May 8, 2021
  • May 8, 2021

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Obaseki and finance minister: tale of money printing and the economy

By Oludare Mayowa

First, it was the governor of Edo State Godwin Obaseki who first threw the salvo at the federal government last week, accusing the government of President Mohammadu Buhari of monetary recklessness.

According to the governor, the management of the nation's economy is far below perfect as the debt burden continues to mount while the government keep printing money to augment revenue sharing among the three tiers of government.

The Obaseki outburst got equal measure of response from the finance minister, when on Wednesday after the cabinet meeting at the state house, Zainab Ahmed literarily called Obaseki a liar over his claim that the government printed money to augment revenue sharing in March.

Ahmed said the governor's claims was not factual as no N60 billion was printed in March to augment revenue sharing among the three tiers of government.

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According to the minister, details of revenue sharing from the federation accounts are published monthly for all to see.

She also said contrary to the claim by the Edo governor, Nigeria's debt at 24 percent of GDP is sustainable and what is required is for the government to increase its revenue to be able to pay debt service and repay debt.

On Thursday, Obaseli hit back at Ahmed by claiming that she was playing ostrich with the direction the economy is going and being managed.

Both Ahmed and Obaseki are known to be economic savvy considering their past exposure and current roles in governments at different level.

However, the issue being raised by Obaseki is very sensitive to all Nigerians who are truly worried about the direction of the economy and the manner of its management.

Nigeria's current public debt stood at N32 trillion as of December 2020, while the federal government continues to borrow more to plug gap in its budgets and also embark on some projects such as rail rehabilitation and the revamping of the Port Harcourt Refinery.

Two major borrowings that recently attracted outrage from the public and they are the $1.5 billion for the construction of rail line from Kano to Maradi in Niger Republic and the $1.5 billion for the revamping of the Port Harcourt refinery.

These are indications of poor judgment on the part of the federal government on the management of the country's resources and its debt strategy.

The two projects are seen as economic waste considering the fact that the refinery is regarded as obsolete while the amount being committed to its rehabilitation is also seen as outrageous and out of tune with the current economic reality.

On the construction of rail line from Kano to Maradi, in Niger Republic, people are wondering what economic value informed the government consideration to extend rail construction on that corridor. Niger Republic is not a known trade partner with the country while Nigeria does not import or export much cargo from the country.

Also, it is always an open secret that Nigeria has accumulated over N11 trillion in Ways and Means, a euphemism for the printing of naira notes for the government to spend.

Obaseki concerns about the state of the economy are pertinent and coincided with the public position and interest on the state of the economy.

The core issue here is whether Obaseki is right to raise such open alarm when he has access to the economic managers of the country and could have directly expressed his misgiving either at the National Economic Council (NEC) or direct interaction with the finance minister.

The other issue is what could have been the motive of the governor in coming out to hit at the government openly, also considering his delicate position as a member of the political elites and Edo State state debt as of today.

Who lies between the governor and the finance minister regarding the printing of new notes in March to augment revenue sharing for the three tiers of government.

What was the reason behind the government decision, if true, to print money to augment revenue for state and local governments at a time the price of crude oil is doing well in the international market.

What are the counterfactual of not printing money to supplement the amount of fund to be shared from the federation account in March?

As it is today, the public is expecting that the federal government should come out clean on the weighty allegation in view of the implications on the economy, particularly on inflation and debt burden.

On Thursday, the National Bureau of Statistics (NBS) released data on March consumer index, showing that inflation rose 18.17 percent compared with the previous figure of 17.33 percent.

Economists and analysts believed one of the core drivers of inflationary surge is the printing of cash by the Central Bank of Nigeria (CBN) to help bridge government budget shortfall, thereby creating excess liquidity in the system,

A transparent approach to resolving the issue will be well appreciated by Nigerians who are currently suffering from the economic burden brought about by years of mismanagement.

Borrowing is not necessarily bad as long as such debt would have direct impact on the economic fortune of the country and add value to the lives of the citizens.

However, a situation where the government is borrowing recklessly without regard to how it’s going to pay back and ensure less disruption on the structure of the economy and the people call for concerns.

Ways and Means advance is a very volatile means of debt; it aggravates inflationary trend and exacerbates the suffering of people on the lower rung due to rapid jump in prices of goods and services as excess liquidity in the system exert pressure on prices.

Money printed by the CBN is usually not back by any asset creation and therefore pushes up inflation and compound the challenges faced by the average citizen in coping with the day to day survival.

It's imperative that both Obaseki and Ahmed quickly resolve the controversy thrown up by their public altercations and ensure that a prompt resolution is found and the economy is put back on sound footing.

The public deserves to know the truth and the real condition of the economy, why is the federal government, if true, printing money for states and local government to spend and what step is the government taking to end this practice and also repay the outstanding ways and means advances from the CBN.

The majority of Nigerians are suffering due to surging inflation and its impact on the living standard of average Nigerians. The government should, therefore, ensure that measures are taking to ease the economic pressure on the common man through prudent management of the economy by those saddled with the responsibility to do so.