By Kunle Oyatomi
My very good friend Jimoh Ibrahim once suggested that the Central Bank should print new money to bail out the economy from its credit and cash crunch.
I am aware that Jimoh is not an economist but he has recorded such huge success in business that he could be considered an “authority by practice” on economic and money matters.
There would have been no need for me to make public reference to Jimoh’s “advocacy”, but for the fact that governor of the Central Bank, Mr Sanusi Lamido Sanusi, has gone public to make his decision known that he will do what Jimoh Ibrahim had suggested – print new money to bail out the economy.
Like Jimoh, I am also not an economist, but based on the experiences of other African countries that have gone that route, I find it uncomfortable to buy into that risk.
In the days of Idi Amin, Uganda took the risk of printing new money to bail that country’s economy out of the doldrums. The exercise backfired so catastrophically, it has taken Museveni over two decades to right the disastrous consequences.
Robert Mugabe’s Zimbabwe is still stewing in the fire of economic wreckage which was exacerbated by the decision of that country’s Central Bank to print new money for the economy to bounce back. Each time Zimbabwe printed new money, the country’s currency drops in value. Today the Zimbabwean dollar can buy nothing anywhere in the world except in bales of the currency to buy a hamburger.
So the argument that Britain and America or any of the countries of the G8 decided to print money to get out of recession is no justification for us to do the same at this point in our own economic crisis. Our economy does not have the strength to absorb such risk.
The economy is in tatters, the infrastructure which can be relied upon for growth is non-existent, or is, at best, in a hopelessly bad shape. Where then is the back-up for such an exercise? This is too dangerous a risk to take.
And talking about risks, I understand that Sanusi is an expert in risk management. That is splendid, but his first risk-management portfolio as Central Bank governor is already turning problematic. The turmoil that exercise is already causing in the economy was least expected. His choice of options in the banking crisis appears to be springing backwards, if not already counter-productive.
With hindsight, it would appear that Sanusi has used a sledge hammer to kill a fly and in the process has smashed into smitterings the glass table on which the fly was standing. Now, that action has created a bigger problem; how to fit the broken glass together again. As a layman, I beg to disagree that the best option now would be to print new money. It is likely to send a more terrible signal out, worse than what occasioned Sanusi’s “damage control” trip to London, in the first instance!!
Now, we are beginning to get a sense of fear that, after all, this crisis in the banking sector could have been handled more skillfully to avoid the so-called tsunami that is doing so much more harm than good. We appear to be confronting a paradox here in which the best of intention is turning out to be a disaster. It could be that Sanusi’s actions were not thought through scientifically before it was executed.
Perhaps the public exposure of the crisis, through the demonstration of the banks’ CEOs and directors, would have been done as an internal exercise. After all, the crime of these executives are no less severe than the crime of bankers in the developed economies that crashed recently. Isn’t it reasonable to ask ourselves why these countries did not sack a single bank executive in spite of the magnitude of their perceived crimes? The case of a better choice of options?
Perhaps the statement of Ben Murray-Bruce of the Silverbird Organisation would give us some food for thought.
While opening the Silverbird Entertainment Centre in Abuja on Tuesday, Ben Bruce expressed his gratitude to Union Bank for the help it gave Silverbird Organisation in completing the Murray- project. And, for thoughtful effect, he said;
“I am saying this because they (the Union Bank) are facing some problems; but they helped financed this project. I thank them very well.”
Does that tell you the reader anything?
Kumasaka need not bring ABU and his discipline into this issue. Linking sound opinion of a lay man (as Kunle Oyatomi preferred to describe himself) with confused scholars view is unfortunate.
We need ask questions.
Can the economy absorb N400b printed cash?
What measures has CBN put in place to ensure that this fresh cash does not land in fast money spinning schemes but rather channelled to the productive sector?
What policy has Govt put in place to caution the effect of the devaluation of Naira that will result from the exercise?
Answers to these questions, from eminent scholars, should be used to evaluate the desirability or otherwise of printing such huge amount into the system.
Nigeria’s economy is the typical example of casino capitalism- simply recycling money via via banks and stock exchange with very little or no manufacturing base, highly dependent on importation of foreign goods, mono-economy that is oil and gas based and needs urgent diversification, lack of electricity which is the foundation for a strong manufacturing base, etc.
The UK, US, etc, could afford to print more money because they have strong manufactuing bases and balance of trade with other nations.
i bet him to print his Islamic emotions on paper and impose it on Nigerians in the South. he shld aid the print of money to ASUU, NASU, N.D.MILITANT , NLC min wage and others. So Help Him God
As a A.B:U. Zaria, Public Administration graduate,one of the functions of govt,is in stabilization of the economy, is by printing and minting money,this is simple and clear,I wonder how some confused economist would say it would create inflation…No,No,…,if the govt does not print money ,how will you fight poverty?,how will you create employment?…,I am grateful for the likes of CBNs ,Mr Sanusi, and myself, that if you dont print money to put in the common mans hands,there would be more instability in Nigeria like the Niger-Delta militants,Boko-Haram,and endless ASUU and NLC strikes,Please we need only clear headed educated people to lead Nigeria,and not confused half educated people.We are blessed in Nigeria to have the oil &gas,all we need are strategic planners to lift and move the country forward,not the I TO KNOW..(I.T.K),that always bring confusion and rubbish good policies,like Some Members of the House of Representatives.
I am very disappointed by this article.Does Vanguard not have a team of writers that can comment/write on money,financial and economic matters.For you to compare what Zimbabwe did to what the CBN and banks in Europe did is a shame.As a writer you should have researched the differences between the two before writing.Nigerians ride on sentiments instead of facts.Most Nigerians being intellectually poor,do not realise how important borrowing is to the economy.It is a healthy practice to borrow from banks.No modern economy can grow without credit facilities.I am deeply touched that the EFCC and CBN are chasing debtors and calling them thiefs.It is not a crminal offence to owe a debt no matter the amount.If the debts are not performing there are laid down rules on what to do and not to publish names.
Nigeria is like a playground sometimes.
A FAILED NATION.
Visiting finland’s President Tarja Halonen expressed shock on 10 March over the failure of Nigeria’s President Umaru Musa Yar’Adua to utilize the abundant sun in Nigeria to solve the nagging energy problem of the country.
Halonen challenged Yar’Adua to immediately initiate a programme that would convert the bright sunshine into a source of energy to meet the power needs of the nation. ‘I am surprised what your government is doing with the bright sun you have. You can convert your abundant sun into power,’ she said.”
Minister of the Federal Capital Territory (FCT), Senator Adamu Aliero described as shameful the continuous use of fire wood for domestic purposes by the citizens in spite of the huge oil and gas deposit in the country.
Aliero who also said that Nigerian power problem dated back the 60s, expressed concern over the inability of the past governments to evolve measures towards solving it.”
“The minister called on Finnish business community to come and invest in Abuja especially, in the areas of waste management and mass housing. He explained that the waste which is recycled in other countries for further use has, however, remained a waste product in FCT.”
“Halonen promised to get Finnish business men involved in waste management in Abuja.”
It is good enough that the writer on this topic wrote what he did. But personally, I you are giving warnings about such as thing as this, I expect more specifics on how practically, printing more currency could lead to economic downturn. We expect this warning to be based on facts that are measurable. You only mentioned of cases where it happened and how it turned bad, don’t you think there were instances where it could have turned good.
We need more contributions on this topic from economic scholars so that we can base the topic on identifiable, quantifiable fact before we can buy it.