LastMumu:


Well you are right to a certain extent, Yes the bank makes crazy earnings from the huge rate they charge customers in comparison to what they pay investors, but the truth is that most of those are actually non-performing, especially now when the economy is in a pretty bad shape.

Also, almost all banks have foreign loads they are servicing, this has left them open to huge foreign exchange loss since they need to source for dollars to servicd the loans. Things ain't as easy or smooth as they seem.

LastMumu:


Well you are right to a certain extent, Yes the bank makes crazy earnings from the huge rate they charge customers in comparison to what they pay investors, but the truth is that most of those are actually non-performing, especially now when the economy is in a pretty bad shape.

Also, almost all banks have foreign loads they are servicing, this has left them open to huge foreign exchange loss since they need to source for dollars to servicd the loans. Things ain't as easy or smooth as they seem.

Chukzyfcb:

It doesn't really affect investors in the money market, but to investors in other sector where loans will be needed to kickstart such investment (eg real estate), it would affect. This news is good for those investors playing in the money market. Coz it means higher interest rate resulting to a higher yield/profit.
Inflation cannot be @ 12% whereas my money in fixed deposit/Treasury bills is growing @ 7%. It implies I'm losing 5% . To move along with inflation & to maintain my purchasing power. My interest rate (r.o.I) has got to be equal or overtake the Inflation rate.

lashout1:

Yes you are good on its influence on money market. But I thought the best government policy is evaluated with that which makes more citizens better off and less worse off. How many person are in with the money market, if not the same microscopic few.

They shld have considered the effect of interest rate on capital market mainly and fairly on commodity.

LastMumu:
Shut up, CBN increased MPR rate from 11% to 12% around January this year or so, how many banks passed the increased rates to their customers? If banks decide not to increase their interest rate even though they are now lending at a higher rate from CBN, what effect would this have on their books? It will eat up their profit, ode.

Icecomrade:


I was about educating you until I saw your user name "Last Mumu" I knew it would be a waste of time. U wont assimilate anything

Lol, go and educate yourself, you obviously need it more.

Chukzyfcb:

You are right bro. Its tough to favour both sides with high/low interest rate knowing fullywell that inflation is rising. It must be tough for the economic team. The interest rate was reduced, MPR reduced so banks would stimulate the economy by giving out loans. But it didn't work, rather our GDP sinked lower to about 2.8% in the lastquarter of 2015....while the growth of the nation was falling, our Inflation rate rose higher from 11-12%. So u see, cbn has tried that measure. Foreign Investors are taking out funds more than they are bringing in. Because the low rates wasn't favourable.
Many people even on NL described how inflation was a result of the forex scarcity and not too much liquidity, wht did the govt do? They just signed a deal with china so as to reduce the pressure on dollar which is the major curency in our reserves , thus indirectly impacting on the inflation rate & reducing the forex rates.
Also, they try to suck out the excess liquidity in the system same time attract local and foreign investors (FPI) back with the propsed high interest rate. Overall, it seems to be a win-win situation #but these are all speculations, reality would soon tell us if the speculations are right or wrong.