A number of legal issues have been thrown up in the wake of the suspension of the Governor of Nigeria’s Central Bank (the “Governor”), by Nigeria’s President and the subsequent arrest of the Governor by Nigeria’s State Security Services. Understandably, there is a lot of emotional reaction from Nigerians because probably for the first time, Nigerians across board and social class felt the direct impact of monetary policy. One of those legal issues, relates to whether or not the Governor can be liable, suspended or removed on account of the failure of the new currency redesign policy.[1] introduced by the Governor, on October 26, 2022. The other question that has arisen is the question as to whether the President can suspend the Governor, in the absence of a specific provision for the exercise of “suspension powers” in the Central Bank of Nigeria Act, 2007 (the “CBN Act”).
To the latter question, we answer in the affirmative. The President ought to be able to suspend the Governor because the ability to suspend is reasonably necessary and incidental to the powers of the President to remove the Governor under the CBN Act. Section 10(2) of the extant Interpretation Act provides that” An enactment which confers powers to do any act shall be construed as also conferring all such other powers that are reasonably necessary to enable the act to be done or are incidental to the doing of it”. This is reasonable. If for instance, there is an allegation of serious misconduct against the CBN Governor, it is not unreasonable for the President to suspend the Governor pending the investigation of the said allegations, in furtherance of the President’s power to remove the Governor under Clause 11(c) of the CBN Act.
To the former question, we answer the question in negative. In other words, the Governor (nor any of his deputies) ought not be held liable on account of the introduction and/or failure of the said currency design policy or any monetary policy, for that matter. This position is consistent with the banking law doctrine of Central Bank Independence ( discussed below). In Nigeria, by virtue of section 52 of the CBN Act , the Governor enjoys near-absolute immunity from legal actions or liability to any person with respect to any action done or omitted to be done, by the Governor, in so far as such actions are done in good faith and within the scope of powers granted to the Governor. Ordinarily, this means that, the Governor may only be liable, if a plaintiff can establish (y) bad faith or (z) that the actions that are subject matter of a legal claim or action against the Governor, are outside the scope of the Governor’s powers under the CBN Act.
One issue that arises here is whether the Governor can plead the defence of immunity in relation to legal action taken against the Governor by his/her employer, in this case the Federal Government, or his/her appointor, the President. If yes, (a) does the Governor enjoy immunity from both civil and criminal actions? (b) does the immunity cover the Governor only when in office or does it survive the tenure of the Governor?
Unlike section 308 of the Nigerian Constitution which provides for the immunity of the President and State Governors, there is no indication in section 52 of the CBN Act indicating the scope or tenor of the Governor’s immunity. It would appear therefore that (x) the Governor is immune from both civil and criminal actions; (y)the said immunity survives the tenure of the Governor; and (z) the said immunity of the Governor can only be broken where prosecution establishes bad faith or ultra vires. The other question that arises here is whether or not, the requirements of bad faith and intra vires are cumulative, within the context of a possible prosecution.
The Doctrine of Central Bank Independence
In Banking law, the doctrine of central bank independence, in essence, is that central bankers ought to be free of political influences in the discharge of their statutory functions and objectives given the sensitive nature of their functions and its impacts on the economy. Within the Nigerian context, the central banking objectives, which the Governor implements are to (a) ensure monetary and price stability; (b) issue legal tender; (c) maintain external reserves to safeguard the international value of the legal tender; (d) promote a sound financial system (e) act as a banker to Federal Government; and (f) provide economic and financial advice to Federal Government.
A review of central bank regulations across the world would reveal atleast 3 (three) broad levels and principles of central bank independence. These include, personal independence, in which case, banking laws would typically provide key protections relating to the appointment, removal, remuneration and tenure of the Governor. Central bankers also typically enjoy operational independence allowing them to exercise discretion with regard to the range of policy and financial tools they deploy to achieve monetary stability or other statutory objectives.[2]
In some countries, central bank independence is a constitutional matter. For instance, Article 282(3) of the Treaty on the Functioning of the European Union ( the “TFEU“) provides that the European Central Bank (the “ECB“) shall be “independent in the exercise of it powers” (See also Article 130 of the TFEU). Effectively, safeguarding the independence of the ECB from political interference as would be the case where a law is enacted by a legislature to curtail independence of a central bank.
As earlier noted, this foregoing principle is generally consistent with international banking law. For instance, Principle 2.5 and 2.6. of “Key Attributes of Effective Resolution Regimes for Financial Institutions” issued by the Financial Stability Board (the “FSB“) asserts that resolution authorities and their staff should be protected against liability for actions taken and omissions made while discharging their duties in the exercise of resolution powers in good faith, including actions in support of foreign resolution proceedings. Similarly, principle 1 of the Core Principles for Effective Supervision, issued by the Basel Committee of Banking Supervision (the “BCBS”), asserts the importance of operational independence and legal protection for bank supervisors.
What Does this mean for Mr. President & Mr. Governor?
A critical review of the facts surrounding the suspension of the Governor within the context of Banking law principles is crucial prior to taking any legal action. Also, it is not impossible that an action carried out by the Governor in good faith and within the scope of his powers may amount to a crime. In this instance, the Governor may be able to successfully plead immunity under section 52 of the CBN Act. Overall, it is important to note that the Governor does not enjoy immunity from removal by the President as per the grounds of removal provided under section 11 of the CBN Act.
[1] The currency redesign policy is widely believed to have failed and triggered in its wake, loss of lives and property across Nigeria.
[2] Banking legislation would also typically provide, as far as is possible, some level financial independence for central bankers to ensure independence from political control.
For additional inquiries, please reach out to your usual Balogun Harold contact or via support@balogunharold.com. The foregoing does not constitute legal advice. Please seek legal advice specific to your situation on any legal issues raised in this legal update.
