Financial experts disagree over alleged printing of n60 billion by CBN

By Omoniyi Salaudeen and Henry Okonkwo

The last may not have been heard about the controversy trailing the alleged printing of about N60 billion by the Central Bank of Nigeria to argument the shortfall in the federal allocation recently shared by the three tiers of government as eminent economists and financial experts have called on Godwin Emefiele to speak up or release to the public the detailed circumstances that compelled the action.    

A former President of Nigeria Institute of Bankers (NIB) and Professor of Economics at the Babcock University, Ilisan, Ogun State,  Segun Ajibola, while speaking with Sunday Sun, maintained that printing of money without backup assets could be injurious to the economy. 

He said that though traditionally, printing of money is one of the functions of the Central Bank, carrying out such exercise without corresponding backup assets could further push up the current inflationary trend in the country. financial experts disagree over alleged printing of n60 billion by cbn

He, therefore, stressed the need for proper clarification on the matter to address the issues of concern raised by Nigerians.

He said: “When we talk of printing of money, people tend to speak from emotional point of view. One of the traditional functions of the Central Bank is to issue currency notes and coins. When we earn money from outside in terms of foreign exchange, Central Bank prints money to monetize the foreign exchange. But printing of money becomes an issue when there is no asset to back it up. That will amount to increasing money supply without the requisite income side. It is like you are propping up your expenses without income that can take care of the expenses. We need to be very clear about the money that has been printed and the nature of that money so that we don’t speak out of ignorance.  

“I have listened carefully to all the responses, nobody has said yes or no to the issue of whether or not the printing was backed by assets. CBN should speak up for clarification. Let there be clear explanation, let us understand the details of what transpired. As at today, I, as a person, have no possession of those details. And without those details, it is difficult to say that the printing of money is a good thing or it is a bad thing. Some of us who are analysts can only give unbiased objective comments based on the details that are available to us. When we don’t have the details, we cannot make objective comment on the issue. If the press can probe further and the details are released, then some of us can now analyze and comment on those details. For now, the details are very scanty.”

But Ajibola blamed the dismal plight of the economy on the country’s dependence on oil revenue, lack of proper planning, poor implementation of policy initiatives, as well as consumption habit of Nigerians, among others.   

His words: “As we all know, the challenges the economy is facing today originate from so many angles. There is the COVID angle, there is the structure of our own economy that is lopsided in favour of monolithic product, there is the angle of planning and management, there is the angle of policy implementation, and there is always the angle of attitude of Nigerians to policy initiative, consumption pattern, among others.

“If we are looking for solution, then we must deal with these issues one after the other. Our economy is very vulnerable to the happenings and uncertainties in oil market. This has been a recurring matter over the ages. Until and unless we are able to diversify, we will continue to leave our economy vulnerable to the global oil politics. We need to lay more emphasis on other sectors of the economy. On our attitude to change, government keeps saying let Nigerians produce what they eat. Nigeria can get out of the current scenario only as soon as we can reverse the trend of being a consuming nation. People should show more interest in agriculture to address food inflation that is already getting out of hand. We must change our orientation and our attitude.”

The MD, Taurus Capital, Dr Nnaemeka Obiaraeri, a notable financial analyst, while also lamenting the ailing Nigeria’s economy, decried the failure of government to open up to the citizens on the true state of things. 

He said: “The truth is that Nigeria is in a deep shithole. But rather than the Federal Government telling us how they plan to stop the bleeding, the Finance Minister, Zainab Ahmed, went about talking about debt to GDP ratio.

“This government is plunging us deeper into economic mess by borrowing more to fund consumption without removing the clogs that have held us down. Our huge potential as a people has been stagnated under this quasi-unitary satanic structure that is killing our people daily.

“Some ill-informed and cheeky characters, especially the leadership at the finance ministry, will tell you that with a better nominal debt to GDP ratio that Nigeria can borrow more. But that is hogwash! They refuse to look at the revenue to debt repayment and servicing capacity.”

Suggesting the possible way forward, he tasked the government on the urgent need to reposition the education sector to enhance human capital development, declaring “what we can do to open up our economy and put our huge population to productive work in order to grow our revenue base is to pursue quality education with vigour and sincerity because an educated nation is a resourceful mind.

“Then, we must remove all corruption-laden subsidies including petroleum, power, foreign exchange, as well as gas pricing. Government must also provide the needed secure and enabling policy environment that can help our people to get into productive work. The level of insecurity in Nigeria is terrible. We are currently ranked alongside Afghanistan, Yemen and Iraq as one of the most insecure places to live in the world.

“More capital should be channeled into areas that provide security for lives and property, rule of law, and peace of mind. And finally, we must totally discard the 1999 constitution that has chained everyone and made Nigeria the poverty capital of the world.”

Another Finance expert, Orji Udemozue, MD, Flame Consulting, didn’t spare the CBN as well as the economic management team of the Buhari administration with some of his harsh words either, blaming them for lack of political will to do the right thing.    

He said: “Nigerian economy as it is now is badly managed. And it is unfortunate that even the technocrats that we have in the position of economic management don’t have the free hand or independence they need to manage this economy, including the Central Bank itself. The printing of money is a very reckless thing to do at this point. Nigeria is already at a very high level of inflation. And there is no realistic hope that this inflationary trend would be reversed anytime soon, knowing that the global oil market is not going to get any better. Even a situation whereby the Central Bank happens to be the only supplier of dollar in exchange market is a reckless policy. “Ultimately, the economic managers are not doing the right thing at this point. They are not doing reform that can put this economy on the path of growth. Yes, there is positive hope that the economy will likely hit three per cent growth rate this year, nobody can be very sure about it. We have been struggling with one or two per cent in the last five years and that is a very big under performance.  

“There is lack of political will to rescue the economy that runs a very high expenditure compared to its revenue. World Bank said sometimes ago that we are at a risk of becoming a failed economy. I am actually modifying that by saying that we are already a failed economy.  Every single day, people are sliding into poverty. We are the poverty capital of the world. Yet, we have not seen bold economic policy that can make things change. We have a government that is depleting our scarce foreign reserve.” 

However, the MD of Cowries Assets Management, Mr Johnson Chukwu, in his own analysis, absolved the CBN of any wrong doing, noting that the Federal Government’s deficit budgeting had been a recurring practice under the present administration which could only be met by additional money creation.

He explained: “When the Federal Government prepares a deficit budget and a portion of that deficit is not going to be funded from borrowing, it means the government is going to borrow that portion from the Central Bank. That portion government borrows from the Central Bank is equivalent of printing of money.  It may not be called printing of money, but it amounts to creation of money.

“So, it is not a debatable issue whether Federal Government has been borrowing from Central Bank or not. By the end of November 2020, the Federal Government had borrowed N10.3 trillion from the Central Bank. From the reports released by the CBN on Friday, Federal Government spent N770 billion in January this year, whereas the actual revenue generation was N285.16 billion. Therefore, the Federal Government had a deficit of N485 billion. That N485 billion was borrowed from the Central Bank. It also means that the Central Bank printed N485 billion in January.

“Normally, the fiscal economy policy act says that the Federal Government cannot have a budget deficit of more than three per cent of the GDP. But the president signed an executive order that extended that limit to five per cent.”

According to him, the current inflationary trend would continue to go up for as long as the government continues to borrow to finance its budget deficit. “The thing is that if you keep borrowing from the Central Bank, you push up the inflation and put pressure on the exchange rate, which devalues the income earnings of salary earners,” he added.  

To pull the economy out of the doldrums, he suggested a review of infrastructure financing by way of private involvement to reduce government’s spending, value addition to local production, improvement in power generation and transmission, as well as subsidy removal, among others.  

“Nigeria needs to add value to what we produce so that the term of trade can improve. For us to do that, we need to look at our infrastructural development to reduce our cost of production so that we can produce cheaply. To reduce borrowing, the government has to reduce consumption expenditures that are not creating value to the economy. One of this is subsidy. I understand that the government has spent about N500 billion on provision of subsidy.  Imagine if they had used that money on infrastructure, they would have completed Lagos-Ibadan Expressway and possibly one or two other highways.

“Government has to rethink its approach on financing of infrastructure projects because we don’t have the revenue profile to continue to support those infrastructure.  We need to involve private sector, identify commercial viable infrastructure and then concession them to those who can build and later transfer. If we can do that, we are going to eliminate some of the costs the government is incurring. That way, we will reduce the amount of money government is borrowing,” he posited.

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