Shadysen:
i dont understand one single thing they are talking about, make una help me out abeg.

e simply means say, if you want borrow money for bank, you go pay higher interest than before. Let's say for example you want borrow 1mill your interest go be like 160,000

I still don't get the economy of Nigeria so well. In a country where as high as 70% live below the dollar daily. Even when it was a 150 naira. Where is the excess naira coming from?

Have you ever thought about getting into the forex market? I can tell you that it can be highly profitable, and there are many people who decided to join it, and they don't regret this decision. For example, you can check out https://topbrokers.com/mt4-forex-brokers and give trading a shot, and I'm sure you won't be disappointed.

lasthero:
B


SMH, I think Economics should be made compulsory for everybody and every courses up to university level.


In a lay man explanation. When there are too much money in circulation or when there is a perceived inflation, government regulatory body increases interest rates to banks and bank increase interest rates to customers which reduces customer borrowing from banks and hence reduce money in circulation and reduces inflation.


On the other hand. When there are lesser money in circulation, govt reduces interest rates to banks and bank also reduce to loan borrowers to encourage loans.

In economics, it's explained in terms of bonds

Where exactly are you seeing the money in circulation? When most people can barely feed themselves?
Our over dependent on imported goods is the reason for the rise in prices of commodities, not because there's too much money in circulation.
Inflation and unemployment are supposed to move in different directions, which is not the case here.

Tonytonex:
ok. Thanks. Savings interest rates don't always work. It's only when you want to take a loan that they implement it

That's because Nigeria's economy is complex and regulations is lax plus the corruption in the system.

In the obodo Oyinbo, when interest rate is increased, business and people will reduce their spending as they also need that money to service their debts obligations (remember lending and borrowing are very popular in those countries), so there are less money chasing few products. This helps slow down demand and also brings about a fall in prices of commodities; hence, reducing inflation.

In the US, Canada and other advanced countries. The economy is overheated i.e. plenty of jobs, people have lots of money to spend, economies opening up too fast, so there are more money chasing fewer goods since there was supply chain issues because of covid.

But we don't have the same in Nigeria, unemployment is extremely high, people don't have lots of money, Nigerian economy is not opening up because of covid (we weren't affected that much), Nigerian economy is not heating up, but the CBN is increasing interest rate anyway. The only reason I could think of is because of the exchange rate. Dollar is getting higher so it's being done to make buying the dollars less attractive. Perhaps, this will only apply to a few people in Nigeria as not many people in Nigeria buy dollars anyway aside those that school abroad or business men dealing with foreign export and import.

nedu666:
Buhari and emefiele caused the[b] excess liquidity[/b] by printing 19.8 trillion naira to support govt deficit budget. Now he is raising interest rates to check excess liquidity but at the same time will print trillions of naira to support govt 11trillion 2022/ 2023 budget deficit. Take note industrial output fell by 34% and imports in dollar term fell by 39% i.e less goods being chased by trillions of naira printed equals more inflation.

Nigeria is not suffering from Excess liquidity partner. When you have too much money in circulation chasing after a limited supply of services and goods that is excess liquidity. Last time i checked that does not seem to be the issue in that country. What that country is suffering from is artificial inflation created due to non-uniformity in the country's exchange rate. You sell Forex to the banks at 421 or 431. The freaking banks then turn around and sell to the Bureau De Exchange at 695. The spread is just too wide. Have you taken the time to read Banks' statement in Nigeria this past year? They are making out like bandits which they are actually in this context. Until this man is removed nothing will change.

Tonytonex:
e simply means say, if you want borrow money for bank, you go pay higher interest than before. Let's say for example you want borrow 1mill your interest go be like 160,000

gracias, our leaders wicked sha.

lasthero:
B


SMH, I think Economics should be made compulsory for everybody and every courses up to university level.


In a lay man explanation. When there are too much money in circulation or when there is a perceived inflation, government regulatory body increases interest rates to banks and bank increase interest rates to customers which reduces customer borrowing from banks and hence reduce money in circulation and reduces inflation.


On the other hand. When there are lesser money in circulation, govt reduces interest rates to banks and bank also reduce to loan borrowers to encourage loans.

In economics, it's explained in terms of bonds

Where is the excess money in circulation? If there is excess money in circulation, you will see it in workers being paid early, private sector making a kill and employing more hands and even the employees smiling.

Educate my ignorance if this is happening right now.

gambojimeta:

That's because Nigeria's economy is complex and regulations is lax plus the corruption in the system.

In the obodo Oyinbo, when interest rate is increased, business and people will reduce their spending as they also need that money to service their debts obligations (remember lending and borrowing are very popular in those countries), so there are less money chasing few products. This helps slow down demand and also brings about a fall in prices of commodities; hence, reducing inflation.

In the US, Canada and other advanced countries. The economy is overheated i.e. plenty of jobs, people have lots of money to spend, economies opening up too fast, so there are more money chasing fewer goods since there was supply chain issues because of covid.

But we don't have the same in Nigeria, unemployment is extremely high, people don't have lots of money, Nigerian economy is not opening up because of covid (we weren't affected that much), Nigerian economy is not heating up, but the CBN is increasing interest rate anyway. The only reason I could think of is because of the exchange rate. Dollar is getting higher so it's being done to make buying the dollars less attractive. Perhaps, this will only apply to a few people in Nigeria as not many people in Nigeria buy dollars anyway aside those that school abroad or business men dealing with foreign export and import.

Those aren't advanced countries.....

Kaa4:
If the interest rates cascade down and banks pay appreciable amount of interest on the savings, it might help the Naira to reduce outflow in dollars. People are saving their wealth in other currencies and the dollar is the gateway.

true.

BigBashiru:


Those aren't advanced countries.....

Okay. They are developing countries. I hope you are happy now.

Deltavariant:
The most lazy way of fighting inflation, just sit and keep increasing interest rates. No incentives, no palliatives.

I wish I could like this 10 times

t2luv1:


I have been saying this since the day he was appointed. Case in point before he stopped supplying forex to the bureau de exchange Naira black market rate was at 495 while the official exchange window was at 421 after he stopped the bureau de exchange supply of Forex, the Naira black market has risen to 705 while the official exchange window has risen to 431. The man created this artificial inflation and to combat this what has he proposed an increase in interest rate. The man is clueless how he managed to be CBN head is beyond comprehension. Question how many people are impacted by the interest rate in Nigeria as compared to the Naira exchange rate?

God Bless your own reasoning!
They simply yanked off the supply from the black market to create more demand for forex knowing it will affect pricing/value. Then buy with influence through proxies from thee banks and re-sell to black market dealers. Pathetic, selfish reasoning.

Vilgax:
scary stuff.
let's see if this can slow down inflation...

incase you don't really understand what this means, this na wetin dey sup.

when a central bank raise interest rate.
your normal bank will also respond by raising their own interest rate.
with higher interest rate, people will tend to spend less and demand for goods and services will also drop, which will cause inflation to fall.
When demand is low, most companies won't raise their prices in order to stay competitive. since prices of goods and services aren't increasing that fast, you've managed to reduce inflation.
this is how CBN raising interest rates is meant to curb inflation.
but na Naija we dey, our own economics dey always different.

But this won’t work cos no savings. People can hardly feed. Private sector is suffering. Those who took loans can’t pay. Means of production is high and the cost of finished goods is beyond the reach of the common man.

Wo! We should go the way of Turkey, if you ask me. Reduce interest rate, stimulate means of production and devalue.

Atleast, stimulating the economy will create jobs and drive SME.

But what do I know self?

Shadysen:
gracias, our leaders wicked sha.

very very wicked. They just want the common man to suffer.

Vilgax:
scary stuff.
let's see if this can slow down inflation...

incase you don't really understand what this means, this na wetin dey sup.

when a central bank raise interest rate.
your normal bank will also respond by raising their own interest rate.
with higher interest rate, people will tend to spend less and demand for goods and services will also drop, which will cause inflation to fall.
When demand is low, most companies won't raise their prices in order to stay competitive. since prices of goods and services aren't increasing that fast, you've managed to reduce inflation.
this is how CBN raising interest rates is meant to curb inflation.
but na Naija we dey, our own economics dey always different.

Will this reduce cost of production?

You need to understand the fact that the high cost of goods and services currently happening in Nigeria isn't demand driven.

politicoNG:
CBN to mop up liquidity from Banks by Thursday



https://nairametrics.com/2022/09/27/breaking-cbn-to-mop-up-liquidity-from-banks-by-thursday/




https://www.thecable.ng/breaking-cbn-raises-interest-rate-to-15-5-to-tame-rising-inflation/amp

kahal29. You can see that Obi was right after all

Nigeria is a mysterious country.

Tonytonex:
e simply means say, if you want borrow money for bank, you go pay higher interest than before. Let's say for example you want borrow 1mill your interest go be like 160,000

I am going to let you in on a secret. Nobody cares about what the interest rate is in NIGERIA. so let us get that out of the way. Trying to get a loan from a Nigerian bank by an individual is close to impossible. Most banks commercial lending rate currently in Nigeria is around 33%. This 15.5% is actually the interbank lending rate. All banks by law are required to have a daily balance of reserves. sometimes a bank might need to borrow money overnight to meet this reserve this is where this interest rate number comes into play. I used to have Citibank as a client so I am well aware of this setup.

t2luv1:


I am going to let you in on a secret. Nobody cares about what the interest rate is in NIGERIA. so let us get that out of the way. Trying to get a loan from a Nigerian bank by an individual is close to impossible. Most banks commercial lending rate currently in Nigeria is around 33%. This 15.5% is actually the interbank lending rate. All banks by law are required to have a daily balance of reserves. sometimes a bank might need to borrow money overnight to meet this reserve this is where this interest rate number comes into play. I used to have Citibank as a client so I am well aware of this setup.

Alot of Nigerians actually use Microfinance banks. In a normal environment, interest rates on those loans will increase.

gambojimeta:

Okay. They are developing countries. I hope you are happy now.

They are infrastructurally advanced only....

This he goat wants to curb cost push inflation by increasing interest rate


These guys no wise at all.

gambojimeta:

Alot of Nigerians actually use Microfinance banks. In a normal environment, interest rates on those loans will increase.

Thanks, I need to look into the role of the Microfinance banks in that Country as it pertains to the Economy

Borntosmoke:
Naira will gain value nw.

Story for the gods

They are basically just rearranging d problem rather than solving it because they cannot solve it.

U reduce inflation & devaluation this way, purchasing power still remains unchanged at its low point..

Alexas58:
A very nice move to curb inflation and help raise the Naira.
Most people would not understand the implications of this, since they don’t understand how the forex market works

odaniel1:


God Bless your own reasoning!
They simply yanked off the supply from the black market to create more demand for forex knowing it will affect pricing/value. Then buy with influence through proxies from thee banks and re-sell to black market dealers. Pathetic, selfish reasoning.

This is a simple fix. Instead of selling 100% of Forex to the banks why not sell 20% to the banks @431 all the banks are using that 20% for is to meet their customers' foreign ATM usage anyway. The banks buy at 431 and sell their ATM usage at 497 which is what they are presently doing. The remaining 80% of Forex sell to the Bureau de exchange not at 431 but at 451 with the stipulation that they can only sell to the public at 520. They will still make N100 profit on every dollar sold. The exchange rate of 520 will still be better than the current rate of 705. The greediness of the banks is what is killing the economy in that country.

Kaa4:
It definitely will not raise the value of the Naira. The Naira's case is matter of DD and SS and lack of confidence in the economy. The government has to generate the confidence in the economy before capital flight can stop. Higher DD than SS will create scarcity anyday.


Irresponsible lot! CBN inclusive of the government.

You are right ,the CBN governor is disastrious ,the increase in increase rate will not curb inflation in Nigeria because
1)Our Economy is not Robust
2)Demand and supply curve is quite abnormal
3) we have very low purchasing power in Nigeria
This is what I can think of

lasthero:
B


SMH, I think Economics should be made compulsory for everybody and every courses up to university level.


In a lay man explanation. When there are too much money in circulation or when there is a perceived inflation, government regulatory body increases interest rates to banks and bank increase interest rates to customers which reduces customer borrowing from banks and hence reduce money in circulation and reduces inflation.


On the other hand. When there are lesser money in circulation, govt reduces interest rates to banks and bank also reduce to loan borrowers to encourage loans.

In economics, it's explained in terms of bonds

What we're experiencing in Nigeria is self induced inflation. There is no money in circulation, the price of good and services are majorly increasing because of increase in cost of import, and constant devaluation of naira against the USD which apparently affects almost every other thing in the country.
We all know Nigeria heavily relay on imports, increasing Interest rate without addressing the main issues will only deepen the effects of inflation to the average Nigerian.

But obviously CBN governor doesn't understand the technicalities of the current economic crisis he resorts to text book practice when he should be advising the government on ways to the salvage the economy.

Black man's economics is always annoying.... politicians are sharing billions amongst themselves ...too much money in circulation but not in hands of manufactures that will create jobs and boost the economy...you are giving Dangote and the rest tax holidays in critical time like this and keep squeezing the common man until they die by killing SME's....old men with sticky fingers SMH.

politicoNG:
CBN to mop up liquidity from Banks by Thursday



https://nairametrics.com/2022/09/27/breaking-cbn-to-mop-up-liquidity-from-banks-by-thursday/




https://www.thecable.ng/breaking-cbn-raises-interest-rate-to-15-5-to-tame-rising-inflation/amp

Looks like our CBN is using 1939 monetary policies. Our current inflation is not as a result of too much money in circulation. It is driven by other exogenous factors. They should stop punishing Nigerians for being Nigerians.

Ex0rrcist:
Oga devalue the currency, let's know where we are headed. An economy with two exchange rate is bound to collapse, ask Sri Lanka. Devalue the currency to meet the current market rate, so this will enable him to control the situation. But no, mumu man working for mumu president with stupid economic decisions. Can't wait for the next dispensation, honestly this government is really terrible.

If not for the high level of corruption going on in this government, haven't they suppose to remove subsidy by now. Dollar is 725, they exchanged dollar at 425 among themselves, since they are only there to add to our woes. How will they even understand the pains of ordinary Nigerians hustling under the hot sun when all they do is antipeople.

They shouldn't devalue it now.

Alexas58:
A very nice move to curb inflation and help raise the Naira.
Most people would not understand the implications of this, since they don’t understand how the forex market works

How if I must ask?