LAGOS, Nigeria (VOICE OF NAIJA)-The International Monetary Fund (IMF) has urged the Central Bank of Nigeria (CBN) to terminate the regulatory forbearance granted to Deposit Money Banks (DMBs) during the COVID-19 pandemic.
It also warned the Federal Government against proposed amendments to the Act establishing the apex bank, emphasizing the need to preserve the autonomy of the central bank.
The Fund’s stance was detailed in the Article IV Staff Consultation Report of the Board of Governors, a global organization document released on Thursday in Washington DC, United States.
While the report did not provide details on the waivers granted to the banks, it emphasizes the significance of closely monitoring these institutions for financial sector risks.
The report read, “Directors emphasised the importance of close monitoring of financial sector risks. They supported the increase in the minimum capital for banks and urged the CBN to unwind the regulatory forbearance introduced during the pandemic. Directors acknowledged the recent improvements in the AML/CFT framework and called for sustained action to exit the FATF grey list. They supported the authorities’ efforts to foster financial inclusion and deepen the capital market.”
The IMF emphasized the need to strengthen the legal and operational framework governing monetary policy in Nigeria.
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The IMF also expressed concern about the lack of a clear hierarchy among the objectives of the CBN, along with the involvement of government representatives on the Board of Directors and potentially the Monetary Policy Committee, as stipulated in the 2007 CBN Act.
According to the IMF, this situation undermines the effectiveness of monetary policy operations and introduces ambiguity regarding accountability to the public.
Furthermore, it emphasized the necessity to modernize the 2007 CBN Act as proposed by the 2021 Safeguards Assessment. This modernization aims to prioritize price stability, enhance central bank autonomy, and improve governance structures. Additionally, it highlighted the significant dependence on monetary financing for the fiscal deficit.
The report read in part, “Directors supported the authorities’ intentions to shift to an inflation targeting regime and recommended strengthening central bank independence and communication to ensure a successful transition.
“They recommended caution regarding amendments to the Central Bank of Nigeria Act that might weaken the central bank’s autonomy. They encouraged further progress in implementing the outstanding recommendations from the 2021 safeguards assessment.
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“Directors commended the authorities for restarting the cash transfer programme and emphasised the urgency of scaling it up to mitigate acute food insecurity. They welcomed the authorities’ work on a comprehensive revenue mobilization strategy including boosting tax enforcement and broadening the tax base.
“They stressed the importance of keeping a tight monetary policy stance to put inflation on a downward path, maintaining exchange rate flexibility, and building reserves. Directors welcomed the removal of foreign exchange market distortions and encouraged the authorities to continue improving the functioning of the FX market, including by adopting a well-designed FX intervention framework.”