What Is Seigniorage and Printing Money Explained

Seigniorage is the profit a government makes from creating money — the gap between a note’s face value and what it costs to produce. Relied on too heavily, money printing fuels inflation and weakens the exchange rate, so it is a tempting but dangerous tool.

How it works

• Issuing money — the state creates currency at low cost.
• The hidden tax — resulting inflation erodes everyone’s naira.
• Deficit financing — printing to cover gaps is the risky version.

Why it matters

When a government leans on the printing press, inflation and naira pressure follow — the mechanism behind inflation and devaluation. It is why disciplined money supply matters, as covered in money supply.