Answer to Question #89448 in Macroeconomics for Adebisi

Question

When we need money in Nigeria, why do we borrow money from other countries when we are going to pay interest rather than printing the money through Central Bank of Nigeria.

Answer 1

A drastic increase in money supply due to printing will lead to a devaluation of the Naira in respect to foreign currency. This will result in inflation as the price of imports rises. In addition, an increase in money supply will mean more money to spend in the economy, which will in turn force retailers to hike their prices to avoid running out of products. Therefore, Nigeria opts for borrowing other than printing to ensure economic stability.