The recent claim by the Governor of Edo State, Mr. Godwin Obaseki, that the Federal Government, through the Central Bank of Nigeria, printed about N60 billion for the month of March to augment revenues shared by the federating units, has set off alarm over the possibility of the economy facing the risk of falling off the fiscal cliff if the government continues its alleged reliance on Ways and Means (W&M) to fund the widening deficits and financial support to states. According to Obaseki, “when we got the Federal Allocations for March, the Federal Government printed 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 national borrowing is going to be within N15- N16trillion. Imagine a family that is just borrowing without any means to pay back, and nobody is looking at that, everybody is looking at 2023.” However, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, described Obaseki’s claim as untrue. The CBN also refuted the governor’s allegation. The Finance Minister explained that contrary to the allegation, the monies distributed at the Federal Account Allocations Committee (FAAC) were generated from the Nigeria Customs Service, the Nigerian National Petroleum Corporation (NNPC) and the Federal Inland Revenue Service (FIRS). The total amount disbursed by FAAC for March was N650 billion. Obaseki however insisted that he got his facts right.
Despite Federal Government’s rebuttal, experts have warned against the inherent danger of printing money to fund budget deficits. Money printing, technically known as money financial programme, occurs when the government resorts to financing itself by issuing non-interest bearing liabilities. Those liabilities could be currency or reserves that banks hold at the Central Bank. Not long ago, the CBN Governor, Godwin Emefiele, defended the allegation against the backdrop of the World Bank and International Monetary Fund (IMF) advice that resorting to Ways and Means to support the government has unpleasant consequences, at least, in the long run. Besides, it will erode the independence of the apex bank. While it is not in dispute that at one time or the other, especially in critical financial situation, many nations take the option of money printing, but it must be noted that what works for one country may not work for the other, particularly for countries like Nigeria with high inflation, high unemployment rates and extreme low productivity capacity. Currently, Nigeria’s inflation rate is tending toward 20 per cent mark, and unemployment rate of more than 33 per cent. Worse still, revenue generation is low, taxation has become a serious burden for the citizens and big businesses are evading taxes.
The fact is that Nigeria’s economy at present cannot absorb a reckless money supply expansion. The immediate consequence is the risk of hyperinflation. This is bad for a shrinking economy such as ours. Though the N60billion allegedly printed by the CBN on behalf of the Federal Government represents less than 10 per cent of the revenue the federating units shared for the month of March, the allegation should be thoroughly investigated. Moreover, the Federal Government is reported to have overdrawn its account with the CBN. The resultant effect is that the present fiscal situation in the country is precarious, and therefore, will worsen if the government continues to take the easy but dangerous path of money printing to service the country’s huge debt and other financial exigencies.
With crashing oil revenue, which the Finance Minister has acknowledged, and rising debt profile estimated to reach N38 trillion by the end of the year, government should tackle the economic challenges facing the country by initiating concrete fiscal and monetary policy measures. It must, among other things, provide the necessary infrastructure to enable businesses thrive and Nigerians assured of a better future. Right now, the future is bleak for most Nigerians, including the youths that make up about 60 per cent of the over 200 million population.
We urge the government to seek better alternative funding sources for servicing our debt and other infrastructural development across the country. The facts on ground show that Nigeria will not afford uncontrolled printing of currency to finance the budget. Beyond that, our economy remains fragile to absorb the likely consequences, because money printing is unarguably the most inflationary way to finance deficits after other sources have been exhausted. The Federal Government should work towards sustainable growth for the future rather than taking actions that could adversely affect the economy and the citizens.
We are, indeed, worried like everyone else, over the direction our country is headed, politically and economically. Even though our debt to GDP ratio is still within the internationally acceptable limits, it is slipping fast if unpopular government’s policies are not reversed. Only recently, the CBN was reported to be involved in a N10trillion government debt conversion restructure deal from a short-term to long- term arrangement for 30 years. While we agree that as the ‘lender of last resort’, the CBN is covered by its Act to provide financial support to the federal government, especially during financial crisis, including the printing of money; it should be done with utmost caution.