Validated:

It means that before you borrow to go and do "owambe", you need to think twice and leave borrowing to those who are interested in productivity. Infact, it should hit 30% by Q2.

And you think those who are interested in productivity/productive economies take loans/lend money to businesses at over 30%? In Nigeria, how many businesses can you run successfully and also pay back a loan of over 30% while at it?

Also, you fail to understand the role consumption ('owambe') has in driving an economy. Production is only meaningful if there's someone to consume new goods

DeLaRue:
It is a double edge sword.

As CBN rate rises, commercial banks will increase savings/fixed deposit rates, thereby attracting more savers who will be locked into 12 months or more term.

This will indirectly reduce the money available for spending and thus reduce patronage of many goods. As traders and manufacturers wait to exploit consumers with predatory prices, less and less people will buy their goods. As their warehouses pile up with unsold goods, they'll have to reduce prices, thus helping to reduce inflation.

Increasing interest rate will also mean the government can issue bonds at rates that will be attractive to foreign investors. More dollars should flow into the country.

The bad news is:

As Cbn increases interest rate, banks too will increase their lending rate with the likely result that:

1. Many businesses that depend on bank loans will lay off staff or even close down

2. There will be fewer new investments- businesses can't survive on 33% - 35% loan rate

3. More pain for the economy generally.

Unfortunately, with the amount of money printed by Mr Buhari's government, the CBN will have to keep increasing interest rate in order to mop up excess liquidity and control inflation.

Managing a large economy in times of crises is a sophisticated game of chess. For every positive steps, there are multiple potential negative consequences. There are usually no easy solutions.

Unfortunately for politicians, the public want solutions NOW! or they dabaru everything and even call for coup

The public is not interested in, nor do they understand economic theories.

You called it a theory, not a fact, before any process the government has the list of unemployed graduates through NDE and established social welfare for the unemployed, instead distributing money as palliative through the state govt. If the interest is raised beyond the normal level, who will invest? The govt has turned even artisans to card-carrying members in other survive.

Me that I don't understand all this money terms was just looking like what's the meaning 😃.
Thanks to the intelligent folks up there for their analysis. Nairaland really have some great minds but tribalist makes it look like the forum harbour slowpokes

Acidosis:


There are over 300,000 cooperative societies in Nigeria (around the largest in the world). The UK has only 7,000.

These institutions have more than 30 million members in Nigeria.

SMEs contribute 48% to Nigeria's GDP.

Over 70% of business owners in Nigeria would rather depend on loans from cooperative societies than bank loan. These are the people controlling credits in Nigeria.

The above are fundamental datasets that are peculiar to the Nigerian economy. We need people to hack our peculiarities. Enough of using economic jargons from the West. Our lives and economic decisions shouldn't be solely based around the banking sector.

The issue is that we know or copy what works or others did but we don't know the how or why it worked for them. Of course without the luck of sharing same peculiarities, those copied policies quickly fail.

In life, he who knows why will always lead

Kukutenla:

I don't see the difference it will make. The banks have not been interested in lending for a while so this is good for them. For the real economy though. It is tales of woe as the manufacturing sector will constrict further. Let's hope it tames inflation though. But is the source of inflation too much money as it is being touted?

This reeks of grand confusion and its sad that the citizens bear the brunt of these wrong thoughts all the time and now just because Nigerians are used to coping mechanisms, they are being blamed for rising prices, since I guess, they continue to purchase products nonetheless, albeit out of excessive sweat and stress. Your last sentence captures what should have been the debate before going ahead with this textbook move. If there's too much money in circulation, is it in the hands of the citizens or the minute elite? Is this the only available move on earth that can nip inflation in the bud? Eyi je, eyi o je mini mini mani mo government.

jedisco:


The issue is that we know or copy what works or others did but we don't know the how or why it worked for them. Of course without the luck of sharing same peculiarities, those copied policies quickly fail.

In life, he who knows why will always lead

True that. Knowing the why and how is key 👍

nairalanda1:


Because we had appreciable income from oil. Not anymore.

Modified

And when the oil price crashes, borrowing commences.

1973-82, 2006-14.

You ain't telling the truth at all . What has been the price of a barrel of oil in the past 4 years? Do you even know the price of oil currently?

You give out excuses for ineffective administration led by the president, check out the tenure of Obasanjo and the price of oil and compare it to the administration of buhari and Tinubu and see the difference between Apple and pineapple.


https://www.macrotrends.net/1369/crude-oil-price-history-chart


OBJ experienced lower crude prices than any other administration in the fourth republic but you will leave that comparison and bring in that of yaradua/Jonathan. What did OBJ do that this folks can't replicate?

omowolewa:


CBN is withdrawing monies inncirculatuon by making it difficult for banks to push monies to circulation

Couldn't be more wrong !!

GoodSpirit:


You ain't telling the truth at all . What has been the price of a barrel of oil in the past 4 years? Do you even know the price of oil currently?

You give out excuses for ineffective administration led by the president, check out the tenure of Obasanjo and the price of oil and compare it to the administration of buhari and Tinubu and see the difference between Apple and pineapple.


https://www.macrotrends.net/1369/crude-oil-price-history-chart


OBJ experienced lower crude prices than any other administration in the fourth republic but you will leave that comparison and bring in that of yaradua/Jonathan. What did OBJ do that this folks can't replicate?

What was the price of oil between 2014 and 2021?

What happened between 1983 and 2006?

The fact is, when oil prices crash we take loans to survive, and when oil price rises , we pay off the loans with whatever money we gain from the oil price hike.

We had that problem at least once before. We would have spent the 2006-14 period spending the lagresse of oil on paying debts from 1993-05 if we had not gotten some debt forgiveness with other African countries


If you are still here, know this. I am not defending tinubu or attacking gej or excusing any government.

I am showing you why we have problems, and why even in times of plenty our economy is at risk.

We rely too much on oil. And until we industrialize, we will continue to have the problems we have. We will have cycles of good and bad times. Until we industrialize


Better learn that lesson. Okay?

Acidosis:


That zobo production business and the likes (i.e.,MSMEs) contribute over 48% of your country's GDP, and over 90% of the total employment in Nigeria. The highest in the universe or let me say the planet earth. Meaning that, if these MSMEs shut down today, you and everyone in your state will most likely be jobless forever.

I understand that many of you don't like data, but I'll try to answer your questions again.

30 million Nigerians belong to at least one cooperative society.

Cooperative societies in Nigeria are over 300,000 as opposed to just 7k in the UK. Your parents most likely used loans gotten from one cooperative society to build their first home, get their first car. They probably got cooperative loan at some point to pay your school fees, but no, you want to build your economy around bank datasets because you're in the UK, where people build/buy homes via mortgage?

Cooperatives in Nigeria contribute 1.2 trillion yearly to your GDP.

But you want to work with something you read from a book written by a UK based professor? Probably someone that has never withdrawn money from a POS vendor? Ahaha 😄

When your leaders are ready, they'll consult the right people.

Make I rest.

You didn't answer my question, how much did Dangote collect from co operative to build his refinery. How many graduates is your zobo company employing annually and how much are they paid.

Don't Don't come here and paste data doe me, I have been dealing with data on GDP from my diploma days to the university. Hope it is the poor Nigerians who cannot afford 50 naira pure water that will save money in the so called co operatives.

Do you even know that more than 65 % of Nigerians spend their income on food alone? Start from taking data of your area first and generalize it to the whole country, before you bring out some fake data you probably don't know anything about. Try know the person you are sharing them with.

What do you think SMEs are, some akara women business? Those small factory in your locality that worth more than 50 million are also categorized as SMEs, name a co operative that can give them 50 million loan.

Do you even know that most of these co operatives are not being checked by CBN and thereby charge huge amount of interest as against the reason they were established?

What do you think GDP is, increase in GDP of a NY economies is being attributed to production by big manufactures, you don't even know that these big manufacturers produce raw materials for most small businesses, check the sectoral GDP contribution in Nigeria for the past 2 years.

You think economics is by shouting data which you do not understand?

Who do you think make up the economy of Lagos, akara sellers? Remove producers from the economy and juicy agency like custom, FIRS, Shippers council and our seaport which being revenue to the economy aside crude oil will be an August meeting centre.

Paramount01:



Pls explain to me, how will it slow down inflation, I don't know that is why i ask pls

When the central bank rates are higher than inflation, this will encourage savings rather than spending. Thos will mop up a lot of excess cash in circulation.

With less cash in circulation, inflation will brgin to cone down and the Naira will begin to appreciate.

When the central bank believes it has contained inflation, it will gradually begin to reduce interest rates. This is global best practice.

Bevista:
Fairly bold move by CBN.
---
The interest rate was too low compared to inflation resulting in a negative yield on bonds. Government cannot be borrowing at such a low rate while causing huge inflation on the masses. It encourages financial rascality.
---
The negative yield was partly why many investors preferred to preserve their funds in USD resulting in the significant depreciation of the naira.
---
Let's hope the fiscal side (Wale Edun & Co) begin to act responsibly.

Do you know the implications on business, you borrowed N100. You will pay N122.75, so if you are a producer, you must make return of at least 40% to break even, considering rent, charges, salaries, levies and your own profit. So what will you do......

IamANigerianMan:


My brother i am crying here, a country where unemployment is high how can you increase MPR , this man is useless... we are talking of single digit this idiot is increasing it

Life isn't about what I like or don't. If something is the right thing to do, do it! Being angered that 1 + 1=2 won't make it 3.

That is why central banks are made independent globally, so that I, you or the president can't interfere in its core function of fighting inflation.

The high inflation that's plaguing the economy today is partially due to the loose monetary policy that the central bank has been implementing, probably influenced by the presidents preference for low interest rates. This has had disastrous consequences as we almost saw the Naira hit $1 -N2,000 recently.

The high inflation rate which you unknowingly prefer has probably done far more harm to businesses than a hike in interest rates would. Prices have gone totally bunkers.

Saintinoo:


You didn't answer my question, how much did Dangote collect from co operative to build his refinery. How many graduates is your zobo company employing annually and how much are they paid.

Don't Don't come here and paste data doe me, I have been dealing with data on GDP from my diploma days to the university. Hope it is the poor Nigerians who cannot afford 50 naira pure water that will save money in the so called co operatives.

Do you even know that more than 65 % of Nigerians spend their income on food alone? Start from taking data of your area first and generalize it to the whole country, before you bring out some fake data you probably don't know anything about. Try know the person you are sharing them with.

What do you think SMEs are, some akara women business? Those small factory in your locality that worth more than 50 million are also categorized as SMEs, name a co operative that can give them 50 million loan.

Do you even know that most of these co operatives are not being checked by CBN and thereby charge huge amount of interest as against the reason they were established?

What do you think GDP is, increase in GDP of a NY economies is being attributed to production by big manufactures, you don't even know that these big manufacturers produce raw materials for most small businesses, check the sectoral GDP contribution in Nigeria for the past 2 years.

You think economics is by shouting data which you do not understand?

Who do you think make up the economy of Lagos, akara sellers? Remove producers from the economy and juicy agency like custom, FIRS, Shippers council and our seaport which being revenue to the economy aside crude oil will be an August meeting centre.

I sincerely hope that you're not a graduate. That's the only way I can rationalize and justify this post.

"You have been dealing with data on GDP since your diploma days" but you don't know the contributions of each sector to your GDP? You don't know the difference between SMEs and MSMEs? You don't know the contribution of MSMEs to the employment rate? But you'll rather scream Dangote, bla bla? How many people in our generation work with Dangote? Even his (Dangote) employees rely on cooperative loans for survival. How often does Dangote consult your bank for a loan??

To discard your thoughts here, I had to check Dangote Cement's debt-to-equity ratio (I hope you know what this means?). Anyway, a debt-to-equity ratio of 23 per cent means that Dangote relies more on equity financing (77%) than loans (23%) for his business. Do you now see the relevance of data "abi you still won't chop statistics"?

No worries sha, whenever I have to discuss "copy and paste" final year project works like you did in your diploma days, I'll tag you.

My line of thought differs from whatever you have posted here. I apologize for the initial mention. It's such a waste of time and intellectual property.

But I'll try to help you for the last time.

Nigeria has 21 commercial banks
The UK has 375 commercial banks

Nigeria has 916 microfinance banks
The UK has 60 CDFI (aka microfinance banks)

Nigeria has 300,000 cooperative societies
The UK has 7,000 cooperative societies.


Now if you were a 4-year-old toddler, would you apply the same policy measures taken in the UK in Nigeria just because these policies worked in the UK? Answer like a 4-year-old. That's enough.

kettykin:


I thought what was driving the cost of goods and services was the continously dropping of naira , will the rate stop naira fall or devaluation or will it make the cost of borrowing the valueless naira very high.

If interest rates rise, especially above inflation, this will encourages savings above consumption. This will mop up a lot of excess cash in circulation.

With less money in circulation, there'd be less money to purchase things, including forex. This will bring down inflation and an appreciation of the Naira.

Kukutenla:

I don't see the difference it will make. The banks have not been interested in lending for a while so this is good for them. For the real economy though. It is tales of woe as the manufacturing sector will constrict further. Let's hope it tames inflation though. But is the source of inflation too much money as it is being touted?

A lot of the investors will be institutional investors such as pension funds, insurance companies and banks. You would also have Foreign Portfolio investors.

Yes, hikes in interest rates will lead a contraction in the economy but it will be only for the short term. Once inflation has been brought under control, interest rates too will begun to fall.

melodyogonna:

At the cost of massive interest rate. Interest rate is vital for manufacturing, no?

There is no option my guy. That is the only way inflation can be brought down. There is no other means.

jmoore:

You guys are funny.

Cost push inflation can't be tackled by interest rate.

Majority of small businesses have nothing to do with borrowing.

This is not the first time CBN is raising interest rate. What did they achieve the last time?

The central banks have severally in the past increased interest rates, especially after the release of the monthly allocations to the 3 tiers of government which usually leads to an excess of cash in circulation.

Seun:
Reduction in inflation.

Hm! Looking at DeLaRue's analysis, I grabbed some idea about what it is.

grandstar:


The central banks have severally in the past increased interest rates, especially after the release of the monthly allocations to the 3 tiers of government which usually leads to an excess of cash in circulation.

You have not said anything. When was the last time inflation decreased from those actions of CBN?

grandstar:


If interest rates rise, especially above inflation, this will encourages savings above consumption. This will mop up a lot of excess cash in circulation.

With less money in circulation, there'd be less money to purchase things, including forex. This will bring down inflation and an appreciation of the Naira.

lets watch and see then what happens in the next few days, weeks, months etc

grandstar:


There is no option my guy. That is the only way inflation can be brought down. There is no other means.

I see. Hopefully it turns out well

I hope it will resolve the economic challenges faced in the country.

grandstar:


A lot of the investors will be institutional investors such as pension funds, insurance companies and banks. You would also have Foreign Portfolio investors.

Yes, hikes in interest rates will lead a contraction in the economy but it will be only for the short term. Once inflation has been brought under control, interest rates too will begun to fall.

My concern is the contraction.
We need expansion of our manufacturing sector especially now
Besides, the inflation seems to be as a result of supply shortage not demand pull. I hope I'm wrong though

Everything I wrote about in my last thread, they are now beginning to implement. You put round pegs in round holes.

CodeTemplar:
Finally, they have given in to our textbook jargon experts. Let's see how the move goes.

Cc: grandstar, nairalanda1, omohayék, kukutente

It’s not txt book jargon to raise interest rate when inflation rate is high.

You want to attract savers!! Less money in circulation, making the value of naira gradually appreciating.

Victory662:
Somebody should explain this to me oo. I'm a lay man on this particular issue. How will this help our depreciating naira?

Wen u need money for business, u go to thr bank and the bank charges u what is called interest rate....

When the banks need money, they go to the CBN nd thr CBN charges them what is called MPR still an interest rate...

Now the interest charged by the banks on u, if low, encourages u to borrow more, but if the interest rate is high, it discourages u to borrow.....this same mechanism of raising the interest rate to encourage borrowing and reducing it discourages borrowing is used by thr CBN on banks..

Now if the CBN raises its MPR, it discourages banks from borrowing from.them, and if the banks borrow less from.them, banks will give less to business borrowers.....and if the banks went ahead to still borrow from the CBN at high cost, it will also raise borrowing cost (interest rate) on the businessman...

Since businesses won't borrow at high cost, it means new money supply to the system will b reduced nd with less and less money in thr system, inflation will be reduced...

Inflation: it is the continuous rise in the price level of goods and services as a result of too much money in circulation

Kukutenla:

My concern is the contraction.
We need expansion of our manufacturing sector especially now
Besides, the inflation seems to be as a result of supply shortage not demand pull. I hope I'm wrong though

Yes, u are wrong...the inflation is a cost push inflation...

grandstar:


There is no option my guy. That is the only way inflation can be brought down. There is no other means.

There is ...

@DevilsEqual

You have low standards.
if you support this Tunubu, its fine but dont act like things are going well in the country.

Nigerians be supporting mediocre performance.

DevilsEqual:
Waiting for obidients who would come here to call a verifiable stats some propaganda

Some emergency Economic analysts will come here to start propounding some theories on why this will is just smokescreen but na lie, Nigeria go rise for their presence


kudos Cardoso, Now its looking like we now know what to do to make things right

Last quarter of 2024 seems promising

Acidosis:


I sincerely hope that you're not a graduate. That's the only way I can rationalize and justify this post.

"You have been dealing with data on GDP since your diploma days" but you don't know the contributions of each sector to your GDP? You don't know the difference between SMEs and MSMEs? You don't know the contribution of MSMEs to the employment rate? But you'll rather scream Dangote, bla bla? How many people in your generation work with Dangote? How often does Dangote consult you for a loan??

Don't worry, whenever I have to discuss "copy and paste" final year project works like you did in your diploma days, I'll tag you.

My line of thought differs from whatever you have posted here. I apologize for the initial mention. It's such a waste of time and intellectual property.

But I'll try to help you for the last time.

Nigeria has 21 commercial banks
The UK has 375 commercial banks

Nigeria has 916 microfinance banks
The UK has 60 CDFI (aka microfinance banks)

Nigeria has 300,000 cooperative societies
The UK has 7,000 cooperative societies.


Now if you were a 4-year-old toddler, would you apply the same policy measures taken in the UK in Nigeria just because these policies worked in the UK? Answer like a 4-year-old. That's enough.

I gave you a good analysis of how an economy work, but as usual, you are beating round the bush with data probably from worldbank.

I will continue stating more facts just as I have done in the last post. Go back and check the contribution to GDP in the last two years, only trading came second to manufacturing sector in GDP contribution.

You have refused to answer any of my questions, but rather you continue beating around the bush. Tell me the co operatives that can give loan to the MSMEs you are talking about, what do you think grows a nation economy? How many businesses in MSMEs produces most of the FMCG in Nigeria, you think it the local bread producers that grow the economy?

For your information, most businesses in SMEs depend on big manufacturers for raw materials for their products.

I know people who no nothing about the economy when I see one, always bringing forth data they saw online without a critical analysis if these data can be compared to developing economies like ours.

There is really no need arguing about the economy with you, because I so much believe that you know nothing about economics aside going online to download data as a point of argument.

For your information, I carried out my thesis all by my self, with the help of a professor, and can defend that anywhere in the world.

One last thing, I will tell you this as a trained economist, you do not compare different economies in order to getvyour economy working, so keep comparing Nigeria to UK shows that you know nothing about what you are saying.

Go to your state, probably ask the businesses over there to shun banks and collect loans from co operatives. Akara selling economist.