By Kadiri Abdulrahman
“Government’s printing of Naira simply means loans advanced to states to pay salaries and survive; and not the literal interpretation of printing money from the factory and sharing to the public,” according to Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN).
It was Emefiele’s initial reaction to a recent comment by Gov. Godwin Obaseki of Edo that the CBN printed about N60 billion to augment Federal Account Allocation Committee (FAAC) subvention to states in March.
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Speaking at the Edo Transition Committee stakeholders engagement, Obaseki had raised concern that the step the apex bank took was an indication that the Nigerian economy was ailing.
The Edo governor said: “When we got FAAC for March, the Federal Government printed additional N50 billion to 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 borrowings are going to be within N15 trillion to N16 trillion.”
This position by Obaseki elicited varied reactions from cross sections of Nigerians, most of it creating panic.
Economists and financial experts have warned that Nigeria faces the risk of “falling off the fiscal cliff” if the federal government was not tight on ways to fund deficits.
The experts said Obaseki’s claims may signal another dimension to the economy and increase fears.
However, the National Economic Council (NEC) has 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 Thursday.
A statement by Laolu Akande, spokesperson for the Vice President, said: “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.
“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.
Meanwhile, Emefiele had earlier explained that the apex bank does not just print money and distribute to people.
“Most countries in the world today are confronted not only by the challenges coming from the COVID-19 pandemic, but other issues causing economic crisis.
“What I keep saying is that it will be irresponsible for the CBN or any other federal reserve bank to stand idle and refuse to support its government at this time,” he explained.
The Finance minister, Zainab Ahmed, had also countered Obaseki’s position on the issue.
Speaking to newsmen after a Federal Executive Council (FEC) meeting in Abuja, Ahmed said that what was distributed at the monthly FAAC meetings were generated revenue from government institutions available to the public at the ministry’s website.
“The issue that was raised by the Edo governor for me is very, very sad, because it is not a fact.
“What we distribute at FAAC is revenue that is generated and in fact distribution of revenue is a public information,’’the minister said.
Some analysts believe that Obaseki was probably drawing attention to the undeniable revenue challenge the Nigerian government presently contends with, and the dire need to accelerate economic diversification to accommodate broader revenue options.
According to Mr Laoye Jaiyeola, Chief Executive Officer of Nigeria Economic Summit Group (NESG), central banks of other countries facing similar economic challenges as Nigeria also print money.
Jaiyeola corroborated Emefiele explanation that “printing money” does not always have to do with physical cash.
He said: “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 N1billion and only about N100million 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 governments pending when they then pay back.
“So, the CBN does that through the concept of ways and means. So, when government eventually gets this money, they pay back,” he explained.
Shedding more light on the contentious issue, a professor of Economics from the University of Ibadan, Lanre Olaniyan, also said that the idea of printing money mainly relates to the CBN creating money for government.
Olaniyan said that “creation of money” for government by central banks was normal, adding that cash will only be involved if the cash reserve was extremely low.
“In elementary economics, we are told that the central bank is the lender of last resort to the government,’’ he said.
He described “Seigniorage”, the process where the apex bank prints money to fund activities of government is a welcome development in economics when necessary.
He added that a country freshly out of recession, like Nigeria, needed to put money in people’s pockets.
“The Federal Government will have to spend enough money that will go round a large percentage of the citizenry to sustain the post-recession economy; it is called “quantitative easing”, he said.
An economist, Mr Tope Fasua, believes that printing of money is an integral part of the functions of the CBN.
Fasua said that the apex bank performs that function through the Nigerian Security Printing and Minting Plc, where it is the largest shareholder.
He added that “the reason why the CBN will want to print money ranges from the routine to the emergency.
“Routine because the CBN has to ensure that banks are always liquid in terms of cash, and emergency for the purpose of economic intervention.”
The Chairman of the Progressives Governors Forum, Gov. Abubakar Bagudu of Kebbi State, also waded into the controversy.
Bugudu explained that due to the shortfall in revenues by N43.34 billion compared to the previous month, an augmentation was made in the sum of N8.65 billion from the Forex Equalization Fund Account.
He said that this brought the total distributable revenue to N605.59 billion.
He added that revenues distributed monthly primarily consisted of mineral revenues from the sales of oil and gas, as well as non-mineral revenues from customs and excise duties, company income tax and value added tax.