‘Nothing Wrong If CBN Prints Money To Augment Revenue’

A professor of Economics, Lanre Olaniyan, says there is nothing untoward about the Central Bank of Nigeria (CBN) printing money to augment Federal Government’s revenue.

Olaniyan told the News Agency of Nigeria (NAN) in Abuja on Tuesday that it was part of the apex bank’s responsibility to print money whenever the need arose.

He was reacting to a statement by Gov. Godwin Obaseki of Edo penultimate Saturday decrying the “printing’’ of N60 billion by the CBN to augment allocation to states for the month of March.

Zainab Ahmed, Minister of Finance, Budget and National Planning, has however, debunked Obaseki’s claim.

“It is not true to say we printed money to distribute at FAAC. It is not true,’’ the minister said last Wednesday at the end of the weekly Federal Executive Council meeting.

Prof. Olaniyan, who teaches at the University of Ibadan, said the concept of ‘printing money’ does not always relate to the printing of physical cash.

“This happens virtually all over the world. The money is not always printed as cash.

“Sometimes, it just refers to ‘creation of money’ for government. Cash is only involved when and if the cash reserve is very low.

“But the big issue is that any money that is printed to support government is a loan.

“It is not a free gift. It appears in the balance sheet as loans given to government,’’ he said.

The idea, he added, was for the central bank to give loans to government as ‘the lender of last resort’.

“I do not know for sure whether or not the CBN printed money, but there is nothing wrong if it did.

“It is the duty of the CBN to print money, and virtually, every central bank in the world prints money.

“Apart from the reason of shortage of cash or replacing mutilated cash in circulation, the CBN can print money to give loan to government.

“In elementary economics, we are told that the central bank is the lender of last resort to the government,’’ he said.

According to the professor, when governments face revenue challenges they usually resort to their central banks for succour.

The central banks, he said, would usually raise such monies through the sale of bonds and treasury bills.

He, however, added that the idea of printing money should be under certain economic considerations.

“When the CBN gets such money, either through bonds or treasury bills, it then gives it to the government as loan with terms.

“It could be a short term of between one month and 90 days, or long term of between one year and five years.

“When government prints money, it is usually to stimulate a productive sector of the economy for increased economic growth and sustainability,’’ he said.

Olaniyan added that high interest rates usually served as incentives for people to invest in bonds or treasury bills.

“In the last one year, because of the recession that we had, interest rate has gone low, and people are not too willing to invest in treasury bills or bonds,’’ he said.

According to him, Nigeria has limited choices in sourcing for improved revenue as most revenue sources are getting tight.

“The other alternative is foreign loans, but we already have a high burden of foreign loans.

“The total revenue of government is about the same amount we are spending on debt servicing,’’ he said.

The finance minister also addressed the issue of external debt last Wednesday.

“The Nigerian debt is still within a sustainable limit.

“Our debt, currently at about 23 per cent to GDP, is at a very sustainable level, if you look at all the reports that you see from multilateral institutions,’’ she had said.

Olaniyan said also that “the only option is to go back to elementary economics and approach the ‘lender of last resort’, the CBN.

“If people are not investing in treasury bills and bonds, the central bank embarks on printing of money.

“It is called, ‘Seigniorage’, a process where the apex bank prints money to fund activities of government.’’

The don said that Nigeria was a country freshly out of recession, which needed to put money in people’s pockets to sustain the post-recession economy.

“The Federal Government will have to spend enough money that will go round a large percentage of the citizenry; it is called ‘Quantitative Easing’.’’

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