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Still On Gov Obaseki’s Gaffe On CBN’s Monetary Policy Mandate

Since his re-election for a second term as Edo State governor a few months ago, Governor Godwin Obaseki, appears to have assumed the roles of the Peoples Democratic Party’s ombudsman in the manner the former Ekiti State Governor, Ayodele Fayose, played it in the hey days of the party’s domineering presence in the nation’s political landscape, by trying to rattle the current government on any policy measure it initiates to keep the economy going.

Yes, to some observers of the circumstances that led to Governor Obaseki’s ‘crossing to the other side’ before the last governorship election in Edo State, his disqualification by the ruling All Progressives Congress (APC) party based on the frivolous allegations concocted by the then party chairman, Adam Oshiomhole, and his cohorts was most unreasonable and condemnable. But then, as Edo People have shown, through the ballots, that Governor Obaseki remained their preferred choice amongst other cnadidates, he is expected to still stand for all things that would benefit the Nigerian socio-economically deprived masses.

Ironically, rather than learn from his political travails and use the opportunity availed by divine fate and the goodwill of the people of Edo State to champion the cause of ordinary Nigerians who, over the past decades, have been at the receiving end of Nigeria’s democratic adventures based on their worsening socio-economic conditions, Governor Obaseki has, by his latest comments on the Central Bank of Nigeria’s (CBN’s) monetary measure of printing money, exhibited his recent penchant for politicizing issues of interest to ordinary Nigerians.

Quite amusingly, he rose in the toga of a political demagogue to condemn in insinuating tone the apex bank’s policy measure, saying that it printed N60 billion to supplement the FAAC allocations to states in March, without having infallible data to support his claims.

Citing the rising national debt stock as the basis of his argument, Obaseki said: “When we got FAAC for March, the federal government printed additional N50-N60 billion to top-up for us to share.

“This April, we will go to Abuja and share. By the end of this year, our total borrowings is going to be within N15-N16 trillion. Imagine a family that is just borrowing without any means to pay back and nobody is looking at that, everybody is looking at 2023, everybody is blaming Mr. President as if he is a magician.”

Although the fiscal and monetary authorities have debunked his claims with the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, describing Obaseki’s figures as untrue and a figment of the governor’s imagination.

She clarified: “The issue that was raised by the Edo State Governor for me is very, very sad because it is not a fact.

“What we distribute at FAAC is a revenue that is generated and in fact distribution revenue is a public information. We publish revenue generated by FIRS, the customs and the NNPC and we distribute at FAAC. So, it is not true to say we printed money to distribute at FAAC, it is not true”, the minister maintained.

As expected, the apex bank has , along with other dispassionate economic analysts, defended its monetary policy measure, describing it as a desirable step towards sustaining the modest growth trajectory of the nation’s economy, following its recent recovery from recession.

It clarified: “The concept of printing of money is about lending money and that is our job. It will be irresponsible for the CBN or any Central Bank or Fed to stand idle and refuse to support its government at a time like this.”

Our point in this piece is that if the concern raised by Governor Obaseki had been made by any of his political colleagues (governors) with little or no knowledge about the nexus between a nation’s monetary policies and its politico-economic wellbeing, one would not have bothered as opinion, as they say, is free. But coming from an investment banker, seasoned financial system analyst and political leader, the comments cannot but elicit some corrective reactions in the form of this piece.

We are not in the camp of some rabble rousing commentators who, in the past few days, have spoken from the two sides of their mouths in their reactions to the Governor Obaseki’s pesky jab on the apex bank’s leadership but we stand on the side of truth and like to make some remarks on the raging controversies.

First, we strongly believe that the Central Bank of Nigeria has, in the past few years, not only played its statutory roles with uncanny commitment and patriotic zeal by supporting the present government’s with appropriate monetary policies and other regulatory guidelines to grow the economy by proactively managing lending to critical sectors and the national and sub-national governments, but also intervened, in some cases when the APC-led administration makes some fiscal mistakes, with appropriate policies to stabilize the economy.

These proactive measures by the Board and management of the apex bank have helped in taming the menace of rising inflation, curbing financial system frauds, boosting the foreign reserves, and ensuring the nation’s financial system stability, amongst other constitutional responsibilities it has played in these times of national economic turmoil linkable to the COVID-19 pandemic and other fiscal-policy blunders of the government

But for the CBN-initiated measures, pulling the nation’s out of the doldrums after plunging down the recessionary abyss within a year would not have been possible. Today, the Godwin Emefiele-led the apex bank is stronger and better positioned to play its constitutional responsibilities given the level of the investment in critical hi-tech infrastructure, the quality of its manpower and its customer-centric communication system, amongst other assessment criteria.

Now appraising the issue raised by Governor Obaseki on borrowing to ensure that the Federation Account and Allocation Committee (FAAC) could meet its fiscal obligation to the states, we strongly feel that if the sub-national governments had created enabling environment for businesses to thrive in their domains and also given more attention to their Internally Generated Revenue (IGR) drives, the states’ over-dependence on federal allocations to meet their funding needs would have been reduced to the barest minimum.

Again, if the governors had been proactive in fiscal matters, the apex bank would not have further been burdened by giving them loans and such funds would have been deployed to other needy areas with potential for improved job creation and Gross Domestic Product (GDP) growth for the country.

As it is now, the state governments are suffering from what could be termed fiscal sluggishness and accentuating the increasingly worrisome inflation level in the economy by depending on borrowing to fund their needs. If the governors wake up from their politically-induced slumber and, like a desperate fighter, pursue with diplomacy and fiscal aggressiveness the drive for improved IGR, the costs associated with borrowing to loan them money from the CBN vault and wastages associated with their monthly fiscal jamboree in Abuja to share money would be drastically reduced.

If they rake in more IGR and and still be able to retain old businesses and attract new ones into their domains, the CBN will be saved the burden of ‘printing’ more money with the attendant positive implications for the economy as the money in circulation will be less and the apex bank will be saved the time of dealing with excess liquidity problem, the main catalyst for surging inflation.

From the foregoing, we are of the view that the answer to the problem of printing more money or borrowing in order to bail out state governments from financial crisis remains in the state governors, including Governor Obaseki, to explore the IGR opportunities in their domain for socio-economic benefits.

This option was canvassed by the Executive Chairman of the FIRS, Mr. Muhammed Nami, a few days ago during the Technology and Tax Event for Heads of State Inland Revenue Services organised by the Nigeria Governors’ Forum, in partnership with the World Bank and the International Centre for Tax and Development (ICTD), to support a learning ecosystem for tax administration in Nigeria.

We wish to conclude this editorial piece by aligning our position with Professor Lanre Olaniyan’s stance on the raging money printing controversy. The seasoned academic and professor of Economics, had on Tuesday while interacting with journalists in Abuja, supported the apex bank’s policy in view of the positive implications for the nation’s economy.

He said: “This happens virtually all over the world. The money is not always printed as cash. Sometimes, it just refers to ‘creation of money’ for government. Cash is only involved when and if the cash reserve is very low.

“But the big issue is that any money that is printed to support government is a loan. It is not a free gift. It appears in the balance sheet as loans given to government.

“I do not know for sure whether or not the CBN printed money, but there is nothing wrong if it did. It is the duty of the CBN to print money, and virtually, every central bank in the world prints money. Apart from the reason of shortage of cash or replacing mutilated cash in circulation, the CBN can print money to give loan to government”, Olaniyan argued.

With this ‘big oracle’ justifying the apex bank’s printing of money, we can only advice Governor Obaseki and other governors to do the needful by boosting their IGR in order to reduce their ‘parasitic drain’ on the country’s meagre resources.

To other stakeholders in the nation’s economic space, the best road to ply in our collective drive to re-position the nation’s economy on the path of sustainable growth is for us all to join our hands with the Godwin Emefiele-led team’s in its efforts to use monetary policies and regulatory guidelines to keep the nation’s economy afloat in the increasingly ‘stormy’ waters the COVID-19 pandemic and other challenges have pushed the global economic system into for now.

Yes, some of the CBN’s policies may not be perfect but well-informed suggestions and recommendations to improve them when channeled through appropriate communication channels, not in the manner Governor Obaseki offered his own, will go a long way in helping Godwin Emefiele and his team to get it right and avoid creating the impression in the eyes of the public, particularly the global community, that all is not well with Nigeria’s monetary system.

By Tola Akinmutimi, an economic analyst, sent this piece from Abuja

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