Also, the nature of the intervention was faulty. Until the initial change of board members by the bank and CBN’s query and subsequent reversal of the decision, nobody knows the state of health of the bank. That is capable of eroding public confidence in the financial system. Most people do not understand the message the decision must have sent to the international community.
Sadly, it is difficult to substantiate these claims because the CBN has no audited accounts, showing its operations. Every item of forbearance has an impact on the balance sheet of the CBN and, by implication, the balance sheet of the country. Regarding other climes, in Somalia, forbearance must be discussed at the parliament. This is because the resource deployed is public funds and cannot be used the way the central bank wishes. Placing a bank on forbearance could trigger a moral hazard.
To maintain stability, you must understand the difference between supervision and regulation. Supervision is a real-time process of enforcing compliance. Once there is an impression that you hide the true state of the financial system, you run the risk of overtly colluding with the establishment. Being in their meetings makes no difference because no operational action takes place there. Besides, the CBN is entitled to a comprehensive copy of what transpires at the meeting. Attending the meeting will only increase the air of ‘bossiness’ of the CBN.
Most importantly, we need to analyse the state of health of the CBN to be sure that the country is not bankrupt. There is an argument that our inflation is cost-push and has little to do with money supply? How true is this? What percentage of inflation comes from the money supply? CBN are not published. The monetary authority should be setting the pace for economic growth while the politicians are busy building their political structures. The CBN plays a political role than the technical responsibility it is saddled with.
I supposed the Edo State Governor, Godwin Obaseki, whose state is a beneficiary of this, was propelled by the gods to save the country of the disaster waiting to explode. The closest legal support to what the CBN is doing is Section 30 of its Act, which grants it the power to provide temporal budget support to the Federal Government, not the state governments. And this must be paid within the fiscal year before any other request can be granted.
What? So do you have central bank? Please don't drive us pumpkin!!!