to the development of Nigeria during their life time.

“This move is historic for Nigerian women as it marks the very first time any government, whether military or civilian, will bestow them (women) with this magnitude of recognition and respect. Also, the unprecedented appointment of more women into the federal cabinet and other key positions in government not only affirms that Mr President can be trusted to keep his promise to elevate women to where they rightly belong in the scheme of things,” she said.

The remembrance of these women long after their death, Emodi said, should serve as a lesson to Nigerians, especially the political elite, that posterity will reward individuals as heroes or villains, depending on the roles they play during times of national challenges.

A few days later, the House of Representatives joined the fray but rather than endorsing or condemning it, the lower chamber of the National Assembly summoned the Governor, Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi over the proposed project.
Chairman, House Committee on Banking and Currency, Hon. Chukwudi Onyereri who issued the summon, disclosed   that  contrary to its expectation, the Central Bank of Nigeria  did  not communicate its plans for the currency restructure project  to the House of Representatives.

Onyereri said that the lower chamber would not take a position on the matter until it had been fully briefed on the policy.
He said that though the House fully respects the principle of separation of powers enshrined in the Constitution; the autonomy of the Central Bank as provided by the Central Bank Act 2007 as well as the Banking and Other Financial Institutions Act, the Banking and Currency Committee had a responsibility to the Nigerian People to engage the executive arm of government on issues that may have far reaching consequences on the populace and the national economy.

In its proposed engagement with the CBN Governor, Onyereri disclosed, the Committee will be considering the cost of implementing the currency restructure project, the possible inflationary trend that the policy may trigger, the currency devaluation implications, the fate of the cashless policy and other relevant factors in the economy.

He said that while the Committee on Banking and Currency had been briefed on the Cashless Policy recently introduced by the Central Bank, it was unclear whether the introduction of a higher denomination banknote would not contradict the earlier policy.

“As representatives of the people, with particular oversight responsibility over the banking industry, we have set up the processes to immediately address the matter. In doing so, we will rely strictly on the provisions of the Constitution of the Federal Republic of Nigeria, the Central Bank Nigeria Act of 2007 as amended, the Banking and Other Financial Institution Act, as well as other requisite legal and regulatory instruments.

“The House Committee will invite the management of the Central Bank in an effort for the Committee to know whether the Central Bank is still pursuing the cashless policy, and if they are how this higher currency note compliments the cashless policy. Or if it contradicts the Cashless Policy, what are the next steps?

“The cashless and wireless payment system, we understand, is designed to reduce the actual cash in circulation while not affecting the volume of money available to citizens; this simply means that the Cashless Policy is not a monetary policy instrument used to reduce cash in circulation, as it leaves the cash available in the system unaffected while at the same time substantially reducing the volumes of currency in circulation by converting currency to Electronic Payment Codes and systems.

“We understand that the Cashless Policy encourages payment with a Credit Card, Debit Card or Mobile Money, which means a citizen will avoid the high risk of travelling with currency for large ticket transactions. This is the direction the Central Bank has been following. The understanding is that carrying less cash is in every body’s interest as it reduces the risk, it reduces the money spent on printing currency and it reduces the money spent on movement of currency as well as on security and safe guards for large consignments of currency,” Onyereri said.

He explained that the intervention of the House was to ensure that the CBN followed due process and adhered to the rule of law in its assignments.

According to him, the Nigerian people deserve to know whether there is a short, mid-term and long-term strategy that will bring any benefits to the system as a result of the introduction of the N5000 note.

He assured that the House Committee on Banking and Currency will keep an open mind while engaging the management of the Central Bank in order   to have a full picture of the proposed project and the vision behind it.

“Our Constituents have already inundated us with reports, petitions and write ups with arguments on both sides of the Policy divide, but we believe that at this time the most effective and prudent response for the Committee would be to get a full briefing on the Policy from the Central Bank after which we will take a position,” he said.

The New Approach
  This position taken by the House   is a clear departure from its   past approach to issues concerning the Central Bank of Nigeria . The House   had in the past always taken a tough stance on issues of this nature and had been at daggers drawn with the Governor of the CBN, Mallam Sanusi Lamido Sanusi on several occasions.

In the wake of the global meltdown and the distress that rocked the   banking sector, Sanusi incurred the wrath of the lawmakers when he   sacked the management of five banks, appointed new management boards   and announced the injection of N620 billion into the ailing banks.

The House   disagreed   sharply with   Sanusi and challenged his powers to take the far reaching decisions he took in the banks. They acknowledged the role of the CBN as the regulator over the sector but argued that the apex bank had over stepped its bounds.

Not too long ago, the altercation ensued between the House and the Central Bank following the donation of N100 million to victims of bomb explosions in Kano and largesse of N25million to other bomb victims in Madalla , Niger State. About the same time, the House equally dragged Sanusi to the podium to explain the rationale behind the financial interventions the apex bank made in agriculture, manufacturing and sports.

The parliamentarians  said that while the lending to distressed banks, donations to victims of bomb explosions and lending to private sector organisations may be necessary, the legality of these actions were questionable as long as they had no legislative imprimatur. The lawmakers   accused the CBN of operating on a “blank cheque” and deliberately refusing to follow the due process of the law as enshrined in the 1999 Constitution.

The House argued   that even in the United Kingdom and United States where their apex banks intervened in their banks and other sectors of their economy, they did so with the active participation of their parliaments.

According to the lawmakers, the CBN was hiding under the loophole of institutional autonomy to sideline the parliament and usurp its functions to appropriate funds for the federation. They argued   that there must be a distinction between autonomy and accountability.

Cash Transaction Limitation
In July last year, the  House of Representatives  summoned the Governor of the Central Bank  over the controversy that  trailed  the proposed policy of the apex bank to limit daily cash withdrawals by bank customers to one hundred and fifty thousand naira (N150,000.00) for individuals and one million naira(N1m) for corporate organisations.

The cash withdrawal limitation policy, according to the CBN, was designed to be a prelude to the entrenchment of a cashless economy, but it was   roundly condemned by a cross section of Nigerians particularly politicians who claim that the country was not prepared for the programme. Sanusi was also summoned by the House to answer questions on the equally controversial policy of Islamic banking, an issue that pitched him against the Christian Association of Nigeria (CAN) and raised more questions than answers on the constitutional status of Nigeria as a secular state.

In the face of all these accusations, Sanusi   argued that all its actions were legal and in conformity with the CBN Act as enacted   by the National Assembly. At some point, the   confrontation came to a headway when the    Minority Leader of the House, Hon.  Femi Gbajabiamila (ACN Lagos) dragged the Governor, Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi before a Federal High Court over the insistence of the apex bank that it had powers to inject funds into ailing commercial banks without due authorisation and appropriation of the said funds by the National Assembly.

The suit which was initiated by Gbajabiamila in his private capacity has initiated this civil proceedings in his private capacity asked the courts to determine   the following questions:

“Whether the Constitution of the Federal Republic of Nigeria 1999authorises or otherwise empowers the 1st and 2nd Defendants/Respondents (CBN and Sanusi) or any of their privies including the 3rd Defendant/Respondent (Aondoakaa) to raise money by printing and unilaterally spending the money so raised in their exclusive discretion without submitting the same to the National Assembly for Appropriation or otherwise obtaining the approval of the National Assembly.

“Whether the Central Bank of Nigeria Act authorizes or otherwise empowers the 1st and 2nd Defendant/Respondent or any of their privies, including the 3rd Defendant/Responent to raise money by printing and unilaterally spending the money so raised in their exclusive discretion without submitting the same to the National assembly for Appropriation or otherwise obtaining the approval of the National Assembly.

“Whether the Banks and Other Financial Institutions Act authorizes or otherwise empowers the 1st and/or 2nd Defendant /Respondent or any of their privies, including the 3rd Defendant /Respondent to raise money by printing and unilaterally spending the money so raised in their discretion without submitting the same to he National assembly for Appropriation or otherwise obtaining the approval of the National Assembly.”

The 1999 Constitution, Chapter 5 Section E titled “Powers and Control over Public Funds” stipulates that: “No monies shall be withdrawn from any public fund of the Federation, other than the Consolidated Revenue Fund of the Federation, unless the issue of those moneys has been authorised by an Act of the National Assembly” while Section 80 (4) states that : “No moneys shall be withdrawn from the Consolidated Revenue Fund or any  other public fund   of the Federation except in a manner prescribed by the National Assembly.”

Precedence
In all these   altercations   between the CBN and the House, the later had always been on the offensive but the   apex bank   had always managed to   walk   away without any penalties.  In some cases, the apex bank   succeeded in turning the heat back on the lawmakers by puncturing the usual argument that the bank was going beyond its legal limits. 

The fear of being defeated in the current engagement appears to have influenced the current position of the House to tread softly.
The lesson which the lawmakers appear to have learnt in their long running battle with the CBN is never launch an attack too quickly.  Instead of launching another offensive that might fizzle out when the CBN advanced its own position on the currency restructure project and the proposed N5000 bank note.