Emefiele justifies CBN printing more money to finance Nigeria
Nigeria central bank boss Godwin Emefiele has justified why the bank is printing more money to finance the federal government budget.
“If government cannot finance all its obligations,” the central bank should offer support as a lender of last resort, Emefiele said in a press briefing on Tuesday.
Emefiele is reacting to claims by a global rating agency, Fitch report.
According to Fitch, the repeated financing of the Federal Government’s budget deficit by the Central Bank through Ways and Means is a risk to Nigeria’s macroeconomic stability.
“It is unfair and very unfortunate that Fitch, which is known to be a first-class company, would hold such views on what we are doing,” Emefiele said.
He blasted Fitch Ratings for warning that rising central-bank financing jeopardizes the ability of authorities to tame inflation that hit a three-year high in December.
According to Fitch, the Central bank financing of the Nigerian government has tripled since 2015.
The governor’s comments appeared to contradict the position of Finance Minister Zainab Ahmed, who earlier this month said the government plans to limit the use of central-bank financing to cover a widening fiscal deficit.
Emefiele and Ahmed vowed to eliminate reserve-bank lending by 2025 in a letter of intent to the IMF before the release of $3.4 billion in emergency financing in April.
Deficit monetisation has helped fuel inflation and weaken the naira, which the government has also vowed to allow to float more freely.
The IMF and World Bank have said central-bank financing undermines confidence and hampers long-term investment.
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