According to a member of the Monetary Policy Committee (MPC)who said that he was struggling to understand the reasons behind the regulator allowing the Central Bank of Nigeria to perform the roll of a “piggy bank”.
National financial data has shown what the MPC member described as a “sharp rise” in the financing of the government by the Central Bank of Nigeria, to balance national deficit this year, said Doyin Salami after the MPC meeting which held between July 24th – 25th, according to a Central Bank Statement that was published on Tuesday. The CBN regulator said that the government’s financial reliance on the Bank had risen twenty times over to 814 billion Naira ($2.26 billion) from the end of 2016, while purchases of the governemt T-bills also increased by 30 per cent to 454 billion Naira.
In his words, “It is clear that the CBN has provided piggy-bank services to the federal government,” Salami said. “Whilst I still wonder what the underlying economics is, I sincerely hope it works.”
He lamented that Nigeria, despite being Africa’s largest oil producer, is struggling to generate adequate revenue in the midst of the worst economic downturn that in about 25 years. Gross domestic product expanded by a 0.6 per cent margin from one year earlier in the three months through June after contracting for the previous five quarters. Following that, the MPC has kept its key rate at a record height of 14 per cent since July 2016 and is scheduled to announce its next policy decision on the 26th of September this year.
Revenue generated in the first three months of the year was lesser by 36 per cent than what was budgeted by the government and by May, it was even lesser by 45 per cent, the Central Bank disclosed.
Salami, an academic at Latos Business School and recent retiree from the MPC, has before now criticised the policies of the Governor, Godwin Emefiele. He said in January that the central bank was merely pretending to be tightening the nation’s monetary policy while augmenting the supply of money at the same time.
In the latest comments released by Salami, he said that the Central Banks massive injection of cash into the government do not show up in higher inflation data and currency weakness because the CBN regulator made use of certain “special auctions” that effectively raised the cash-reserve requirements of commercial banks beyond the stipulated 22.5 per cent. Also, consumer-price growth eased up to 16 per cent in July, the statistics bureau reports, September 15th.
“We thus find ourselves at a point where government borrowing from the CBN is neutralized by raising the CRR of banks, thereby limiting private-sector access to credit,” he said. “In other words, the private sector is deliberately crowded out.” (Bloomberg)
NigeriaNewsNg observes that expressed concerns about the CBN’s relationship with the country are rooted on the idea that the government ought to devise more scrupulous methods of handling national deficit without using the CBN as a safety net, especially considering its status as the leading oil trader on the continent.