Nigeria Central Bank’s Acting as Piggy Bank, MPC Member Says

September 26, 2017
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Meanwhile in Africa, the old games between government and central banks continue.

In Nigeria, an MPC member accuses the central bank funding govt’s deficits calling former a piggy bank!

Nigeria’s central bank is acting like a “piggy bank” with its funding of the government, according to a member of the Monetary Policy Committee who said he struggles to understand the regulator’s economic rationale.

 Monetary data showed a “sharp rise” in the Central Bank of Nigeria’s financing of the government deficit this year, Doyin Salami said after the MPC’s July 24-25 meeting, according to a central bank statement published Tuesday. The regulator’s claims on the government had risen “twenty-fold” to 814 billion naira ($2.26 billion) from the end of 2016, while its purchases of government T-bills increased 30 percent to 454 billion naira, he said.
 “It is clear that the CBN has provided piggy-bank services to the federal government,” Salami said. “Whilst I still wonder what the underlying economics is, I sincerely hope it works.”
The MPC statement is here and the statement of the member is on page 36:
Perhaps the most challenging of the present characteristics of the economy in Nigeria is the adoption of a quantitative easing stance by the management of the Central Bank. Monetary data shows a sharp rise in the extent of CBN financing of the government deficit.
Highlights  of CBN financing of the Federal Government since Dec. 2016 are as follows–
  • CBN‟s claims on Federal Government (FG) at N814bn is twentyfold higher while the claims of Commercial Banks rose marginally by 0.4% to N4.6 trillion;
  •  30.0 per cent increase to N454bn in CBN‟s purchase of government T-Bills;
  • 5percent increase in FG Overdrafts to N2.8 trillion; and 
  • Increase in the „mirror account‟ from N3 billion at the end 2016 to N1.5 trillion in April 2017.
It is clear that the CBN has provided „piggy bank‟ services to the Federal Government.
That is some statement to make!
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