The Central Bank of Nigeria is the apex regulator Nigeria’s Banking and Finance sector, having a wide jurisdiction over the licensing, operation and even the winding up of service providers within this sector.

The CBN Act was passed in 2007 and effectively repealed the CBN Act of 1991, but there’s still not enough written on the piece of legislation creating this very vital government agency.

This article will thus be looking at some of the most notable provisions of this act one by one and their effects on Banking and Financial services in Nigeria today.

These provisions are as follows :-

Establishment :- The CBN in its opening section is established as a corporation having perpetual succession, a common seal, and it can sue and be sure in its corporate name. Also, the CBN is an independent body in the discharge of its functions, meaning that it is immune to external oversight or intrusions.

Objects :- Under the act, the CBN was created for the following objects :

– Ensuring monetary & price stability in Nigeria.

– The issuance of legal tender(currency) in Nigeria.

– The promotion of a sound financial system in Nigeria.

– The maintenance of external reserves to safeguard the international value of the Nigerian legal tender.

– Acting as a banker and provider of economic and financial advice to the Federal Government.

– The determination of the Naira exchange rate.

– Acting as a banker to other banks in Nigeria.

Management :- The CBN is managed on a day-to-day basis by a governor or in his absence, one of the deputy governors nominated by him and shall be answerable the CBN Board of Directors for his acts & decisions.

The CBN Board of Directors :- This board is responsible for the policy and general administration of the affair & business of the CBN. This board is made up of –

– The CBN Governor who shall also be the chairman of the board.

– 5 deputy governors of the CBN.

– The permanent secretary, the Federal Ministry of Finance.

– 5 directors.

– The Accountant-General of the Federation

CBN Director Appointments :- The 5 CBN directors shall be appointed by the President of Nigeria subject to confirmation by the Senate and in making these appointments, the president shall have due regard to fair representation in line with the principle of Federal Character. 

These directors shall hold office for 4 years and be eligible for a reappointment term of another 4 years.

The Monetary Policy Committee :- This is a policy created by the CBN Act for the purpose of facilitating the attainment of the objectives of price stability and to support the economic policy of the Federal Government. This committee is made up of :-

– The CBN Governor

– The 4 deputy CBN governors

– 2 members of the board of directors of the CBN.

– 3 members appointed by the President of Nigeria.

– 2 members appointed by the CBN governor.

The CBN Board Secretary :- This CBN secretary is basically a company secretary of the CBN appointed by its board and is responsible to the board through the governor.

The secretary must be a lawyer of at least 10 years cognate experience and is responsible for :-

– Convening meetings of the CBN Board on the authority of its chairman.

– Recording the minutes of all meetings of the board and such other meetings as the board may direct.

– Acting as a secretary to any committee of the board.

– Keeping in safe custody the common seal is the bank.

– Maintaining and keeping minute books and a register of the directors of the bank.

Prohibited Activities :- Under the CBN Act, the CBN is not to engage in activities that include –

1. Trading activities or having interests in any commercial, agricultural or industrial undertaking except as provided under the act.

2. Purchasing shares of any corporation or company including those of any banking institution except as provided under the act.

3. Granting loans upon the security of any shares.

4. Granting secured advances except as provided under this Act.

5. Opening accounts for or accepting deposits from persons except as provided under the act.

Services to the Federal Government :- The CBN under the act is entrusted with rendering the following services to the Federal Government –

1. Receiving and disbursing Federal Government funds and keeping account of them.

2. Handling Federal Government banking and foreign exchange transactions.

The CBN can also act as a banker to state and local governments in Nigeria.

The Financial Services Regulations Coordinating Committee :- This is a committee created by the CBN Act and which is made up of –

1. The CBN Governor

2. The Managing Director, Nigerian Deposit Insurance Corporation

3. The Director General, Securities and Exchange Commission (SEC)

5. The Registrar General, The Corporate Affairs Commission (CAC)
6. A representative of the Federal Ministry of Finance not below the rank of a director.

The purposes of this Committee includes –

1. Coordinating the supervision of financial institutions especially conglomerates.

2. The reduction of arbitrage opportunities usually created by differing regulations and supervision standards among regulators in the economy.

3. Deliberating on such other issues as may be specified from time to time.

Payment & Settlement Systems :- The CBN under this Act shall facilitate the clearing of cheques and credit instruments for banks carrying on business in Nigeria and for this purpose, the bank shall at any appropriate time establish houses in premises provided in such places as the CBN may consider necessary.

Tax Exemption :- The CBN under this Act is exempted from the payment of income tax under the Companies Income Tax Act (CITA) or any subsequent amendment as well as exempted from any tenement rate, ground rent or such other property tax imposed under any legislation dealing with real property.

Exemption from the Jurisdiction of the Companies and Allied Matters Act (CAMA) :- The CBN is exempted from any provision of the Companies and Allied Matters Act or any subsequent amendments.

Liquidation :- The CBN under this Act shall not be placed in liquidation except pursuant to legislation enacted in that behalf and only in the manner directed by that legislation.

The federal government of Nigeria has released a total of N625.43 billion as part of 13 percent oil derivation, subsidy and Sure-P refund to nine oil producing states.

In a statement titled: Oil Derivation, Subsidy and Sure-P Refunds: Nine Oil Producing States Receive N625.43bn in Two Years; N1.1trn Still Outstanding, which was signed by the Senior Special Assistant to the President on Media & Publicity, Garba Shehu, the federal government shared how the fund was disbursed and promised to ensure that the outstanding N1.1trn is paid to the respective states.

I have approved payments totalling 1.7 Trillion Naira to 9 oil-producing States,as refunds owed them by @NigeriaGov. As a matter of honour, all debts owed States must be paid, regardless of political affiliation. N625B has been paid so far; the balance will be paid in due course.

— Muhammadu Buhari (@MBuhari) December 2, 2022

“The states that received the refunds dating from 1999 to 2021 are Abia, Akwa-Ibom, Bayelsa, Cross River, Delta, Edo, Imo, Ondo and Rivers.

Data obtained from the Federation Account Department, Office of the Accountant General of the Federation, show that a total of N477.2 billion was released to the nine states as refund of the 13 percent derivation fund on withdrawal from Excess Crude Account (ECA) without deducting derivation from 2004 to 2019, leaving an outstanding balance of N287.04 billion.

The States also got N64.8 billion as refund of the 13 per cent derivation fund on deductions made by NNPC without payment of derivation to Oil Producing States from 1999 to December.

The benefitting States still have an outstanding balance of N860.59 billion windfall from the refunds, which was approved by President Muhammadu Buhari.

According to the figures, under the 13 percent derivation fund on withdrawal from ECA without deducting derivation from 2004 to 2019, Abia State received N4.8 billion with outstanding sum of N2.8 billion, Akwa-Ibom received N128 billion with outstanding sum of N77 billion, Bayelsa with N92.2bn, leaving an outstanding of N55 billion.

Cross River got a refund of N1.3 billion with a balance N792 million, Delta State received N110 billion, leaving a balance of N66.2 billion, Edo State received N11.3billion, with a balance of N6.8billion, Imo State, N5.5 billion, with an outstanding sum of N3.3 billion, Ondo State, N19.4 billion with an outstanding sum of N11.7bn while Rivers State was paid 103.6 billion, with an outstanding balance of N62.3 billion.

The States were paid in eight installments between October 2, 2021 and January 11, 2022, while the ninth to twelfth installments are still outstanding.

On the 13 per cent derivation fund on deductions made by NNPC without payment of derivation, the nine oil producing States were paid in three installments this year, with the remaining 17 installments outstanding.

Under this category, Abia State received N1.1 billion, Akwa-Ibom, N15 billion, Bayelsa, N11.6 billion, Cross River, N432 million, Delta State, N14.8 billion, Edo State, N2.2 billion, Imo State, N2.9, billion, Ondo State, N3.7 billion, and Rivers State, N12.8 billion.

Meanwhile, the benefitting States shared N9.2billion in three installments in April, August and November 2022 as refunds on the 13 per cent derivation exchange rate differential on withdrawal from the ECA.

The three largest benefitting States were Akwa Ibom (N1.6billion), Delta State (N1.4billion) and Rivers State (N1.32billion).

Similarly, all the nine states received N4.7 billion each, totaling N42.34 billion as refunds on withdrawals for subsidy and SURE-P from 2009 to 2015. The refund, which is for all the states and local government councils, was paid on 10th November, 2022.

The Federation Account also paid N3.52billion each as refund to local government councils on withdrawals for subsidy and SURE-P from 2009 to 2015 on the same date in November.

President Buhari considers it a matter of honour and decency that debts owed to states or anyone for that matter be repaid, and in time without regards to their partisan political affiliations.

The President will continue to render equal service to all the states of the federation and an acknowledgment of this by Governor Nyesom Wike of Rivers State and the others is not out of place.

The refunds to the oil producing states will continue,” the statement said.

However, the announcement has sparked fresh criticism of the state governors who are said to be largely responsible the development deficiencies in Nigeria, particularly in human capital development.

Recently released report by the Nigeria Bureau of Statistics shows that 133 million Nigerians are in multidimensional poverty. This includes people living in the oil-producing states – receiving the 13 percent oil derivation fund. Some of them ranked among the most poverty-stricken states in Nigeria.

President Muhammadu Buhari had this week blamed the governors for the rising spate of poverty in the country. He said that the governors are not doing enough to alleviate poverty in their respective states, supporting the belief that most of the funds derived by the states are being misappropriated by their chief executives.