ABSTRACT
The economic importance of a robust central banking system has attracted considerable scholarly attention. For centuries, central banks have evolved in their relationship with the state, their interaction with financial markets, and their internal management. While a strand of the literature suggests that the performance of central banks reflects its degree of independence, the literature has reported inconsistent findings across varieties of capitalism. In contributing to the debate, this chapter engages Africa’s largest economy (Nigeria) to explore the link between the independence of the Central Bank of Nigeria (CBN) and the country’s political institutions. In doing this, the chapter employs the resource dependence notion to understand in what ways the external resources of organisations (political influence) affect CBN’s operations. This chapter emphasises that the CBN’s capacity to support growth in developing economies is maximised when monetary and fiscal policies are shielded from political interference. To curtail the impact of political institutions on CBN’s independence, this chapter articulates some propositions. First, the CBN should implement an incentive-based executive remuneration strategy that is characterised by specific performance targets. Second, the appointment of CBN directors should rely on criteria that detach from the country’s traditional civil service regulations.
