The remark by Edo State Governor, Godwin Obaseki, that the Federal Government printed N60 billion to augment shortfall in March revenue allocation ignited a flurry of comments, thereby necessitating a consciousness on the role the central bank has played in recent times to stabilise the economy. ABDULWAHAB ISA reports
Across the globe, central banks are entrusted with a unified role of protecting the economy from sudden plunge. Be it the United States’ Federal Reserves, Bank of England in United Kingdom; Banque de France, or Bank of Ghana, central banks, indubitably perform core function of getting the economy liquid, and keeping inflation at a moderate level.
This task was put to test recently during COVID-19, a syndrome that tested the economic elasticity of the world. Both developed, developing and struggling economies responded to the crisis spilled by COVID-19 unanimously, using different approaches.
Central banks, the world over, engaged in direct interventions as a means of cushioning the impacts of the pandemic on individuals and businesses. One way of doing it was ‘printing’ monies to inject funds into the system. According to records, at the height of COVID-19 in 2020, the U.S. Fed printed $3 trillion, UK £875 billion, European Union €1.85 trillion; India $44.2 billion, Ghana $1.7 billion and South Africa R.20.9 billion to mention a few. Also, CBN responded appropriately. As of January 2021, the apex bank’s total disbursements amounted to N2.0 trillion via COVID-19 Targeted Credit Facility (TCF), a facility devoted to catering for household and small businesses.
Without doubt, through CBN’s intervention, businesses were revived and individuals’ income boosted. Without such interventions, Nigeria’s economy would have been seriously challenged. Regrettably, however, the interventions are politically being misconstrued. A recent remark by Edo State Governor, Mr. Godwin Obaseki, was laced with such insinuation.
Obaseki lamented that the economy was in a terrible state and supported his claim with Federal Government’s printing of N60 billion to augment shortfall in March revenue allocation. His alarm stirred raging controversy around printing of money. Obaseki said the rising debt profile was worrisome as dependence on crude oil was no longer sustainable. “Nigeria has changed.
The economy of Nigeria is not the same again, whether we like it or not. Since the civil war, we have been managing, saying money is not our problem as long as we are pumping crude oil everyday,” he said. The governor’s remark called to question the role of the central bank in times of economy distress. However, Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, at the end of a meeting of the Federal Executive Council (FEC) in Abuja, described the claim as not only untrue but unfortunate.
Speaking on intervention in the face of COVID-19, CBN Governor, Mr. Godwin Emefiele, last week in Awe, Nassarawa State, said what CBN did was in tandem with global responsibility of central banks. Emefiele told reporters that the controversy was unnecessary as CBN acted in national interest. According to him: “It’s very inappropriate for people to just give coloration to printing money as if it is some foreign word coming from the sky.” He said since the state government had resorted to indicting the Federal Government and, by extension, CBN, for assisting them with bailout to meet their financial obligations during the 2015/2016 fiscal crisis, they must repay the debts. “If you understand the concept of printing money. The concept printing of money; it is about lending money.
That’s our job – to print. “It’s about lending money and so there’s no need putting the controversy about printing of money as if we are going into the factory printing the naira and start distributing on the streets. “I think it’s important for me to put it this way – that in 2015/2016, the kind of situation we found ourselves now, which is even worse than 2015/2016, we did provide a budget support facility to all the states of this country. “That loan remains unpaid till now. And we are going to insist on the states paying back those monies since they’re accusing us of giving them loans.
“Most countries in the world today are confronted by not only health challenges coming from COVID- 19, causing economic crisis and the rest of them. “What I keep saying is that it will be irresponsible for CBN or any central bank or any FED to stand idle and then refuse to support its government at this time.
“What is being done is being done in every clime. And at the last MPC meeting, I gave data on what is being done in developed economies to shore up their economy and take them out of recession. “Nigeria is unfortunately in a very bad situation. I am not going to pretend about it, in the sense that we are facing problems about productivity output, which is GDP. Luckily, we managed to come out by a hair’s breadth,” Emefiele said.
States on life support
Majority of states can’t survive in the absence of monthly financial feed from the Federation Account Allocation Committee (FAAC). Before 2016, civil servants’ salaries and contractors’ obligations piled up unpaid. The Federal Government came to state governments’ rescue. CBN was directed to lend $1.2 billion as Budget Support Facility in tranches to relieve states of financial burden. Regrettably, most states are back to the same insolvent condition. Most are back to percentage salary payment. Some states are routing to sack workers in order to cope. Governors under the Progressive Governors’ Forum (PGF), a group of governors elected on the platform of the All Progressives Congress (APC), admitted the financial challenge facing states. The forum, in a statement by Abubakar Atiku Bagudu, Governor of Kebbi and Chairman of PGF, noted that Obaseki’s claim did not reflect the true position of things.
“As a trained economist, who has been a governor since 2016, Mr. Obaseki is aware of all the support states have received from President Buhari in coping with the shocks that have resulted from COVID- 19 and resultant economic recession,” the forum said. “Not only have we received budget support, bail out support to meet salary obligations and infrastructure refunds to all states, this was implemented in the overall public interest without discrimination on the basis of party affiliation.
“This unfortunate and inaccurate assertion by Governor Obaseki becomes even more worrisome when juxtaposed with the official statement released after the meeting of PDP governors last week, calling for restructuring and greater devolution of powers to states.
“It would appear that matters that require the collective resolve of all leaders are now being turned into purely partisan, point scoring claims. “Given the constraints faced by the Nigerian economy, the Central Bank of Nigeria had responded commendably well while still working hard on exchange and interest rates. “We urge the overnor, management and staff not to be distracted,” the forum added. PGF urged state governors to work collaboratively in tackling the economic challenges present in Nigeria “rather than resort to cheap and demagogic point scoring in our quest to rescue the economy,” Bagudu said.
Should CBN press on with the threat of having states pay back $1.2 billion support, experts say the action will spell doom for a struggling economy with minimal recovery. Speaking with New Telegraph on the implications, Dr. Idakolo Gabriel Gbolade, Managing Director/CEO of SD&D Capital Management Limited, foresaw danger in the economy.
“The move by CBN to demand the loan is retaliatory in nature and it is borne out of the statement by Edo State governor and other state governors, who have been attacking the policy implementation of CBN on behalf of the Federal Government. “It is important to note that the facility given to state in 2016 could have been memorised and repayment pattern should have been consistent with monthly allocation to the affected states.
“I foresee a danger in the demand by CBN for these states to start repayment because the situation that necessitated the facility in 2016 is worse now as most states are presently unable to meet their debt obligations and the implementation of the minimum wage payment,” he said. However, Gbolade lampooned the states for not being creative with abundant resources at their disposal. “The states also cannot be said to have performed well as they continue to criticise the Federal Government without doing anything considerable to develop their respective states. Be that as it may, this demand will further increase the economic recession in the country with the country’s inflation on the roof top,” he said.