The Governor of the Central Bank of Nigeria, Godwin Emefiele, has said it will be irresponsible not to finance the federal government when revenues drop.
Speaking in Abuja on Tuesday after the Monetary Policy Committee opted to hold the benchmark interest rate at 11.5% on Tuesday, Emefiele 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.
“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. “If government cannot finance all its obligations,” the central bank should offer support as a lender of last resort, he said.
Bloomberg reports that the governor’s comments appeared to contradict the position of Finance Minister Zainab Ahmed, who earlier this month said the government planned 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 monetization 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.