World Bank, Economists Warn CBN to Stop Printing Money as Currency in Circulation Jumps to Record High
- Economists from the World Bank and the Economist Intelligence Unit, EIU, have spoken out about Nigeria's growing money supply
- They are concerned that the CBN creating money to pay the federal government deficit in the face of declining income will hurt the economy
- Their warning comes at a time when the amount of money in circulation in the economy hit a new high in April 2022.
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The Central Bank of Nigeria has been urged to stop the printing of money as the currency supply in the economy reached a record high.
The advice is coming from the Economist Intelligence Unit, EIU and economists at the World Bank.
The EIU in particular said the central bank might have been breaking the law which stipulates a limit beyond which it shall lend to the government.
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According to a report published Saturday, 19 June the EIU noted that the ability of the CBN to tame Nigeria’s inflation through raising rates is being undermined by its continued direct financing of the budget deficit.
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Part of the report reads;
"Building credibility in the target rate (of inflation) has not been a priority in recent years. The continued printing of money at the same time as tightening policy would prevent effective control of the price level”
Nigeria has rules that limit how much lending the central bank should offer the government and there are statutes that forbid the government from reckless borrowing, but the EIU inferred that these rules have been contravened repeatedly.
EIU added:
“All prudential rules on the government borrowing through the (CBN’s) overdraft facility have long been broken”
World Bank comments on Nigeria
The World Bank on its part says the Central Bank of Nigeria’s development finance intervention is fuelling inflation in the short term and weakening the ability of the apex bank to control inflation.
In a new report titled the ‘Nigeria Development Update (June 2022): The Continuing Urgency of Business Unusual, the World Bank said, there is huge money in supply in Nigerian economy
The global bank said:
"When central banks around the world tighten monetary policy the primary goal is to curtail money supply, but there is a curious case in Nigeria where the central bank is tightening monetary policy and at the same time pumping more money into the system by deficit financing and by its development finance initiatives"
Currency in Circulation at all-time high of N3.3trn
Data obtained from the CBN website titled ‘Money and Credit Statistics’ showed that Currency in Circulation(CIC) has hit an all-time high of N3.31 trillion in April 2022.
Currency in circulation has been on the increase in 2022, and when the current data is compared to N3.29 trillion at the start of the year over 0.62 per cent or N20.5billion have been added to the economy.
Remittances to FG continue to decline
Meanwhile, Legit.ng reported that the Nigerian National Petroleum Corporation (NNPC) has continued to deposit less amount of money to the federation account.
The NNPC remitted the sum of N10.54 billion to the Federation Account Allocation Committee (FAAC) in November 2021 from the proceeds of sales of crude oil and gas in October.
It gave this account during a presentation to FAAC for the month of December 2021, obtained by Legit.ng.
Source: Legit.ng
