Experts have reacted differently towards the recent defence by the Governor of Central Bank of Nigeria (CBN), Mr Godwin Emefiele over the printing of about N60 billion to augment the states’ March federal allocations.
Governor Godwin Obaseki of Edo state had made the revelation earlier saying the federal government through CBN used the Ways and Means strategy of printing about N50bn to N60bn to complete the states’ share of the monthly federal allocations for March 2021.
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However, the Minister of Finance, Budget and National Planning, Zainab Ahmed had at the end of the last Federal Executive Council Meeting (FEC), faulted Obaseki’s claim.
Obaseki in a reaction to this, said he stood by his comment, indicating he got his facts right.
But clearing the air recently on this, CBN governor Emefiele who field questions from newsmen in Tunga Awe LGA of Nasarawa state recently, said printing money is a key mandate of the bank and that it was part of lending to the government at difficult times.
“If you understand the concept of printing money. The concept of printing of money is about lending money. That is our job – print money. So there is no need to put controversy about the printing of money as if we are going into the factory, printing naira and distributing on the streets.
“In 2015/2016, we were in a similar [fiscal] situation, but it is far worse today. We provided a budget support facility to all the states of the country and that loan remains unpaid till now. We are going to insist on the states paying the loan back since they are effectively accusing us of giving them loans.”
Emefiele said it was irresponsible for CBN not to support the government at this hard time.
“Most countries of the world today are confronted by not just the health crisis from the COVID pandemic but also the economic crisis. Whatever we do in Nigeria is being done in any clime.”
The apex bank head however noted that the government was concerned about the rising inflation figures and was working on that.
Caution, praises for CBN
In a follow up to this, some experts speaking to Daily Trust have lauded the CBN for its support to the government, while others still insist it must take caution.
The Chief executive officer of Cowry Asset Management, Johnson Chukwu said: “The Central Bank of Nigeria (CBN) has been providing financial support to the federal government to boost its revenue and the government has overdrawn its account with the monetary authority.
“Government is in a difficult position. That the government prints is a statement of fact but what I cannot vouch for is how much that is involved. The CBN has been providing financial support to the Federal Government but that support has been overdrawn.”
Economist and consultant to the Economic Community of West African States (ECOWAS), Professor Ken Ife also said it was okay “as long as the underlying conditions” are met.
He said the N60bn is less than 10 per cent of the money the federating units share monthly and par into insignificance when weighed against the country’s Gross Domestic Product (GDP).
Ife argued that money supply contributed only about 20 per cent to the inflation. With the current high unemployment rate, he argued that it was illogical to attribute the high inflation rate to demand and high money supply.
A Development Analyst and ONE’s Africa Executive Director, Edwin Ikhuoria said the CBN intervention is nothing new. He however argued that over-dependence will result in worsening inflation.
He said: “The general assumption is that, once this COVID-19 is over and global demand picks up, our revenue positions will improve and hopefully, we don’t continue to sustain this behaviour.”
On his part, Prof. Uche Uwaleke, a professor of Finance and Capital Market said, “Unlike commercial banks, the CBN is not a Deposit-taking institution. So, its role as a lender of last resort lies in its ability to print money.”
However, Uwaleke said: “The resort to print money must be the last card. This point must be emphasized given its implications on inflation and Exchange rate.”
In another comment, Dr, Bongo Adi, a senior lecturer at the Lagos Business School (LBS) said, “The CBN printing money to lend actually fits into my own model as an economist. The new modern monetary theory (MMT) is what is about. That is what the US has been using.”
He however said there is a challenge of mistargeting in the interventions and that should be looked into adding that the CBN should refocus the interventions to focus on transportation energy and security infrastructure.
In his comment, economist, Hussaini Aliyu Ibrahim, said the printing of money must be done with caution to reflect the real value of production in the economy.
“If you print money arbitrarily, it will harm the economy, it will harm investment and foreign direct investors as well. It will harm the real value of production in the economy,” the economist said.
“If you print money without commensurate economic activities in the real sector, that’s when inflation sets in. Once your economy is booming and you are producing, you are supposed to print money to match the growth of the economy,” he said.
By Simon E. Sunday, Chris Agabi & Francis A. Iloani (Abuja) & Sunday M. Ogwu (Lagos)
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