Beyond the controversy of printing of money by central bank

Godwin Emefiele

The recent alarm raised by Gov. Godwin Obaseki of Edo State on the management of the nation’s troubled economy has once again stressed the need for speedy diversification of the economy and stop the monthly financial pilgrimage to Abuja for revenue sharing. For sure, Nigerians are not interested in the arguments and semantics of printing of money by the CBN, they desire improved management of the economy that will be able to tackle rising inflation, high unemployment, and widespread poverty in the country.

By Benprince Ezeh

MANY Nigerians could not help but join the recent controversy generated by the alleged printing of N60 billion by the Central Bank of Nigeria, CBN, to support the monthly federal allocation to the three tiers of government for the month of March 2021. Some of those who expressed their views on matter called on the federal government to come out clean by telling Nigerians, not just if it indeed printed the money as alleged, but also explain the real situation with the nation’s economy.

Gov. Godwin Obaseki

Governor Godwin Obaseki of Edo State had said during the Edo transition committee stakeholder’s engagement in Benin that the federal government had to print N60 billion to support the amount being allocated for the month of March. The governor also said that the country’s economy was dying gradually. “Nigeria has changed. The economy of Nigeria is not the same again whether we like it or not.

Since the civil war, we have been managing, saying money is not our problem as long as we are pumping crude oil every day.  So, we have run a very strange economy and a strange presidential system where the local, state, and federal government, at the end of the month, go and earn salaries. We are the only country in the world that does that.

“Everywhere else, the government relies on the people to produce taxes and that is what they use to run the local government, state, and the federation. But with the way we run Nigeria, the country can go to sleep. At the end of the month, we just go to Abuja, collect money and we come back to spend.

We are in trouble, huge financial trouble.

“When we got Federation Accounts Allocation Committee, FAAC, for March, the federal government printed an additional N50-N60 billion to top-up for us to share. This April, we will go to Abuja and share.  By the end of this year, our total borrowing is going to be within N15 trillion to N16 trillion,” the governor said.

Zainab Ahmed

But in her reaction, Zainab Ahmed, minister of finance, budget and national planning stated that the claim by Gov. Obaseki was not just false, but insisted that the money being shared monthly at FAAC was revenue generated.

“The issue that was raised by the Edo State Governor, for me, is very sad because it is not a fact.

What we distribute at FAAC is revenue that is generated and in fact, distribution revenue is a public information.

“We publish revenue generated by Federal Inland Revenue Service, FIRS, Nigerian Customs Service and Nigerian National Petroleum Corporation, NNPC and we distribute at FAAC.

“So, it is not true to say we printed money to distribute at FAAC. It is not true,” the minister said.

In the same vein, Godwin Emefiele, the governor of Central Bank of Nigeria, CBN, justified the action of the government and stated that it was the job of the CBN to print money and lend it to government and described Obaseki’s claim as “unfortunate and totally inappropriate” and insisted that the printing of money was a key mandate of the Apex bank.

According to him, the CBN must always act to support the government at times of ‘financial difficulties. “If you understand the concept of printing of money. The concept of printing of money is about lending money. That’s our job, to print. It’s about lending money and so there’s no need putting the controversy about printing of money as if we are going into the factory, printing the naira and start distributing on the streets.

“For us to see some people playing some games, overheating the polity talking about printing of money, I think it is unfortunate and totally inappropriate. I would like to advise that this should stop. We should all work for the growth of our country and not play politics.

“It is very inappropriate for people to just give some colouration to the word ‘printing of money’ as if it is a foreign word coming from the sky,” Emefiele said.

For Emefiele, printing of money to lend to government for sharing among the three tiers is not a new thing, as he alluded that it had been done in 2015/2016 when the situation was not this bad.

He explained that it is the same thing that is being done in other countries facing similar challenges.

But the question most Nigerians are asking is why did the finance minister deny the allegation and tried to cover up what will eventually become public knowledge with time.

Oladele Bello, a banker and economic expert, explained that what is happening is obvious, as the current government has tried hard to keep the real situation away from Nigerians, just to hoodwink citizens with fake reports of performance and reeling out numbers that only exist in their imaginations.

“This is not rocket science, the boat of government was rocked by the revelation by Gov. Obaseki. I can tell you for free that they never expected that the printing of the money will become public knowledge, thereby, rocking the boat of the artificial image of performance and robust economy it had always laid claim to.

“The reality is that Nigeria is not just broke, but the economy is already in shambles. Government is not generating enough revenue to keep up with what is needed, and they do not want to admit it. We are indeed in trouble with the insatiable appetite of this administration for loans, with those saddled with running the economy constantly telling us that the nation’s debt is still tolerable. How can the debt profile of a country that uses a huge chunk of its budget to service be tolerable? These people qualify to be called Voodoo economists,” he said.

Speaking on the issue, Prof. Lanre Olaniyan of the economics department of the University of Ibadan, noted that there is nothing untoward about the CBN printing money to augment federal government’s revenue, saying that it is part of the apex bank’s responsibility to print money whenever the need arises.

“Concept of ‘printing money’ does not always relate to the printing of physical cash. This happens virtually all over the world. The money is not always printed as cash.

“Sometimes, it just refers to ‘creation of money’ for government. Cash is only involved when and if the cash reserve is very low. But the big issue is that any money that is printed to support government is a loan.

“It is not a free gift. It appears in the balance sheet as loans given to government,’’ he told the Agency of Nigeria, NAN, in an interview.

According to him, Nigeria has limited choices in sourcing for improved revenue as most revenue sources are getting tight. “The other alternative is foreign loans, but we already have a high burden of foreign loans.

“The total revenue of government is about the same amount we are spending on debt servicing.

“If people are not investing in treasury bills and bonds, the central bank embarks on printing of money. It is called, ‘Seigniorage’, a process where the apex bank prints money to fund activities of government,” he said.

Olaniyan also stated that Nigeria was a country freshly out of recession, which needed to put money in people’s pockets to sustain the post-recession economy and the federal government will have to spend enough money that will go round a large percentage of the citizenry; it is called ‘Quantitative Easing’.

“So, the CBN does that through the concept of ways and means. So, when government eventually gets this money, they payback,” he added.

For Laoye Jaiyeola, chief executive officer of Nigeria Economic Summit Group, NESG, the central banks of other countries facing similar economic challenges as Nigeria also print money.

Jaiyeola corroborated Emefiele’s explanation that “printing money” does not always have to do with physical cash. “When they say printing money, it is not cash. You know how banks create money; it is not only cash.

“All the money we have in Nigeria is not in cash. So, the CBN can create N1 billion and only about N100 million out of it can be in cash.” He urged stakeholders to understand the concept of “ways and means” to get the issue in proper perspective.

“The concept of ways and means is something most of us should understand. If government says this is our budget for the year, these are statements of where they expect income to come from and what expenses they are going to have.

“But this income does not come at the time they expect it. So, the central banks as governments’ bankers are allowed to give some amount of money to the government’s pending when they then payback.

But many Nigerians, including politicians of the opposition Peoples Democratic Party, PDP, who do not trust nor support many of the policies of the government, responded by calling for the dismissal of the finance minister, saying that the admission by the CBN governor has vindicated their position that the apex bank has been printing the nation’s currency at the behest of the Buhari administration and that the government under the APC has been characterized by “concealments, deceit, and falsehood”.

Kola Ologbondiyan

In a statement, the spokesman of the PDP, Kola Ologbondiyan, said: “Indeed, the admission by the CBN governor that “Nigeria is unfortunately in a very bad situation” further justifies our position that the Buhari-led APC administration has wrecked the economy of our nation.

“Our party is worried over the huge negative impact of indiscriminate printing of currency which has led to the unprecedented rise in inflation rate to 18.17% as disclosed by the Federal Bureau of Statistics on Thursday, April 15.

“The PDP calls out President Buhari to come clean on the amount that has been printed so far by the CBN to finance the deficit caused by the financial mismanagement of his government as well as what the funds had been used for.

“Furthermore, for failing the full disclosure test, the PDP demands that the minister of finance should immediately be relieved of her position, while the President accepts responsibility for the indiscriminate printing of currency in our naira.

“Our party implores President Buhari to save our nation by allowing better hands to manage and salvage our economy before it is too late,” the PDP said.

In its reaction to the controversy, the National Economic Council, NEC, affirmed that there was no printing of N60 billion or any other amount to shore up allocation for the month of March.

The council, which is chaired by Vice President Yemi Osinbajo, took the position during its meeting in Abuja on April 22.

Laolu Akande

A statement by Laolu Akande, spokesperson for the Vice President, said that the council expressed satisfaction with clarifications made by the Nigeria Governors’ Forum, NGF, represented by its Chairman, Gov. Kayode Fayemi of Ekiti State. Akande said that the minister of finance, budget and national planning and Emefiele also made clarifications on the issue.

“Having received presentations from the minister of finance, the central bank governor, and the NGF, the NEC has affirmed that there was no printing of N60 billion or any other amount whatsoever to shore up allocation for the month of March as wrongly insinuated recently in the press.

“The Council expressed satisfaction with clarifications made by the NGF, the finance minister and the CBN governor.

“Both the minister and the CBN governor stated to the council that the allegation of the printing of money to augment allocation was outrightly false. The NGF also supported the conclusion and NEC affirmed same as the highest constitutional body tasked with economic affairs in the country,” Akande said.

Despite the varied positions expressed on the issue of printing N60 billion by the CBN by the experts, government officials, and stakeholders, the fact that the nation’s economy is struggling is not in doubt and that the high foreign and local debt stocks are worrisome.

– April 29, 2021 @ 18:10 GMT

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