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Printing more money can backfire

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?


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