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By Nick Agule

Within the last week a war of words has ensued over the management of the Nigerian economy with Gov Obaseki of Edo State firing the first salvo by accusing the FG of the catastrophic management of economy alleging that the FG is printing money to fund federal allocations.

Nigeria’s Finance Minister Mrs Zainab Ahmed fired back in these words:
“The issue that was raised by the Edo State Governor, for me, is very sad because it is not a fact. What we distribute at FAAC is revenue that is generated and in fact, distribution of 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”.

Gov Obaseki returned fire that as an investment banker he stands by his words. This is how he put his rebuttal of the statement issued by the Finance Minister:
“The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed should rally Nigerians to stem the obvious fiscal slide facing our country. Rather than play the Ostrich, we urge the government to take urgent steps to end the current monetary rascality, so as to prevent the prevailing economic challenge from degenerating further. We believe it is imperative to approach the Nigerian project with all sense of responsibility and commitment and not play to the gallery because ultimately, time shall be the judge of us all.”
It became clear that between Gov Obaseki and the Finance Minister, one person was not telling the truth given that their views were diametrically opposed.

All this while as the crossfire raged, the CBN Gov was mute until he was captured on camera issuing threats to Gov Obaseki and other Govs who were bailed out in 2015/16 that recovery action will begin immediately against them if they don’t stop accusing the Govt of printing money! Instructively the CBN Gov did not outrightly deny that the Govt is printing money but did not concede either.

As pressure mounted on the FG specifically on the Finance Minister and the CBN Gov to come clean to Nigerians on what is actually going on, the CBN Gov finally caved in and conceded that Nigeria is printing money in a tweet issued on Friday, 16 April 2021 in the following words:
“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.”


Now that the FG has conceded that they are indeed printing money, let us therefore examine what this means from a layman’s point of view and the impact on our economy.

The CBN prints two types of money:

  1. Physical money – this is the bank notes and coins we use in buying and selling or saving at home. It’s also called cash.
  2. Digital money – this is money in our bank account.Thus you can have N1m with N100k in cash (physical) at home and N900k in your bank account (digital).

The printing of money in dispute here is the digital money not the physical cash. When Central Banks print digital money it is called Quantitative Easing (QE).

QE is a monetary policy tool that central banks use to inject money directly into the economy. So let us say the FG account at the CBN has a balance of N500 billion deposited by the revenue generation agencies of Govt such as the FIRS, DPR, NNPC, Customs etc. But this money is not enough for Govt to spend so the Govt asks the CBN to print money. The CBN simply credits Govt’s account with say N300 billion thus the balance in the Govt account is now N800 billion which Govt will now spend.


To be clear, there is nothing wrong with using QE. Govts all over the world use QE to jumpstart their economies. The US, UK etc Govts used QE in the 2008 economic crash and even more recently in the pandemic hit economies. So if QE is a known, tested and tried monetary economic policy tool, why was the Govt of Nigeria ashamed to disclose to the citizens that it was using QE? And even when they were exposed by Gov Obaseki, why was the Govt still denying until they were forced to concede?
The plausible answer is that Nigeria was making the wrong use of QE.

There are 2 halves to QE which are printing the money and using the printed money, if you don’t get the balance right then QE instead of helping to jumpstart the economy rather ruins it:

  1. Printing the money – by crediting the account of Govt at the CBN with money the Govt did not earn. It is just like you own a bank and you have an account with the bank but did not have money to spend, so you just call the MD of the bank and ask him to credit your account with N1 billion and you immediately see an alert of N1 billion and begin to pay your bills! This is the same thing the CBN is doing for the FG! This is one half of QE.
  2. The 2nd half of QE is how the money is spent. For QE to be effective, there are only restricted ways the Govt can spend the money on. This is because monies earned by Govt from economic activity is backed up with output. So the oil companies must produce oil for DPR to earn money. Oil must be sold for NNPC to earn money. Imports must be made before customs earn revenue. Companies must pay taxes for FIRS to earn money. All these monies are coming from output based economic activities. The difference with QE money is that it is not backed up with output, Govt just increases money supply by fiat and thus it’s a timebomb and if mishandled it will blow off the economy!

To avoid the QE timebomb from exploding on the economy, traditionally the Govts spend QE money in very restricted ways which include:
a. Buy back bonds – bonds are Govt’s debt instruments used in managing the economy. For instance, if there is high inflation (prices are rising because too much money is chasing too few goods/services), Govt in a bid to reduce the inflation will issue bonds. Those who buy the bonds give Govt money and hold the bonds which attract interest payments from Govt. Thus by Govt mopping money from people’s (individuals and companies) pockets, there is less money to spend and the less money that chases goods/services will result in price drop and thus inflation is contained.

The reverse is the case when the economy is down and the Govt wants to boost it. The Govt uses the money from QE to buy back the bonds. So bond holders will surrender the bonds back to Govt and collect their money back. With more money in people’s pockets, they buy more goods/services and this will encourage manufacturers and businesses offering services to produce more to meet up with the demand. The greater output means prices drop as more goods/services are now in the market! The economy is thus brought back to life!


b. Bail out the struggling productive sector of the economy – here the Govt uses the money printed by QE to bail out ailing industries suffering from the downtime in the economy so that with the new cash these industries will fund working capital to bounce back to business and boost their production. A boost in production means more jobs will be created as more factories reopen and service centres return back to life. The economy will then be jumpstarted back to life with increased output and jobs! The US for example used QE to bail out the banks, the auto industry etc during the crash of 2008 and Joe Biden has announced an infrastructure plan of $2 trn are some examples of Govts’ use of QE.

So why was the Nigerian Govt ashamed to admit they were using QE? Does it mean the Finance Minister was not aware of the sources of inflow into the federation account upon which she presides by saying the money was from the FIRS, NNPC, Customs etc and not from QE? Or was she fully aware that the federation account was being funded by QE but set out to deceive Nigerians and pull wool over faces? Either option does not look good on the Finance Minister.


The plausible reasons the Govt was ashamed to admit the use of QE is because while they are printing digital money which is the 1st half of QE, they are totally mismanaging the 2nd half because Govt is neither buying back bonds nor bailing out ailing industries with QE. Instead Govt is sharing the money to the 3 tiers/arms of Govt. And we know that the FG, States & LGs are not using the QE to buy bonds or bail out the ailing industries. The States and LGs are not even paying workers! Huge part of these monies end up being looted!

Let me illustrate what happens when QE is managed well and when it is mismanaged as follows:1. If QE is used rightly – it is a veritable economic management tool that jumpstarts comatose economies back to life. So let us say our economy produces 1,000 yams and money supply is N100,000, all the money will buy all the yams at N100 per tuber. Now if Govt adopts QE and prints N900,000 so that money supply is now N1 million and Govt uses the money to boost the agricultural sector by clearing the land, buying farm equipment and building processing plants, there will be a sharp rise in output to 20,000 yams. N1m will buy 20,000 yams at N50 per yam so price has crashed (inflation tamed) and jobs created because the workforce that will produce 20,000 yams will be more than the one that produced 1,000 yams! This is the beauty of QE when used for economic growth!

Lennox Mall
  1. However and tragically too, if QE is mismanaged, it spells a death sentence to an economy. Nigeria is mismanaging QE by distributing it to the 3 tiers/arms of Govt. These Govts are neither buying back bonds nor bailing out industries. The money is not committed to infrastructure either. Instead the money is used for consumption with a huge chunk looted into the private pockets of those with access to the treasury. This portends danger to the Nigerian economy because the scenario above is reversed in the case of the Nigerian economy.

Let us say that our economy produces 1,000 yams. Money supply was N100,000. All the money used in buying all the yams, a tuber of yam will cost N100. Let us say that through QE money supply has increased to N1,000,000 without an increase in the quantity of yams produced, it means a tuber of yam will cost N1,000. As Govt continues to print money without commensurate increase in output of goods/services, prices will continue to rise until one day you will need a bag to carry the money to buy a tuber of yam! This is what happened to Robert Mugabe’s Zimbabwe’s currency where at a point one needed 35 million Zim dollars to buy a loaf of bread!!! And the shops were even empty as not goods were being produced! This is where Nigeria is heading if the Govt continues on the trajectory they are on right now of printing money without boosting output. Already the impact of the mismanagement of QE is showing with Nigeria’s annual inflation reported to have climbed to a more than four-year high in March 2021, rising 82 basis points from a month earlier to 18.17%. Notably food inflation rose to 22.95% which is making it increasingly impossible for families to feed their children!!!

Constructive criticism is the one that comes with viable suggested solutions. When individuals or organisations are struggling financially, there are two ways open to them to drive out of the economic jam! First is to reduce cost and secondly is to increase revenue. This is like a double dose of vaccine to give Govt a fighting chance against infection of financial troubles. Therefore the following are the top 5 suggested economic management tools that are available to the Nigerian Govt to adopt to jumpstart the economy:

  1. Reduction in cost of governance – The Nigerian Govt must take immediate action to reduce the cost of governance. The Orosanye Committee which turned in an 800-page report with far-reaching recommendations on how Govt will reduce cost of governance must be immediately given full implementation. The Committee recommended the MDAs that should be scraped, those to be merged and those to become self-funding, thereby freeing funds for the much-needed capital projects across the country. The Committee also recommended the discontinuance of government funding of professional bodies and councils. Govt expenditure on things like sponsorship of pilgrimages must also be stopped immediately. The salaries of legislators, ministers and other top functionaries of Govt must be scaled down as with their convoys and other pecks of office. Govt must implement full e-govt to cut down on costs of travels, printing etc. Efficiencies in procurement activity must be generated to obtain best value for the least cost etc.
  2. Taxation of the rich – Nigeria is a country where the billionaires don’t pay taxes. All the market women, okada riders, farmers, artisans etc are made to pay taxes daily. Employees who are captured under PAYE also pay taxes monthly. The Billionaires with private jets are paying little or nothing. The FG at the highest level must summon all the billionaires in Nigeria to a meeting in the Villa and ask them nicely to go and pay their taxes else there will be enforcement action. This step alone which only requires an investment of 30 minutes of the President’s time will shore up Nigeria’s revenue by at least N5 trn!
  3. Stop the $1.5 billion PH refinery repair – Govt must stop immediately the planned rehabilitation of the PH refinery with a sum of $1.5 billion. Knowing that Govt projects are never delivered within budget, this rehabilitation may end up costing Nigeria $3-5 billion! The refinery can be sold as scrap for $1 (one dollar) to allow the buyers to bring in $1.5 billion to repair it. Govt must then convert the $1.5 billion into N570 billion (at N380/$) and invest the full money into agriculture in all the 774 LGs in Nigeria. N570 billion is N736 million for each of the 774 LGs in Nigeria. If Govt sinks N736 million into agriculture in every LG in Nigeria, so much food and cash crops will be produced, there will be plenty of jobs for the teeming youths too. Thus the economy will be jumpstarted and begin to grow astronomically as an output based economy and not QE which is like steroids!!!.
  4. Power – it is a shame that Nigeria as a nation well-endowed with one of the world’s richest deposits of gas reserves, takes pains to produce the gas and then sets the gas on fire instead of harnessing it for electricity generation. Qatar a country with 2.8 million people is generating 8,500 MW of electricity and Nigeria a country with 200 million people is generating only 4,000 MW of electricity. The minimum electricity generation required to support the Nigerian economy is 100,000 MW!!! Thus the huge power supply gap in Nigeria can never jumpstart the economy no matter the economic policies we put in place and no matter the qualification/experience of the economic managers we appoint. QE will not help an economy that is this abysmally poorly powered with electricity! The FG must immediately read the riot act to the oil companies to stop flaring Nigeria’s gas else they must shut down oil production. Govt must also take immediate steps to fully privatise the power sector to allow for investments to boost power supply and close the electricity gap!
  5. Rail – no economy will do well with the poor transport infrastructure that is obtained in Nigeria. The roads are not motorable but most importantly there is no rail transport in Nigeria. There is no reason not to have all the 36 capitals connected by rail today just for a start! The FG must take immediate steps to fully privatise the rail sector to allow investments to build and operate rail transportation to link all the cities, towns and villages in Nigeria. This will be a huge boost to the economy by making the movement of goods and people less cumbersome and far cheaper across the nation. It will also create millions of well paying and sustainable jobs for the teeming population of our unemployed youths.

If the FG follows the suggested solutions, the Nigerian economy will begin to explain astronomical growth and this will be real growth and not steroids which QE is. But if the Govt continues on the trajectory of printing money (QE) without output backed, we will be sure on the road to Zimbabwe and a catastrophic end to our economy. This must be avoided at all costs!!!

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