americanigga:


you are very funny. You don't even understand what it means to reduce interest rate. All developed countries have interes rate lower than 0.5% and in 2015 Nigerian reduced her interest rate to about 9%.
Even a blind man would figure the difference. For Nigeria to compete with other countries our interest rate must be reduced to 0.5%.

With very high interest rate we are already in recession, the only way to reverse it is very low interest. Common sense 101

Those countries you mentioned, what is their inflation rate.


If you took your economics classes serious, you would have known that the gap between interest rate and inflation rate are not too far apart

Real Interest rate= Norminal Interest rate + Inflation rate


You don't expect our Real interest rate to be very far from our inflation rate.

So find out the inflation rate of those countries and minus them

Do same for Nigeria

Try to be objective, it will help your health.

blueto:
For your information: Buhari’s 1 Year + In Office.

Buhari was handed over:
– $30billion in our Foreign Reserves,

With OVER [url=http://www.dmo.gov.ng/oci/pubd/docs/Total%20Public%20Debt%20Stock%20as%20at%2031st%20March,%202015.pdf]$66.5 billion public debt[/url], remember or know from today. Also, note that this debt has somehow reduced and not increased [url=http://www.dmo.gov.ng/oci/pubd/docs/Total%20Public%20Debt%20as%20at%2030th%20%20June%202016.pdf]as at June 2016 to $61.4[/url]. The GEJ administration makes Buhari look like a bible days Joseph-Saviour of some kind.

– $2.5billion Sovereign Wealth Fund,

i don't have details about this, but i know it is some kind of savings fund. The FG has not withdrawn from it, and you would be the first to complain if they did. Also, it yielded interest, the last i heard, so what is your complaint?

– $1.4billion in the ECA,

It is said to currently excess crude account, currently stands at $2.91bn. That is an account that almost ran down under the ineffectual past administration despite EXCESS crude earnings.

– $4.65b back taxes from NLNG.

Please do not be deceitful, we are not small children here or lacking memory. There was NOTHING known about NLNG back taxes until Buhari administration. i remember when Buhari collected it and used it to help the 36 states, and people began to demand for the past. Here was PDP's explanation.
Mr. Metuh said the truth is that the NLNG had been on a 10-year tax haven until 2014.
“Within this period, successive governments, right from President Olusegun Obasanjo never shared nor tampered with the cumulative dividends over the years,” he said.
The federal government had last week shared over $2.1 to the three tiers of government. It said the money came from the payments made by the NLNG and other sources in the middle of June 2015.
Mr. Mohammed had claimed the payment so shared is the first time such lodgements was being disclosed by any government, in addition to paying it into the Federation Account for sharing.
However, Mr. Metuh said whatever taxes paid from the NLNG in the past went through the Federal Inland Revenue Services, FIRS, and recorded as part of the income of the Federal Government.

– Buhari met an approved budget of N4.5trillion

Approved budget with no money to run it. It is like me approving that you go and collect 1billion dollars at the bank, pretty useless because there is no such money there.

Buhari received within a year:
– $2.7billion collected by Inland Revenue in his first 8 months.
– $2.1billion world bank loan.
– $850million Grants from UK, USA and Europe.
– Excluding crude oil sales, Joint Venture profits, Royalties, Income from Customs, NIMMSA, NPA, NACHO ……

Propaganda, get your facts right. You don't have to be spoonfed on everything. i am sure you are one of those that Fayose has the remote to their brain and would believe that Buhari does not excrete if Fayose says so.

– 3trilion on STA

So?

More than a year has passed:
1] Not a kilometer of road constructed,
2] Not a watt of Electricity generated,
3] Not a Ward added to any Hospital in Nigeria.
4] Not a job space created, except the CBN job he shared with his cronies.
5] Not a grain of corn or tomato seed was provided to farmers. [Fertilizer subsidy taken away and handed back to ex-military men] 6] 41 foreign companies mostly in service industry have left Nigeria

More false news.

[s]7] 4.3 Million jobs lost in 10months – National Bureau of Statistics.
8] Food scarcity last experienced in Nigeria between 1983 to 1985 returned back.
9] War on Corruption turned into war against his perceived enemies. Convictions by EFCC were cases meticulously started by previous govt(s). Buhari wins cases only on the pages of Newspapers.
10] Nigeria dropped from No.1 Investment destination in Africa to No.27 before South Sudan.
11] African Biggest economy shrink from a GDP of about 7% to -0.36%, the fastest decline in the world since record began.
12] No.3 fastest growing economy in the world to No.83 in 365days.

And I wonder why the president keeps giving the impression that the country is broke. The problem is not lack of funds, but lack of qualified individuals in the govt.[/s]

Even more propaganda. Get your facts right, and stop this intellectual laziness, this is not election or campaign period. Serious people should be interested in governance and not all this blinded politics.

EternalTruths:

Answer to question 1

There are 6 major things that affect cost of production and in turn increases or decreases production

A) Taxation
B) Forex
C) Interest Rate
D) Salaries
E) Electricity
F) Fuel

If you reduce interest rate without reducing others, it becomes null and void with time.

So the best thing to do is to cut down cost on Taxation, Electricity and Fuel.

Electricity and Fuel costs can be reduced by continuing the amnesty program and avoid issues that makes that region volatile eg 97% 5% comment, attack against Jonathan Tompolo Patience etc.

When these things are done, the cost of doing business will decline.

Now 14% interest rate according to CBN attracted $1bn in the month of june. Meaning that our ability to meet our Forex demand increased by $1bn from FDI.


Answer to Question 2

How can the government get money to finance itself

1) Make peace with the ND people in order to achieve full oil production

2) With peace returned and dollar inflow increased, use that extra money to finance our non-oil sector starting with 4 major things and these are:
A) Agriculture
B) Processing of Solid Minerals from Medium Scale to Large Scale eg Nickel Bauxite Iron(Ajaokuta should start from Medium Scale)
C) Commercialization of any Technology developed in our higher institutions in order to minimize foreign import
D) Creating a National Educational platform like Nairaland whereby the Technologies developed in our higher institutions are taught to local businesses in all states eg Aba Onitsha Nnewi online and offline. This will help spread technological knowledge necessary to help us produce advanced indigenous technologies that can replace foreign ones.

When these things are done, the multiplier effect will lead to more revenue for government in 2 - 5 years time.

By then, you don't need to tell CBN to reduce interest rate. The Banks will ginger them

Sorry for the late reply. And I also edited the bits where you cited Buhari and Northerners. Whatever he and his Northern brothers are doing isn't my prerogative. I want to keep this back and forth within the context of the topic, which is: interest rates.

That said, I honestly don't think you understand what you're talking about. Once you cut the interest rates: it will have a ripple effect on the manufacturing/production/agricultural sectors and also the consumers. Thus increasing consumer spending, creating jobs, and making the country self-sustainable. And nothing drives growth, while reducing inflation more than consumer spending - especially when the production sector is booming and there is self-sustainability. It will also make the economy more attractive to investors. You can lower the taxes, reduce electricity tariffs, and reduce fuel prices all you want. However, when there are no jobs and the consumers have no money to spend - how's that going to change anything?

Without further ado: I'll refer you to what was do in other climes to combat recession. I'm going to cite excerpts from three different economies and you can read the articles for better understanding on economic policies:

1). United States

Fed cuts interest rates to near zero to combat economic recession

The Federal Reserve Tuesday cut its target for a key short-term interest rate to a record low range of zero to 0.25%, from the previous 1%, and vowed to maintain "exceptionally low rates" for "some time".

The dramatic move sent stocks soaring as the Dow Jones industrial average surged 4.2% and broader indexes jumped more than 5% after the central bank said it would accelerate its use of nonconventional tools to stimulate the economy, like buying mortgage-backed securities or Treasury notes.

http://abcnews.go.com/Business/story?id=6474821&page=1

2). United Kingdom

Bank of England cuts Bank Rate to 0.25% and introduces a package of measures designed to provide additional monetary stimulus

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending 3 August 2016, the MPC voted for a package of measures designed to provide additional support to growth and to achieve a sustainable return of inflation to the target. This package comprises: a 25 basis point cut in Bank Rate to 0.25%; a new Term Funding Scheme to reinforce the pass-through of the cut in Bank Rate; the purchase of up to £10 billion of UK corporate bonds; and an expansion of the asset purchase scheme for UK government bonds of £60 billion, taking the total stock of these asset purchases to £435 billion. The last three elements will be financed by the issuance of central bank reserves.

http://www.bankofengland.co.uk/publications/Pages/news/2016/008.aspx

3). Russia

Russian central bank cuts interest rate further—down to 10 percent

Russia's central bank cut interest rates on Friday amid what analysts called more "aggressive" calls for monetary easing.

The central bank cut its key interest rate by 50 basis points to 10 percent on Friday, saying that it made the decision "given the inflation slowdown, in line with the forecast, decrease in inflation expectations and unstable economic activity."
The move was widely expected by economists.

Pressure has grown on the central bank for more monetary easing, but analysts think the central bank will continue its "gradual rate cut strategy" in order to stabilize the rate of inflation to 4 percent by 2017 (it stood at 6.6 percent, as of September).

http://www.cnbc.com/2016/09/16/russian-central-bank-cuts-interest-rate-further---down-to-10-percent.html

Let what I posited in this post sink in and come back with a better rebuttal, without going on a tangent this time around. I also cited three examples that happened in civilised climes recently in the last two months.

Shym3xx:


Sorry for the late reply. And I also edited the bits where you cited Buhari and Northerners. Whatever he and his Northern brothers are doing isn't my prerogative. I want to keep this back and forth within the context of the topic, which is: interest rates.

That said, I honestly don't think you understand what you're talking about. Once you cut the interest rates: it will have a ripple effect on the manufacturing/production/agricultural sectors and also the consumers. Thus increasing consumer spending, creating jobs, and making the country self-sustainable. And nothing drives growth, while reducing inflation more than consumer spending - especially when the production sector is booming and there is self-sustainability. It will also make the economy more attractive to investors. You can lower the taxes, reduce electricity tariffs, and reduce fuel prices all you want. However, when there are no jobs and the consumers have no money to spend - how's that going to change anything?

Without further ado: I'll refer you to what was do in other climes to combat recession. I'm going to cite excerpts from three different economies and you can read the articles for better understanding on economic policies:

1). United States




2). United Kingdom



3). Russia




Let what I posited in this post sink in and come back with a better rebuttal, without going on a tangent this time around. I also cited three examples that happened in civilised climes recently in the last two months.

Look at the highlighted point of yours

Now answer this question


Consumer spending on what type of products. Is it on local or foreign products.?

You fail to understand the difference between Nigerian economy and the economies you mentioned is that we are not a robust manufacturing economy.

So when you lower interest rate to increase money supply, the money is spent on foreign products or semi finished products. This put more pressure on our meagre FOREX leading to higher cost of foreign goods/services as businesses acquire dollars at an expensive price.


Take note: Our economy is not a robust manufacturing economy like US Britain Russia etc

That is why I advocate that we take our Technological education serious and we should find ways to Commercialize our indigenous technologies developed in our schools.



Until that is done, we will always be at the mercy of FOREX wahala needed to meet our demand for modern goods/services which are mostly foreign based Techs.

EternalTruths:


Look at the highlighted point of yours

Now answer this question

Consumer spending on what type of products. Is it on local or foreign products.?

You fail to understand the difference between Nigerian economy and the economies you mentioned is that we are not a robust manufacturing economy.

So when you lower interest rate to increase money supply, the money is spent on foreign products or semi finished products. This put more pressure on our meagre FOREX leading to higher cost of foreign goods/services as businesses acquire dollars at an expensive price.

Take note: Our economy is not a robust manufacturing economy like US Britain Russia etc

That is why I advocate that we take our Technological education serious and we should find ways to Commercialize our indigenous technologies developed in our schools.

Until that is done, we will always be at the mercy of FOREX wahala needed to meet our demand for modern goods/services which are mostly foreign based Techs.

Consumer spending on both local and imported goods. No country on the planet depends solely on only locally made goods. The most important thing is for local manufacturers to be productive and competitive and for consumer spending to increase. Thus driving up growth and that will effectively cut down inflation. It will also stabilise the naira.

The problem with your reasoning is that you're only focusing on the consumers, especially in a country like naij where the lending facility won't be accessible to most consumers. Those who will benefit from it the most are the drivers of the economy and it will trickle down to the consumers.

The Russian economy is very similar to the Nigerian economy albeit there are nuances. Russia is also heavily dependent on gas.

Shym3xx:


Consumer spending on both local and imported goods. No country on the planet depends solely on only locally made goods. The most important thing is for local manufacturers to be productive and competitive and for consumer spending to increase. Thus driving up growth and that will effectively cut down inflation. It will also stabilise the naira.

The problem with your reasoning is that you're only focusing on the consumers, especially in a country like naij where the lending facility won't be accessible to most consumers. Those who will benefit from it the most are the drivers of the economy and it will trickle down to the consumers.

The Russian economy is very similar to the Nigerian economy albeit there are nuances. Russia is also heavily dependent on gas.

Look at your point which I highlighted red


Remember that our FOREX is low and that because our interest rate has increased to 14%, we have successfully attracted $1bn to our FOREX reserve

Now to the killer punch

1) When these economic drivers as you said, go to the banks to borrow more money due to a lowered interest rate, the things they buy to expand their operations, will those things be bought locally or imported.?

2) If those things are imported, have you asked yourself the implications on our FOREX.?


3) Now when you lower interest rate, the quantity of FOREX entering our economy reduces and the pressure on our limited FOREX increases. Don't you think it is best to leave the rates where it is and reduce others like Taxation Fuel and Energy costs if we desire to support the drivers of the economy.?


The problem you have not identify is that we are a Technological unserious Nation.

Russia FOREX is heavily oil and gas dependant but don't forget that the Russians can manufacture almost everything they want because they are Technologically advanced. So for this reason, can weather the storm better than us.



Technological education is the key to this problem.

Ask yourself these simple questions below

All the phones we use, how many are produced locally.?

If none, why aren't they produced locally.?

Will Nigerians survive FOREX instability if we can manufacture most of our technologies locally.?

If yes, why aren't we manufacturing locally.?


Technological education and Commercialization of our indigenous technologies developed in our schools are keys to this problem.

If Nigerians are a technological serious people, this high cost of dollars will favour us because
1) more Nigerians will buy local products that are as good as foreign products due to our sophisticated level of technology
2) lots of Nigerians will be discouraged from buying foreign products due to high cost
3) Foreigners will be discouraged from dumping their foreign products on our soil due to high price
4) Foreigners will be encouraged to buy our local products and export due to cheap price.



This is the secret behind China and Japan devaluation of their currencies against the dollars.


Shym3xx , technology remains the key.

Pls read the other post above.

AZeD1:
Can't you see the irony in your post?

Were will this money come from if not by borrowing which is expensive right now or by raising taxes which is counter productive?


Same as above.



1) Reduce taxation and government can't get the money it needs for salary talk less of infrastructure.
2) Electric companies are businesses too and right now, it's not a profitable business. The companies also need cheap loans to be able to expand.
3) Do you want subsidy brought back?

In summary, you want government to spend money it doesn't have by reducing taxes, which it would further reduce government revenue, then it should cover that short fall by borrowing expensively thereby plunging us into further debts with astronomic interest rate which would have to be paid from the reduced revenue, then we would have to borrow more....... Rinse repeat

You and the people that gave you 8 likes please read



https://www.nairaland.com/3365622/external-reserves-drop-24bn

idupaul:

This write up is what is called beautiful nonsense..Where does the writer expect the funds that would be used to diversify the economy to come from if interest rates are pegged at 14 percent ..The writer also wrongly assumed that most bank loans wouldn't be put into what they where designated for ..Govt has no choice but to reduce interest rates on loans directed at areas the govts seeks to stimulate and not personal loans to buy pampers or milk . History has shown is that the best way put of a recession is to out spend the recession in capital manner

The beautiful nonsense is becoming real

Please read


https://www.nairaland.com/3365622/external-reserves-drop-24bn

vedaxcool:
[b]Your fall into the fallacy of living in your own illusion, as govt policies wouldn't be reduced to one single policy but several whose efficacy lies in each other, hence it is not just about cutting interest, cutting interest rates in tadem with several other policies will result to economic growth.

You say govt should cut the price of fuel with which money? Cut Taxes how will they fund themselves, cut electricity bill, discos complain current tariffs are too low for investment? So who would pay for all you wishful thinking? Like I tell people PMB can create a illusion for everyone that everything is well by simply borrowing and borrowing like GEJ did in 2014, but eventually you will simply create a black hole for all to fall into.

Cutting interest rate will result iin consumers have more money to spend, causing the economy to grow and inflation to increase. The opposite holds true for rising interest rates. As interest rates are increased, consumers tend to have less money to spend. With less spending, the economy slows and inflation decreases

Currently we are in a recession to leave this situation, cutting interest remains key to achieving this as clearly economies growth is declining and even the average man on the street feels this is largely due to money not circulating as for taxes, we have one of the lowest VATs in the world, but govt has already plans to create new enterprises, meaning more jobs, a robust social system[/b]

Fallacy becomes real

Please read


https://www.nairaland.com/3365622/external-reserves-drop-24bn

JAkpayen:
Intelligent economic suggestion from EternalTruths. Those saying that CBN should lower interest rate should examine the 2016 Budget and see how much is allocated to capital expenditure, just a mere ₦1.8T from budget proposal of ₦6.07T. FG will still service debts running into trillions of ₦. If interest rate is reduced, governments (including States) will borrow to pay salary arrears thus making inflation go up.

The truth is that FG does not have sound fiscal policy to drive the GDP growth rate projection of over 4%

Blueto drss2

Please read so that those supporting Kemi will see the danger of following her


https://www.nairaland.com/3365622/external-reserves-drop-24bn

Emefiele is Nigeria biggest problem and until he is sack we may remain in this recession for a longer time.

He is not sure at all about what to do, he is on demo on all major policy decisions he has made.

EternalTruths:


Blueto drss2

Please read so that those supporting Kemi will see the danger of following her


https://www.nairaland.com/3365622/external-reserves-drop-24bn

d only tin dat will drag nigeria out of recession is for buari to resign n nigeria returns to regionalism.

Nigeria has gone beyond these simple economic theories. Many factories are closed down because of no Sales and patronage to move their Products. Workers are laid off cos no money to pay wages. No money to maintain dilapidated Machines and Equipment and you can't borrow at high interest to do all these and be able to pay back when the Market is not fluid enough to move your Products. The Ministry of Finance is picketing to remove Adeosun and not the PS or the CBN, cos their Salaries have not been paid. There's no money in circulation, because there is no Production. The Minister cannot borrow money at high interest to pay just salaries when there will be no Production and Sales Revenue Earnings to pay back principal and its high interest demands. Emefiele doesn't know the Practical. That's why Buhari must ease him out and deploy Adeosun to CBN as Governor. If NOI cannot be brought, then bring back Soludo because he's skilful with the application of the Principle and Practice of Denomination of Forex transactions. And with either NOI or Soludo as Minister of Finance and Adeosun as CBN GOVERNOR neither MTN nor even Dangote will dare our F.G Forex Transaction Prowess.

Emefiele isn't right.