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Can Printing More Money Make Poor Nations Richer?



Printing More Money

It seldom works when an entire country attempts to get wealthy by creating more money. Everyone has more money, thus prices will rise. And individuals are finding that they need more and more money to buy the same number of products as they did in the previous years.

As a result of the recent printing of additional money in Zimbabwe and Venezuela in South America, both nations’ economies grew.

Due to increased printing, prices began to rise at an alarming rate and these nations began to experience “hyperinflation.” It’s at this point when costs skyrocket.

During Zimbabwe’s 2008 hyperinflation, prices increased by 231,000,000% in one year. Imagine that a candy that cost one Zimbabwe dollar before inflation now costs 231 million Zimbabwean dollars.

Considering the amount of paper used, it’s likely that the banknotes printed on it are worth more.

For a country to get wealthy, it must produce and sell more products and services. Printing additional money for people to buy those extra items is now secure.

A country’s prices will rise if it prints more money without producing more goods. Those old Star Wars toys from the 1970s, for example, can be quite valuable.

These models are no longer produced. As a result of this, the vendors will just raise their prices.

Only one country can become richer by printing more money at the present, and that’s the United States of America (a country that is already very wealthy).

Most precious commodities, such as gold and oil, are valued in US dollars. The main idea behind this is that the US dollar is a more stable currency than other country’s national currencies.

That’s because investors and those people who are involved in the Forex market are investing more money in USD.

In order to learn more about the dollar and the reasons why traders invest more money in the mentioned currency, you need to understand the meaning of bid price in Forex, which is one of the commonly used terms in Forex trading.

The bid price shows the dealer’s willingness to pay for the asset, whereas the dealer’s willingness to sell it is the asking price. As the dollar can be used, like gold, to hedge against inflation, many investors are ready to pay a certain amount of money. That amount of money is also known as, as already mentioned, bid price.

If the United States wishes to buy more items, it can simply create more dollars to do so.

Rather, consumers will trade items for other goods, or seek to be compensated in US dollars in lieu of foreign currency. In Zimbabwe and Venezuela, as well as in many other nations, hyperinflation took place.

For example, Venezuela enacted regulations to keep food and medical prices low to safeguard its people from hyperinflation. The stores and pharmacies just ran out of such items.

While a country cannot get wealthy by creating money, this is not true. Money shortages prevent firms from selling enough or paying all their employees. Even banks are unable to lend money because people do not have any.

When more money is printed, individuals can spend more, which allows firms to create more, resulting in more items to buy, and more money to buy them with.

During the global financial crisis of 2008, banks lost a lot of money and were unable to give it to their clients. To their advantage, most nations have central banks, which assist to manage the other banks, and they issue more money to get their economies back on track again.

Prices fall because there is not enough money, which is a terrible thing. But when there isn’t greater output, printing more money causes prices to rise, which may be just as terrible. “Dismal science” has been used to describe economics – the study of money, commerce, and business.

Problems Caused by Printing More Money

Poor countries could not get wealthy by printing additional currency. This is known as “Inflation”. If you believe that the issuing government will not fail, then your currency has value. In the past, the United States currency was a “gold standard”. A dollar was no longer merely a piece of paper; it could be exchanged for its equivalent value in gold. Having abandoned that standard, our currency is depreciating in value as they create more money.

Consequently, inflation will skyrocket and the value of money will plummet. It’s simple to suggest that we can create more money and grow affluent, but in reality, the country will become even poorer as a result of this strategy.

Everyone knows what occurred to Zimbabwe as a result of the election results. One loaf of bread or one egg costs a lot of money. Each egg cost them $1,000,000 Zimbabwean dollars. To borrow money from the World Bank is always preferable to creating money, which will lead to a huge economic catastrophe.

Lots of money doesn’t necessarily translate into a lot of wealth, and vice versa. Economics depends on human needs, which are inexhaustible; everyone has something they want. There are, however, limitations to desires due to limiting resources like labour.

The price of milk and sugar, for example, has skyrocketed, now costing thousands of dollars instead of its regular price, if everyone was a billionaire; therefore, millionaires would spend hundreds of thousands for someone to mow their lawns.

Not money, but wealth, is what needs to be increased. A country’s economy can flourish by increasing the number of finite resources it possesses, such as labour. For example, China’s economy flourished as wealth was produced.

Global governments have spent billions in response to the COVID-19 epidemic this year — billions that many politicians argued nations didn’t have or couldn’t afford before the pandemic hit.

To pay for their policies, why can’t governments merely print money?

Inflation is the quick answer.

It’s been proven time and time again that when governments create money, prices rise because there are too many resources competing for too few commodities. Many people find that they can no longer purchase basic necessities since their salaries are rapidly devalued.

According to some estimates, monthly inflation in Zimbabwe throughout the 2000s surpassed 80 billion %. In the end, the native currency was replaced with the US dollar.

For example, in Germany during the 1920s, people were seen wheelbarrowing cash to stores to pay for basic necessities. Although the spiralling costs at the time had more to do with the punitive reparations payments than with money printing, it nevertheless shows the issue well.

In addition to this, governments cannot simply create additional money to pay off debt and fund spending since they are not in command of the money printing process.

Central banks, such as the US Federal Reserve, the Bank of England, and the European Central Bank, are in charge of regulating the money supply in most industrialized countries. However, central banks are autonomous of the government, even if they occasionally work together.

A decade ago, central banks printed billions through quantitative easing, which was intended to stimulate the economy.

Because they’re purchasing debt, central banks are freeing up capital that may be used for other purposes, such as investing in businesses or innovative technologies.

Central bankers, on the other hand, are solely concerned with the health of the economy and not with larger government issues like defence, education, and healthcare.

The central bank’s direct financing of the government might also cause international investors to lose faith in a country’s economy. To measure the size of an economy, money supply and exchange rates are used. Isn’t it almost like a snake devouring its own tail if central banks are just pumping out more money to pay off debt? As a result, a country’s currency value would plummet, making everyone in the country worse off.

Is Inflation Bad?

Depending on who you ask, inflation may be a sign of a failing economy or one of prosperity.  It’s basically simply a new way of describing what inflation is. Due to a rise in prices, inflation reduces the buying power of cash. In the early years, a cup of coffee was priced at several cents. In today’s market, the price is closer to $3.

An increase in coffee’s popularity, price pooling by coffee growers, or years of catastrophic drought, flooding, or violence in a key growing region might all have contributed to a price increase. Prices of coffee goods would go up in these situations, while the rest of the economy would remain relatively the same. However, in this case, only the most caffeine-addled customers would see a considerable decrease in purchasing power.

There is a well-known pattern of people buying more now rather than later when their purchasing power declines. For this reason, it is best to get your shopping done early and stock up on items that are unlikely to depreciate in value.

Consumers must fill up their petrol tanks, stock their freezers, buy shoes for their children in the next size up, and so on and so forth. As a result, firms must make capital investments that, under other conditions, could have been put off until a later time. However, the short-term volatility of these assets might negate the benefits of being protected against price increases.

A surplus of cash is created as consumers and companies spend faster in an effort to decrease the amount of time they retain their depreciating money. So, as the supply of money increases, so too does the demand for it, and the price of money—the buying power of currency—declines at an ever-increasing rate.”

Hoarding takes over when things become truly bad, and grocery store shelves are left bare as a result. In a state of desperation to get rid of their cash, people spend their paychecks on everything they can get their hands on – as long as it’s not dwindling in value.

Using monetary policy, the U.S. government has managed inflation for the last century. The Federal Reserve (the U.S. central bank) relies on the connection between inflation and interest rates in order to accomplish its job. For example, corporations and individuals can borrow inexpensively to establish a business, get an education, recruit new employees or buy a beautiful new boat. In other words, low interest rates stimulate consumers to spend and invest, which in turn tends to fuel inflation.

It is possible for central banks to dampen these animal spirits by boosting interest rates. That boat’s or that company’s monthly payments look a bit excessive now, don’t they? In general, central banks do not want money to grow more valuable, as they dread deflation almost as much as they fear hyperinflation, despite the fact that scarcity enhances its worth. If inflation is to be kept at a target level, they will pull the interest rates in either way (generally 2 per cent in developed economies and 3 per cent to 4 per cent in emerging ones).

The money supply is another method to look at central banks’ involvement in managing inflation. Inflation occurs when the amount of money grows faster than economic growth. To pay for its World War I reparations, Weimar Germany revved up the printing presses, much as Habsburg Spain did in the 16th century with Aztec and Inca gold.

It’s not uncommon for central banks to boost interest rates by selling government bonds and removing the revenues from the money supply.

With no central bank or central bankers who are accountable to elected governments, borrowing rates will often be lowered by inflation

Let’s say you borrow $1,000 at a 5% yearly interest rate. A 10 per cent increase in inflation means that your debt’s real worth decreases faster than the interest and principal you’re paying off combined. A high amount of household debt encourages politicians to print money, fueling inflation and discharging voters’ debts. Because of this, politicians are considerably more motivated to create money and use it to pay off debt if the government is highly indebted.

Even though the Federal Reserve is mandated by law to promote maximum employment and stable prices, it does not need legislative or presidential approval to set interest rates. That does not mean, however, that the Fed has always had a free hand when it comes to policymaking. According to Narayana Kocherlakota, the former Minneapolis Fed president, the Fed’s independence is “a post-1979 phenomenon that relies primarily on the president’s discretion.”

Unemployment can be reduced by inflation, as evidenced by a few studies. It is common for wages to be “sticky,” meaning that they do not respond quickly to economic developments. According to John Maynard Keynes, the Great Depression was a result of wage stagnation. Because workers rejected salary cutbacks and were dismissed instead, unemployment soared (the ultimate pay cut).

If inflation reaches a particular level, businesses’ real payroll expenses decline, allowing them to recruit additional workers.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via

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Geregu Power Listing Will Attract Other Electricity Firms to Stock Exchange—Mahmood



Geregu Power Listing

By Dipo Olowookere

The chairman of the Nigerian Exchange (NGX) Limited, Mr Abubakar Mahmood, has described the listing of the shares of Geregu Power Plc on the platform as a good development as it will attract other electricity firms to the stock market.

On Wednesday, October 5, 2022, Geregu Power listed its stocks on the bourse, increasing the market capitalisation of the exchange by N250 billion following the listing by introduction of 2.5 billion ordinary shares at N100 per unit.

Business Post gathered that the NGX placed Geregu Power under the Utilities sector and Electric Power Generation sub-sector, with the trading symbol GEREGU.

The Geregu Power listing today made the company the first power generation company (GenCo) in Nigeria to be listed on the NGX main board, a listing segment for well-established companies with demonstrable records of accomplishments.

“We are particularly pleased that Geregu Power has joined the prestigious group of companies listed on our main board, which will differentiate it as a professionally run power company with high standards, having met NGX’s listing criteria.

“The main board listing is a sign of commitment to strong corporate governance, excellence, professionalism, service delivery efficiency, and increased returns to shareholders.

“We expect that the Geregu Power listing will encourage other power generation and distribution companies to list their shares on the exchange, thereby opening the sector up to cheaper, long-term capital that will boost infrastructural development and value creation,” Mr Mahmood said in his speech to welcome the new company on board.

On his part, the Chief Executive Officer of NGX, Mr Temi Popoola, described the listing of Geregu Power as “a promising development in the country’s power sector.”

“We are delighted to welcome Geregu Power Plc to the exchange. Having Geregu listed in our market proves NGX’s commitment to building a robust and inclusive market and creating avenues for sustainable investment.

“This listing will enhance liquidity for Geregu, increase its visibility among global investors, elevate its value and boost transparency, as our marketplace is a sterling platform for raising capital and enabling sustainable growth for national development.

“As a listing platform of choice, we are committed to working with companies at various stages of growth to explore the different opportunities in the capital market to meet their business objectives,” Mr Popoola added.

The chairman of Geregu Power, Mr Femi Otedola, stated that, “The listing of the company was the actualisation of a vision to bring world-class standards in governance, sustainability, and business processes to the company and the Nigerian electricity sector.”

He added that “listing on the exchange’s main board will ensure that the long-term growth of the company is assured and its benefits will be passed on to our esteemed shareholders.”

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Agusto Forecasts Nigeria’s Pension Assets to Grow to N14.8trn Amid Headwinds



Nigeria's pension assets

By Adedapo Adesanya

Global research firm, Agusto & Co, has forecast that Nigeria’s pension assets will reach N14.8 trillion by the end of 2022.

This is as unpaid pension obligations by some employers, enrolees’ apathy toward the transfer of Pension Fund Administrators (PFAs), and the ability of industry operators to protect the value of pension funds in the face of deteriorating macroeconomic conditions, particularly a weakening exchange rate and soaring inflation, are at the heart of the industry’s current problems.

Agusto noted that in the last decade, the 628 per cent surge in the size of pension fund assets to N14.27 trillion is indicative of the industry’s growth and evolution following legislative support provided by the Pension Reform Act (PRA) 2004 and the amendment in 2014.

However, the rising rates of emigration and unemployment in the last five years have slowed down the growth rate in pension contributions. If individuals who fall within these groups, who are eligible to access a 25 per cent lump sum of their pension assets, exercise the withdrawal option, it could cause the growth of assets under management (AuM) to stagnate.

The 3 per cent decline in the industry’s annual contribution remitted to the RSAs in 2021 underlines this growing threat and National Pension Commission (PenCom) approval to use 25 per cent of the amount of a pension contributor’s Retirement Savings Account (RSA) to pay for an equity contribution for a mortgage may lead to a decline in pension AuM in the medium term.

The research firm noted that low yield in investible outlets amid a 17-year high headline inflation rate of 20.52 per cent will lead to a contraction in the real value of AuM over time and implies that pension fund contributors could be worse off in retirement.

It was noted that this would renew interest in diversifying investments into foreign-denominated securities to improve returns and preserve value but warned that the prohibition on PFAs from acquiring foreign currencies directly through official channels might hinder this.

However, Agusto & Co. expects the pension sector to remain robust, given the industry’s strategic importance to the Nigerian economy and the need to align the Nigerian pension scheme more closely with international standards in the near term.

Agusto & Co. also estimates that growth in pension assets will slow from a five-year average of 19 per cent to around 10 per cent in 2022 due to a combination of a muted interest rate environment and a slowdown in the rate of contributions which has been impacted by mass emigration and high unemployment.

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NASD OTC Down as FrieslandCampina Loses 3.85%




By Adedapo Adesanya

FrieslandCampina Wamco Nigeria Plc dragged the NASD Over-the-Counter (OTC) Securities Exchange down by 0.6 per cent on Tuesday, October 4, after its share price fell by N3.00 or 3.85 per cent to N75.00 per unit from N78.00 per unit.

It was the resumption of trading activities on the NASD OTC exchange yesterday after the public holiday declared on Monday to mark Nigeria’s 62nd year of independence.

The loss posted by the leading diary company in Nigeria reduced the NASD unlisted securities index (NSI) by 4.45 points yesterday to 731.34 points from 735.79 points.

Equally, the market capitalisation of the bourse diminished by N5.85 billion to wrap the day at N962.75 billion compared with the preceding session’s N968.60 billion.

Yesterday, the unlisted securities market finished without a price gainer.

It was observed that the volume of transactions depreciated on Tuesday by 72.2 per cent as investors only traded a total of 29,331 units of shares in contrast to the 105,440 units of shares transacted last Friday.

However, the value of the stocks bought and sold by investors jumped by 37.6 per cent to N2.2 million from the previous session’s N1.6 million, while the number of deals executed by traders went down by 33.3 per cent as only four deals were carried out yesterday compared with the six deals completed in the previous session.

When the market ended for the day, AG Mortgage Bank Plc was the most traded stock by volume on a year-to-date basis with 2.3 billion units valued at N1.2 billion, Central Securities Clearing System (CSCS) Plc was in second place with 687.6 million units worth N14.3 billion, and Mixta Real Estate Plc was in third place with 178.1 million units valued at N313.4 million.

In the same vein, CSCS Plc finished the day as the most traded stock by value (year-to-date) with 687.6 million units worth N14.3 billion, VFD Group Plc was in second place with 27.7 million units valued at N7.4 billion, and FrieslandCampina closed in place for trading 14.3 million units valued at N1.7 billion.

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