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World Bank says CBN money printing is damaging the economy



According to the Economist Intelligence Unit and World Bank analysts, when central banks worldwide are fighting tooth and nail to keep inflation under control, Nigeria’s central bank (CBN) may be fanning the embers of spiraling inflation.

World Bank says CBN money printing is damaging the economy

World Bank says CBN money printing is damaging the economy

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.

Last month, Nigeria’s central bank tightened monetary policy by 150 basis points, ostensibly to achieve its 9% inflation target, yet the same central bank has continued to unbridledly finance the government deficit, according to economists.

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 says the World Bank.

“The CBN has continued to create money for the federal government, whose overdraft facility with the CBN reached N19 trillion (US$46 billion) in April 2022, up from N17.4 trillion at the end of 2021,” according to a report published Saturday by the EIU. The CBN also runs a number of direct loan initiatives in the agricultural, manufacturing, and energy sectors, with a combined value of around N3.6 trillion (US$9 billion).”

The EIU said 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. “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,” the EIU said.


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