The Central Bank of Nigeria is acting
like a “piggy bank” with its funding of the government, a member of the
Monetary Policy Committee, Dr. Doyin Salami, has said...
Salami said he was struggling to understand the CBN’s economic rationale for such action.
Monetary data showed a “sharp rise” in
the CBN’s financing of the government deficit this year, Salami said
after the MPC’s July 24th to 25th meeting, Bloomberg reported quoting a
CBN statement published on Tuesday.
He said the CBN’s claims on the
government had risen “20-fold” to N814bn from the end of 2016, while its
purchases of government treasury bills increased by 30 per cent to
N454bn.
“It is clear that the CBN has provided piggy-bank services to the federal government,” Salami said.
“While I still wonder what the underlying economics is, I sincerely hope it works,” he added.
The Federal Government is struggling to raise enough revenue amid economic challenges.
The Gross Domestic Product expanded by
0.6 per cent from a year earlier in the three months through June after
contracting for the previous five quarters.
The MPC has kept its key rate at a
record-high 14 per cent since July 2016 and is scheduled to make its
next policy decision on September 26.
All four analysts surveyed by Bloomberg expect it will keep the rate unchanged.
Revenue in the first three months of the
year was 36 per cent less than what the government budgeted and was 49
per cent short in May, according to the central bank.
Salami, who is an academic at Lagos
Business School and retires from the MPC this year, has previously
criticised the policies of Governor Godwin Emefiele.
In January, he said the CBN was “pretending” to tighten monetary policy while boosting money supply at the same time.
In his latest comments, he said, “The
massive injections of cash to the government don’t show up in higher
inflation data and currency weakness because the regulator used ‘special
auctions’ that effectively raised banks’ cash-reserve requirements
beyond the stipulated 22.5 per cent.”
Consumer-price growth eased to 16 per cent in July, the National Bureau of Statistics said last week.
“We thus find ourselves at a point where
government borrowing from the CBN is neutralised by raising the CRR of
banks, thereby limiting private-sector access to credit,” Salami said.
“In other words, the private sector is deliberately crowded out,” he added.
The CBN spokesman, Isaac Okorafor,
didn’t answer calls to his mobile or respond to a text message seeking
comment, Bloomberg reported.
Salami and another MPC member voted to
cut the policy rate at the July meeting, while the other six who were
present, including Emefiele, wanted to hold.
“Monetary policy management is presently about funding the federal government,” Salami said.
“Policy consistency and credibility
demand that the monetary policy rate be significantly reduced to reflect
the underlying preferences of policy managers,” he added.
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