The Central Bank of Nigeria (CBN)
recently printed and injected N500b into the Nigerian economy, our
investigations can exclusively reveal. This is despite concerns that
such a move will only fuel inflation in the Country.
Our source, a Director at CBN who asked
not to be named, indicated that the move was initiated by the Buhari
administration to combat the liquidity crunch currently plaguing the
country.
“The money was printed and used in purchasing a number of government
bonds. It is part of a test phase for a government policy to stimulate
the economy. By buying up government/corporate bonds, CBN aims to
increase the value of the bonds while keeping long term interest rates
down.” he said.
“This would make more money available to private banks, who would then be able to loan money at lower interest rates.” he added.
However, our source went on to say that
this policy runs the risk of making inflation worse. “Everyone knows
that the Nigerian Bureau of Statistics (NBS) puts the inflation rate at
18.3% as at end of October 2016. Such a policy runs the risk of spiking
inflation even further.”
He refused to give a definitive answer as
to whether the policy would be successful or would lead to greater
economic challenges.
An analysis by our in-house economic team
raised concerns about the ability of the current administration to
implement such a risky policy successfully. Of particular concern was
the ability of the government to mop up such excess funds if the economy
recovers.
Our economic analysts also raised
fundamental concerns about the ability of the government to implement
such a high risk policy without negative consequences knowing that such a
policy would require attention to detail, firm and speedy decision
making, and economic nous the sort of which the administration has not
yet displayed in its management of the Nigerian economy.
They referred to the collapse of economies in Venezuela, Zimbabwe and
Uganda during the tenure of the dictator – Idi Amin Dada as evidence of
how the implementation of such a policy could destroy an economy. - LNg
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