gare2510:
My TB with First Bank was not successful, did anybody experience same?

gare2510:
My TB with First Bank was not successful, did anybody experience same?

Itsrm:
Another way to understand it is this. If you keep reinvesting your interest at the same rate, you end up with 23%pa rather than the original 19%.

Let's say you invest 100,000. You earn an upfront interest of 19,000. You reinvest the 19,000 at the same 19%, you get 3610. Reinvest 3610, you get 685 naira. Reinvest 685 and you get 130 naira. Reinvest 130 naira and you'll get 24 naira.

At the end of one year, you get 100,000+19,000+3610+685+130=N123,425

This represents 23.425% increase on your initial 100k.

Itsrm:


I doubt they participated in the last auction. I suspect they are waiting for MPC.

Godisrealxyzabc:


First bank did. Mine went through @19%

Godisrealxyzabc:


First bank did. Mine went through @19%

gare2510:


Did you specify your rate or went with bank rate?

Is it normal for bid for some customers within the same bank to be successful while others are not especially if they go with bank rate

Quiteparrot:
This country is finished, everybody is now chasing after the dollar, #1800/$ as at today. I'm so depressed right now, all my investments are in Naira. Mutual funds is giving me 11.5%, Bond at 15.7%, my purchasing power has been reduced by more than 50%. I sold my SUV about two years ago, hoping to buy something bigger, now the old version type I sold is now 14m for Nigeria used, I can't keep up. I had to close down my business because of government satanic policies, fixed investments wey I put eyes to dey use take care of family, devaluation and hyperinflation no gree, I'm so tired.

Each time I want to process a withdrawal from my mutual funds investment in order to starch it all in dollars, I get weary because of the monthly income I will earn from it which I've been using solely to take of my family, the more I tarry the more the dollar soar. Newbies should learn from my mistake, don't keep more than 20% of your investments in Naira, 80% should be dollar investment.

Is there anyway I can sell my 10 years SUKUK? Nigeria bonds is a loss in disguise

jedisco:
Seems the 2018 era of high interest rates.

The CBN would typically say its to battle inflation and attract foreign investors. We already know TBs are always oversubscribed irrespective of the prevailing rate. Why then are rates being increased? Like in 2018, I still ask

1. Where does the government get the money to pay the 20% interest on TBs? Is it more printing?
2. Who benefits from high TB rates- is it the rich large institutions or everyday folks?
3. If foriegn investors cared about local interest rates, why wouldn't they skip Nigeria and head to Argentina with over 100% interest rate?
4. With CBN interest rates typically forming the minimum floor for commercial loans, how would Nigerian businesses survive sourcing loans at over 20% when foreign counterparts are at 5%?

The next excuse is inflation but again I wonder if we are just blindly copying the West.
In Western nations, Interest rates and inflation reverberates throgh the society and reaches the common person. Due to good exposure to cheap credit, a rise interest rate means monthly mortgage payments and subsequently rents increase, house prices fall/stall, more interest on credit purchases for cars, holidays, gadgets e.t.c hence less demand. It generates a drag limiting discretionary spending. Hence why the west quickly conquered their highest inflation in decades by raising rates to 5%.
In Nigeria, How does this rate hike filter through to the common man and even then, how much discretionary spending do we make. How much credit exposure do we have

It's the reason why high interest rates hardly ever brings down inflation but instead causes more inflation, destroys businesses, enriches the rich/banks and leaves us chasing our tail. Keen to get alternative views.

ositadima1:


But the rate of inflation is about 26%. Does it not imply that an entity borrowing your money today at 19% to pay a year later is actually profiting at your expense? The entity can simply invest your money and profit from the difference. For example, it can buy goods like palm oil, store it in large reservoirs, and one year later, they pay you your 19% and pocket the change. I'm not saying this is exactly what the government is doing, but I am answering your question that the government can have that money invested or even spend it today.

The other point you raised is that it is always oversubscribed. Maybe they are constrained on the initial offer quantity, and they rely on the oversubscription. Perhaps by hiking the rates, it will be even more oversubscribed, as I've heard there is a very high amount of Naira in circulation currently.

I'm not a professional, and these views are just layman's views aiming to see things from the other side of your argument. Thus, on another day, I can be on your side, lol.

jedisco:


I see your point. Our views matter.

Issue here is that interest rates by central banks are not for purpose of generating profit but rather to drive 3 main macroeconomic levers viz: stimulating growth, combating recession and fighting inflation. During covid, major central banks crashed interest rates to zero so people and businesses could have access to cheap credit, keep spending and hence maintain demand.
Outside recession/inflation major economies maintain interest rates at very low rates to encourage businesses growth. In some nations, its even negative. I.e you loose money by buying government bond. They still get subscribed (just like here) as some financial houses/pension funds have to hold government debt as part of their core portfolio. The analogy you gave is right for an individual or business but not for the government. The average Westerner is able to get a loan to buy a house at 5% today. Meanwhile Nigeria is borrowing same foreign currency at over 12%. How can we compete? 'Lending' the government money hardly generates any economic footfall and hence shouldn't be overly rewarded moreso if it's new money being printed for this purpose.

Regarding oversubscription, they mostly take up what they set out to (rarely go over). I've stated why it'd be oversubscribed irrespective of the rate. Yes, there's high amount of money in circulation. The way to tame that is by stopping excessive printing and chanelling printed money to productive parts of the economy. What this does rather is push the can down the road so they print more next year and we're back to square 1 just like in 2018.

ositadima1:


In the first part of your discussion, you made comparisons of interest rates. Did you consider that the inflation rate is over 20%? Have any of these European countries you looked at ever had such high inflation? Do you still think they will maintain the 5% interest rates if that were to happen?

"U.S. interest rates reached 15% in the early 1980s. This was primarily due to an effort by the Federal Reserve to combat extremely high inflation, which peaked at over 14% in 1980."

jedisco:


In the unlikely situation they have such inflation rate, their interest rates would exceed 5%.
In my first post, I explained how this works. Temporary rise in interest rate is a good lever against inflation where the system is flush with consumer credit. My issue is that we see western nations doing this and hastily copy them without understanding why it worked for them and if it would for us. Why has the raised interest rate not worked for us in combating inflation? Its either we try to replicate the system in the west or craft out other means of fighting inflation.

I'm happy you brought up the US scenario. The end of the world war saw the birth of consumer credit and the period between 1945 and 1980 saw unprecedented growth in consumerism i.e mortgages, credit for cars, hoysehold items, holidays e.t.c hence why rate hikes worked.
Another example is last year. Every 0.25 rise the Federal Reserve or Bank of England made was met with significant media fanfare and analysis as it had a direct impact on everyday folks. How many people in Nigeria know the current rate or are directly affected?

Secondly, for rate hike to work, every rise is usually met with fear and a change in perception/spending habits. There'd be concern about house price and stock market crash, job lay offs e.t.c. Even fund managers and banks do not want increased rates as it means less return elsewhere. Here, we are celebrating it which shows quite well its not having the intended effect.

narite:

Nigeria’s problem all boils down to one thing “Being a major import dependent Nation”. Certain areas of the economy have been totally abandoned for decades and focusing on just one major area (oil producing), an area that is not even optimally exploited (still end up importing the oil).

Clearly, the inflation ravaging our country is not that of too much Money chasing few goods (individuals and organizations are already cutting on spendings they do not even have) rather it more of cost-push. With the general increase in the cost of raw materials all over the world and coupled with our currency’s devaluation as an import based nation we are bound to experience drastic unfavorable changes in price of commodities, the costs of staying in business are passed down to the final consumer, this is simple math.

Raising interest to combat this problem as at this point in time is totally absurd, businesses are struggling, trying to navigate through this unfamiliar territory (rising cost of foreign materials, currency devaluation) and we are there raising interest rate, to do what exactly? Probably to kill whatever is left of all this businesses, if they choose not to run away.

There is no shortcut to fixing our problems. Definitely, raising interest rate won't cut it for us. This inflation will persist for a long time.

narite:

Nigeria’s problem all boils down to one thing “Being a major import dependent Nation”. Certain areas of the economy have been totally abandoned for decades and focusing on just one major area (oil producing), an area that is not even optimally exploited (still end up importing the oil).

Clearly, the inflation ravaging our country is not that of too much Money chasing few goods (individuals and organizations are already cutting on spendings they do not even have) rather it more of cost-push. With the general increase in the cost of raw materials all over the world and coupled with our currency’s devaluation as an import based nation we are bound to experience drastic unfavorable changes in price of commodities, the costs of staying in business are passed down to the final consumer, this is simple math.

Raising interest to combat this problem as at this point in time is totally absurd, businesses are struggling, trying to navigate through this unfamiliar territory (rising cost of foreign materials, currency devaluation) and we are there raising interest rate, to do what exactly? Probably to kill whatever is left of all this businesses, if they choose not to run away.

There is no shortcut to fixing our problems. Definitely, raising interest rate won't cut it for us. This inflation will persist for a long time.

frank33:
Government is increasing TB interest rates to encourage more people to purchase TBs.

The more people buy TBs, the less cash they will have to buy dollars.

The aim is to reduce the demand for dollars within the country. They want to stabilise the exchange rate (slow the decline of the naira) by any means possible.

Make your choice, buy TB at this high interest rate or buy dollars. Shikena

Odunharry:

Yes o. New moniker?

Meerahbel:

narite:

.....

Clearly, the inflation ravaging our country is not that of too much Money chasing few goods (individuals and organizations are already cutting on spendings they do not even have) rather it more of cost-push.
......

frank33:
Government is increasing TB interest rates to encourage more people to purchase TBs.

The more people buy TBs, the less cash they will have to buy dollars.

The aim is to reduce the demand for dollars within the country. They want to stabilise the exchange rate (slow the decline of the naira) by any means possible.

Make your choice, buy TB at this high interest rate or buy dollars. Shikena

Tranquility2345:


Gbam! Na the koko be this! No be all the yamayama jargons wey those two guys up there are typing!

jedisco:


Wisdom is not repeating same thing continously and expecting different results.

Interest rates were increased in 2017- 2019. How did it end?

Argentina, Turkey e.t.c all have interest rates double that of Nigeria. How has that helped them fight inflation? How come Western nations were able to cripple inflation by just rasing rates to 5%?