The Minister of Finance and Coordinating Minister of Economy, Wale Edun, has attributed Nigeria’s current hyperinflation crisis to the excessive printing of currency by the Central Bank of Nigeria (CBN) between 2015 and 2023.

Edun made these remarks during an interface with the Senate Committee on Finance, shedding light on the dire consequences of the reckless printing of trillions of naira without corresponding productivity measures.

During the session, Edun highlighted that the staggering sum of N22.7 trillion printed through Ways and Means overdraft for the Federal Government during the said period had landed Nigeria into the bedlam of hyperinflation it faces today. He noted that the printing spree was not matched with productivity, exacerbating the inflationary pressures gripping the nation.

Edun said, “We talked about inflation, and you have helped to solve that. Where has it come from?

“It came from eight years of just printing money not matched by productivity. It’s not like when you earn dollars, and you free the naira alongside it, although there’s even a better way than that. But that’s still not as bad.”

Edun’s disclosures come on the heels of the Senate’s resolution to probe the N30 trillion Ways and Means expenditure by the previous administration, which it deemed as reckless spending. The Minister pointed out that the unrestrained spending of the overdraft acquired from the CBN, under the tenure of Godwin Emefiele, significantly contributed to the prevailing food and security crises in the country.

“It’s not as if the money is matched by productivity increase in output. It is not. And what happened was that for eight years, the weak were left to their own devices. It is the privileged few that took everything,” Edun told the committee.

Acknowledging the Senate’s role in addressing the inflationary challenge, Edun outlined the government’s plan to raise N7 trillion to repay the Central Bank and stabilize the economy. He pledged to conduct a comprehensive audit of the aimless printing of N22.7 trillion, underscoring the administration’s commitment to accountability and fiscal prudence.

“You distinguished senators have helped. You have given us the mandate to raise N7tn, which we will do by sucking money from the market, using it to pay back the central bank and giving the government a balanced book. We are going to audit even the N22.7 trillion printed aimlessly,” he said.

Despite the grim economic situation, Edun expressed optimism regarding the government’s damage-mitigating policies, assuring that they would yield positive outcomes in terms of lower inflation rates and improved GDP growth. He lauded President Bola Tinubu-led government’s efforts in revenue generation, citing over N13 trillion generated from the non-oil sector in 2023.

“We should not be despondent. We have done the hard part. Mr. President, through the bold and courageous measures which are recognized around the world as being beyond the usual, what you would normally see.

“To so riskily and robustly change the things that are wrong. And it wasn’t just a set of measures. It’s not just lifting of subsidy here or margin of rates there. No. It is a strategic plan, the whole fiscal side, the government’s finances have been repaired,” he said.

The minister added that, with the help of the Senate, the federal government has increased revenue generation by blocking leakages orchestrated by import duty waivers,

“You, distinguished senators, have helped further to encourage and enroll the executive to further repair the finances, the fiscal situation of this country by endorsing and urging us to do something about the leakages in the import duty, waiver system. And we have explained to you what we will do. And even from your body language, I believe you feel that that is in the right direction,” he stated.

In his closing remarks, Senator Sani Musa, Chairman of the Committee, affirmed that the interactive session would be an ongoing exercise to monitor the government’s short-term and long-term plans to navigate out of the current economic predicament.

The present government faces the daunting task of restoring stability and confidence in the economy as Nigeria grapples with the repercussions of unchecked money printing under the past administration. Economists note that with concerted efforts and prudent fiscal management, there remains hope for a brighter economic future, albeit with considerable challenges ahead.

Remember your neighbour as Nigeria’s “Main street” is struggling even as the Broad street people (stock market,  banks, mega investors) are having great moments: “In a sobering report released by the Manufacturing Association of Nigeria (MAN), the state of the manufacturing industry paints a grim picture as the country’s economic challenges escalate.

“According to the findings, a staggering 767 manufacturing companies closed their doors in 2023, while an additional 335 faced severe distress. This unsettling trend, the report said, stems from a confluence of economic hurdles, including exchange rate volatility, escalating inflation, and a general deterioration of the investment climate.”

I remain bullish on Nigeria because it will rise. But we need to look at our policies to accelerate that ascension. According to MAN, “the capacity utilization in the [manufacturing] sector has declined to 56%; interest rate is effectively above 30%;…” 

Nigeria has a huge inflation and that continues to drive the benchmark rate hikes by the central bank. The question now is this: have the rate hikes been effective? I think using rates the way we have used them has not worked because Nigeria’s economy is not “typical”; we have many fudge factors which require trying new things.

I posit that Nigeria’s inflation is as a result of Supply scarcity, not due to excess cash. If that is so, when we raise benchmark rates at the central bank, we are effectively raising interest rates on companies which are the main vehicles to boost Supply since consumer lending in Nigeria is so small that rate hikes hardly affect consumer spending (i.e. the Demand side is hardly affected with rate hikes). (This contrasts with US, Uk, etc where they have credit cards, which on high prime rates, set by their central banks, could affect consumer spending at scale)

I wish there could be an experiment on my thesis where the Central Bank of Nigeria will select Ovim, Abia State, to reduce benchmark rates, in a walled way,  making it possible for companies to access bank loans at 9%. I am confident that Supply of products and services  will increase through improved production even as Demand remains the same as consumer lending in Ovim is negligible. If that should happen, ceteris paribus, inflation will drop in Ovim since we will have more goods.

MAN Statement:

The imposition of EEL poses a potential impact on the manufacturing sector and the economy at large. This will in turn mark an unwarranted and unprecedented addition to the cost of doing business in Nigeria, especially to manufacturers.

“The manufacturing sector is already beset with multidimensional challenges. In the year 2023, 335 manufacturing companies became distressed, and 767 shut down.

“The capacity utilization in the sector has declined to 56%; interest rate is effectively above 30%; foreign exchange to import raw materials and production machine inventory of unsold finished products has increased to N350 billion and the real growth has dropped to 2.4%. Expatriates in Nigeria currently pay more than $2000 for CERPAC. The sector cannot afford another disincentive to increased investment and portfolio expansion.”

Remember your neighbour as Nigeria’s “Main street” is struggling even as the Broad street people (stock market, banks, mega investors) are having great moments: “In a sobering report released by the Manufacturing Association of Nigeria (MAN), …a staggering 767 manufacturing… pic.twitter.com/vKRyh0vRhU

— Ndubuisi Ekekwe (@ndekekwe) March 7, 2024

Comment on Feed: Ndubuisi Ekekwe maybe this will give better perspective to what informed CBN decision on tackling inflation. You can see the figures for money supply which has moved from 26.7T as at January 2019 to 93.7T as at January 2024. The currency outside bank from 1.7T to 3.2T within the same period. Many of the funds disbursed as intervention loans are never repaid. Net domestic credit from from about 28T to 113T during the same period out of this credit to private sector moved from about 22T to over 76T. Figures, figures, figures………don’t lie. These funds are in the system but in few hands.

My Response: That does not matter. They raise rates today, they do Ways and Means which is another name for printing money the next day. What they’re taking from rates, they are injecting via Ways and Means. So, that is why it is not working.  They need to try another hypothesis.

In a sobering report released by the Manufacturing Association of Nigeria (MAN), the state of the manufacturing industry paints a grim picture as the country’s economic challenges escalate.

According to the findings, a staggering 767 manufacturing companies closed their doors in 2023, while an additional 335 faced severe distress. This unsettling trend, the report said, stems from a confluence of economic hurdles, including exchange rate volatility, escalating inflation, and a general deterioration of the investment climate.

The repercussions of these adversities have been profound, significantly hampering the performance and sustainability of the manufacturing sector, a vital component of Nigeria’s economy.

Among the myriad challenges faced by manufacturers, the recent introduction of the Expatriate Employment Levy (EEL) by the Federal Government has sparked considerable consternation. Under this levy, companies are required to pay $10,000 for staff and $15,000 for directors, representing a stark escalation from the previous $2,000 fee for the Combined Expatriate Residence Permit and Alien Card.

In the words of a MAN spokesperson, “The imposition of EEL poses potential impact on the manufacturing sector and the economy at large. This will in turn mark an unwarranted and unprecedented addition to the cost of doing business in Nigeria, especially to manufacturers.”

The EEL, seen as a counterproductive measure, threatens to compound the existing challenges faced by manufacturers, further squeezing their already thin margins. With the manufacturing sector reeling from a decline in capacity utilization, which has plummeted to a mere 56%, coupled with skyrocketing interest rates and a scarcity of foreign exchange essential for importing raw materials and machinery, the introduction of the EEL adds insult to injury.

Moreover, the sector grapples with an inventory of unsold finished products valued at a staggering N350 billion, alongside a sobering drop in real growth to 2.4%.

Beyond its domestic ramifications, MAN warns of potential conflicts between the EEL and Nigeria’s international trade agreements, such as the African Continental Free Trade Area agreement. The levy’s imposition could incite retaliatory measures against Nigerian expatriates working abroad, impede regional integration efforts, and tarnish Nigeria’s standing on the global stage.

In response to these pressing concerns, MAN has issued a fervent appeal to President Bola Tinubu, urging a reconsideration of the EEL’s implementation. The association notes the grave repercussions of this levy on the manufacturing sector and the broader economy, advocating for its discontinuation to avert further distress within the sector and align with the overarching objectives of economic growth and development in Nigeria.

MAN advocates the urgent need for decisive and proactive measures to alleviate the burdens weighing down the sector, noting that only through concerted efforts and prudent policy interventions can Nigeria’s manufacturing sector regain its footing and contribute meaningfully to the country’s economic prosperity.

MAN’s full statement:

“The imposition of EEL poses a potential impact on the manufacturing sector and the economy at large. This will in turn mark an unwarranted and unprecedented addition to the cost of doing business in Nigeria, especially to manufacturers.

“The manufacturing sector is already beset with multidimensional challenges. In the year 2023, 335 manufacturing companies became distressed, and 767 shut down.

“The capacity utilization in the sector has declined to 56%; interest rate is effectively above 30%; foreign exchange to import raw materials and production machine inventory of unsold finished products has increased to N350 billion and the real growth has dropped to 2.4%. Expatriates in Nigeria currently pay more than $2000 for CERPAC. The sector cannot afford another disincentive to increased investment and portfolio expansion.”