On Friday, human rights advocate, Femi Falana, announced his legal action against the Central Bank of Nigeria (CBN), challenging what he deems an “illegal” floating of the Naira.
The move may put the CBN’s leadership, particularly the acting CBN governor, Folashodun Adebisi Shonubi, in a precarious legal position.
Falana’s lawsuit takes direct aim at the CBN’s decision to float the naira, a strategy he believes runs afoul of established legal frameworks.
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Based on provisions outlined in Section 7 of the CBN Act 2007, the CBN governor or his nominees are accountable for overseeing the management of the apex bank.
Section 11 of the same Act also states that the governor will cease to hold office if he is disqualified by a court of competent jurisdiction, found guilty of not discharging his duties within the confines of the CBN Act, or if he is removal by the president is backed by two-thirds of the Senate, among others.
Section 11(2) states that a CBN Governor, Deputy Governor or Director shall cease to hold office in the Bank if he “(b) is convicted of any criminal offence by a court of competent jurisdiction except for traffic offences or contempt proceedings arising in connection with the execution or intended execution of any power or duty conferred under this Act or the Banks and Other Financial Institutions Act ; (c) is guilty of serious misconduct in relation to his duties under this Act ; (d) is disqualified or suspended from practising his profession in Nigeria by order of a competent authority made in respect of him personally; (e) becomes bankrupt; (f) is removed by the President: Provided that the removal of the Governor shall be supported by a two-thirds majority of the Senate praying that he be so removed.”
On Friday, Falana told Channels Television that the floating of the naira is not known to law.
Recall that after the swearing-in of President Bola Tinubu, CBN floated the naira by directing banks to buy forex from any source at any rate and sell at any rate depending on a maximum of N1 bid-ask spread between the buy and sell rate.
But Falana maintained that the directive remains illegal, citing Section 16 of the Central Bank Act which states that “the exchange rate of the Naira shall be determined, from time to time, by a suitable mechanism devised by the Bank for that purpose.”
The senior lawyer was of the view that Section 16 of the CBN Act gives the apex bank the exclusive right to determine exchange rates, not market forces.
“There’s no provision for floating the naira. It’s illegal. You say, ‘The value of the naira will be determined by market forces. That is not there in the law.
“I’ve had to sue the Central Bank of Nigeria at the Federal High Court because Section 16 of the Central Bank Act has imposed a duty on the Central Bank to fix and determine the rate of the naira vis-a-vis other currency,” he said.
But CBN had explained in a previous statement that “These changes are necessary to deepen the foreign exchange market, provide more liquidity and create more transparency in the administration of Diaspora Remittances into Nigeria.”