RETHINKING THE CBN’S MANDATE
Malaysia holds lessons for Nigeria, writes UCHE UWALEKE During a recent academic study tour of key financial institutions in Malaysia with some of my Ph.D students from Nasarawa State University,
The Central Bank of Nigeria (CBN) may benefit from lessons drawn from Malaysia's Central Bank of Malaysia (BNM), suggests Uche Uwaleke, a Nigerian academic who recently toured Malaysia's financial institutions. At BNM, officials emphasized sustainable economic growth as central to the Bank's mandate, with monetary stability as a key means to that end, and enhancing financial well-being of households and businesses as a strategic thrust.
Uwaleke argues that Nigeria should reconsider whether monetary stability should be the sole focus of the CBN or if it should also be tasked with contributing to sustainable economic growth. While coordination between monetary and fiscal authorities is essential, a statutory mandate alone may not ensure sustained focus on broader developmental concerns.
An amendment to the CBN Act of 2007, which explicitly includes sustainable economic growth as an overarching objective, could help maintain a balance between monetary stability and broader developmental goals.
Drawing parallels with the Federal Reserve in the United States, Uwaleke notes that a dual mandate including price stability and maximum employment has not undermined the credibility or independence of the central bank. For Nigeria, with its structural challenges such as inadequate productive capacity, limited access to finance, weak industrialization, and high unemployment, incorporating developmental implications of monetary and financial policy may be even more pertinent.
Moreover, Nigeria's recent experience with development finance under the previous CBN administration has raised questions about the boundaries between monetary policy, fiscal policy, and credit allocation. While these concerns should be addressed, they should not deter Nigeria from considering a framework that recognizes the developmental role of the central bank.
In conclusion, Uwaleke contends that a developing economy like Nigeria stands to gain from a central bank that recognizes its broader developmental impacts. An amendment to the CBN Act to this effect could provide a statutory framework for the CBN to consider how its policies contribute to sustainable economic growth, productive capacity, employment, and the financial well-being of Nigerian citizens.
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