Nigeria’s money regulator in recent years has become a printing press for naira bills.
In 2020 alone, the Central Bank of Nigeria printed ₦2.86 trillion without matching the funds with proprietary economic activities a report by Dataphyte has revealed.
Dr Zainab Ahmed, Minister of Finance revealed this while presenting the approved 2021 budget.
Worse, though, this has been the trend of events over the past years, a clear indication of this administration’s inability to diversify revenue streams.
And while previous administrations battled to reduce this trend, the Buhari-led administration proves its commitment to finance its budget continually by any means available.
The upward trend in claims speaks to this. Starting at ₦2.5 trillion in 2015, the funds rose to ₦11.7 trillion by the end of 2019. FG further printed an additional ₦2.86 trillion in 2020.
In all, the current administration has published ₦19.03 trillion in arbitration.
Although there was a dent in the progressive increase in 2017, the overall printing of naira bills is alarming. Even more problematic was the printing of ₦3.52 trillion in 2019, an election year.
A move that possibly hints that such funds went into financing that election, rather than economic activities.
Buhari-led administration flouts CBN Act of 2007
The CBN Act guides the money regulator in its transactions with the government and the public. It further covers all aspects of CBN’s activities, including printing of money.
Section 38 precisely stipulates the guideline in money printing for the FG. In straightforward terms, Section 38, (1) and (2) states:
“Notwithstanding the provision is section 34 (d) of this Act, the Bank may grant temporary advances to the Federal Government regarding temporary deficiency of budget revenue at such interest rates as the Bank may determine.”
“The total amount of such advances outstanding shall not at any time exceed five (%) percent of the previous year’s actual revenue of the Federal Government.”
With the preceding, the CBN doesn’t have the authority to print money beyond 5% of FG revenue in 2019. Total revenue generated in 2019 was ₦4.12 trillion.
Therefore, the total stipulated money printable by CBN is not to exceed ₦206 billion (5% of revenue generated in 2019). However, the bank went ahead to print ₦2.86 trillion, accounting for 69.4% generated revenue in 2019.
Implication on the Economy
Typically, inflation is a result of too much money in the economy. It’s simple economics; Atiku Samuel argued in this line.
He said the inflation experienced in the country today is traceable to the actions of the CBN. Printing of money yearly to fund the budget is not an acceptable practice.
This decision has made the economy volatile, with an increasing inflationary trend.
“CBN are the primary cause of unstable money in the economy. When you print money arbitrarily without an actual economic activity, that money becomes a canon that creates inflation. They went ahead to print ₦2.86 trillion. They don’t have the power to do that.”
The Public Finance expert further arraigned CBN as the reason for the instability in the naira’s value. “They will lend money to the FG at one percent interest rate. And will go-ahead to lend the same money to the public at 13% interest rate.” Thus, the institution responsible for ensuring monetary stability in the country created instability.
Tope Fawua, COE Global Analyst Consulting Limited, also echoed the inflationary implication on the economy. He said the CBN is lending so much to the government; this is bad.
Nonetheless, the Economist acknowledged the specific circumstances of 2020. But these circumstances affected every economy in the world, not just Nigeria. ANd a majority of them did not print money in such volumes. However, he recognised CBN was under political backing to print and borrow to keep the economy flowing. Thus, it’s a political decision rather than an economic one.
(STORY SOURCE: Dataphyte)