BIBILARY:
Can anyone interpret what this means to the Nigeria economy?

jmoore:

Lack of comprehension is failing most of you.
The topic is about interest rate and inflation.

Petrol was previously sold at 195 naira. The price went to 650 naira. A business using petrol at 195 naira and that using petrol at 650 naira, which should have a cheaper price?
How can higher interest rate make the business using petrol at 650 naira to sell at the price of the business using petrol at 195 naira?

Saintinoo:


It will discourage investors from taking loans from banks, because with the increase in MPR, banks are now paying 24% interest on loan to CBN instead of 22%, remember, it was 18% two months ago.

It is a monetary policy that discourage the circulation of money in the economy, but with it negative effect of discouraging investment, is that what we need?

Imagine you approach your bank for loan of 1m naira, and your bank ask you to pay 340k interest on loan, because the MPR have been increased and by implication the bank interest rate. Sure you will not take that loan. This brings about decrease in investment, employment and GDP growth.

iichidodo:
This helps to squeeze out and mop up any loose naira lying about in the economy for speculators to gamble on dollars.I hope this increases the momentum of the current crash of dollar from now to the nearest future and we don't have to beg France to use CFA anymore.

ThierryJay:


It's a double edged sword. It also means that you stand to receive a higher interest rate gain from Banks and other financial institutions when you save or invest your money with them. This encourages investment and savings which will help to mop up more money in circulation and reduce inflation.

jmoore:

You that know something, has inflation reduced since they increased interest rate before this current one?

Copy and paste won't solve anything.
Inflation has many types. Have you heard about cost push inflation?
If you are asked to explain how interest rate will reduce the price of petrol and diesel which are the major factors driving cost of production, you will fail woefully to explain.

jmoore:

You that know something, has inflation reduced since they increased interest rate before this current one?

Copy and paste won't solve anything.
Inflation has many types. Have you heard about cost push inflation?
If you are asked to explain how interest rate will reduce the price of petrol and diesel which are the major factors driving cost of production, you will fail woefully to explain.

Omoawoke:

Bros, I’m not here to drag with you. I basically work with data daily. That’s my work

Saintinoo:


That is the text book economics people are talking about. In US, UK and other developed countries that will work. How many Nigerians have money to save and give as loans in Nigeria?

According to Wale Edun, less than 5% Nigerians have up to #500,000 in their bank account. CBN should use our own Nigeria model to solve our problems and not some western country model.

The policy have not worked and will not work.

InvertedHammer:

/
He used the prescription for asthma in Europe to try to cure cancer in Zimbabwe. In other words, he is using the textbook implementation (increase rate to mop excess liquidity) used by Western developed economies to fix Nigeria's voodoo economy. Comparatively Japan (the 4th largest economy in the world) just increased their monetary policy rate from negative to 0 - 0.1% and that's the first rate hike in 17 years. China's prime rate remains unchanged at 3.95%.

Perhaps someone can explain how a poor country trying to spur economic growth will increase her MPR to 24.75% Shylock rate. Nigerian economy is in coma and Cardoso is feeding it Sniper to quicken her death.

/

jmoore:

It means interest rate has increased.
It will scare people from borrowing.
And those who borrow will have to increase their cost price which will increase the selling price, thereby making inflation higher.

kpompey:
Government should start price control now that naira is gaining. USD is coming down, but rice price remains unchanged. Dangote still sells cement at 9800, building block still sell above 650. The way EFCC attack the aboki's operating the bureau business, the same way those dubious igbo traders should be pounce on. They increased price of existing stocks bought at a very low rate to current price fixed by manufacturers because of surge in dollars.Now manufacturers are reducing the prices, they are claiming old stock must be cleared at old rate.This is not business but fraud. If USD falls and Nigerians failed to enjoy the dividend, then government has achieved nothing. Government should look inward and set price regulatory bodies to checkmate this rogues calling themselves bizmen.

Amigoss:


Lo WA SE fun iyalaya e

Paraman:
People who bought goods when the dollar was high won't want to reduce price now

Freethinker87:


You don't know cheet! You just copy and paste whatever senior agbadorians post on your agbado whatsapp group here.

Tell us why there is inflation in the first place, and why the Naira fell.
Also, explain to us why you think there is excess liquidity in the economy that necessitates a mop-up.

Freethinker87:


Chai! Where do they recruit you agbadorians from?

ThierryJay:


Lol, it works even here. You are quite right that only few Nigerians have excess liquidity. However what you should note is that those few Nigerians (politicians, high network business owners/Ceos, multinational directors & senior management, tech investors, etc) hold a significant portion of the total liquidity in the economy.

These interest rate measures will significantly impact this particular group and being a relatively financially aware segment, they tend to react rationally to the changes to maximize their value which is why Government securities are currently oversubscribed despite the apparent poverty in the land. The reaction of this group will have visible macroeconomic impact in the various markets.

Remember couple of years ago when Yahoo boys were the major drivers of sharp house rent increases due to excess cash available in their hands. Now imagine if some investment scheme was available to suck cash from them, then they wouldnt spend so lavishly and of course rental rates would be lower even though Yahoo boys only constitute a small segment of the totality of Nigerians.

The difference is that while most Yahoo boys rarely react rationally to stimulatory measures, investors and HNIs do.

Omoawoke:


Check my previous post back then, I was among the first to criticize the Floating of the Naira here on nairaland
This is not about Supporting Tinubu or anything , this is about finance and the economy .
And you sound so frustrated, are you hungry?

Freethinker87:


Tell us why there is inflation in the first place, and why the Naira fell.
Also, explain to us why you think there is excess liquidity in the economy that necessitates a mop-up.

Freethinker87:


I agree with you, this is about finance. Could you now, kindly, answer the questions.

NemoDatQuod:
I hope you have a genuine understanding of what happens when interest rates are raised? It increases the cost of living. The guy who has money to go speculate on forex has no problems with rates increase. In fact, it affords him more opportunities for "rent seeking" i.e making money without being productive. Treasury bills become more attractive to him and even fixed deposit schemes become more alluring to him, while at the same time he is using his funds (most likely stolen from you and I) to continue to "rent seek", on the exchange rate.

But you and me, the common man, who are already out of pocket because we either do not get paid well enough at work or we just do not have jobs, we are the burden bearers. Our purchasing power shrinks further, even though it is almost dead already, to begin with. Food, fees, transport, housing etc all increases for me and you. Hence, that increase in interest rate will not serve any purpose other than making the already rich guy richer and impoverishing you and I even further. That is why our interest rate regime has never achieved its purpose. The real players causing problems are not affected. In fact, interest rate hikes reward them. That's why our rates keep going up until they get to 60% one day.

When was the last time we had interest rates of 2% or 3% , something that is the fare in developed societies?

For anything to work in Nigeria, we have to first kill the monster called corruption. It is the beginning and end of all of our problems. It is the architect of the tribalism that has become individualised and profitable to so many Nigerians today. Yes, in Nigeria, tribalism has become a profitable business. Crime/ banditry, etc are all originated from it. And we can solve the problem. We simply need a few good men. But they are nowhere to be found because the structure of public service in Nigeria is built on the foundation of corruption.

Anyone who does not know that that country is in serious long term crisis, has not yet started. It is not about who is the president. It s about making significant, life altering surgery on the administration of government in Nigeria. Yet, the process of seeking public office is the first son of corruption. The judiciary is it's siamese twin and law enforcement is fighting with the military and other agencies on who should assume the mantle of third son.

So, no Sir. There will be no mopping up of anything. The only thing being mopped up is the very little money that you and I have honestly and diligently earned and which has never been enough for anything. And it will make no impact because it is small change. The forex in the hands of our oppressors will remain in their hands and even become more attractive. It is not market forces that are leading to the gains of the Naira. It is organised speculation by the very same individuals who increased the exchange rate in the first place.

In a decadent society, the worst thing you can do is to hand over control to criminals. You make everyone in that society a victim of the criminals, whereas in the past, they could only steal from a select few. Now they are manipulating everything including our currency and interest rate and are raping us before our very eyes.

It is indeed a terrible time to live in Nigeria. I don't know what I would have done if I was still leaving in that country. It is easy to tell someone who does not have, to be patient or that God will see him through. But the hunger, the humiliation of not taking care of yourself enough, let alone take care of those you love, will still be there. The only question is " at what point will a majority of Nigerians rise up and say "it is better to die on my feet than to live on my knees like a dog"?

Oh! and the next time any Nigerian follows after the crowd and stone or burn to death the poor guy who stole bread because he is hungry, or because his family is hungry, that Nigerian should look at himself/herself and call yourself a useless coward. This is for every Nigerian. You are angry and take the life of someone who was hungry. Yet, you "dobale" and make obeisance to and serve the very persons who have turned your daughters/sisters/wives into runs girls, the very men who have robbed you of your dignity. It is now a long midnight. A very long midnight. And only Nigerians will decide how long that midnight is going to be.

Kill corruption and Nigeria will rise. Only the common man in Nigeria can kill corruption. History is replete with examples of the common man killing corruption. It happened in almost all the societies that we run away to today for safe guarding, myself included.

MisterBanny:


Pls Sir help a brother with something to buy food. God bless

Nemere2020:


https://nairametrics.com/2024/03/26/cbn-raises-benchmark-mpr-by-200-basis-points-to-24-75/?fbclid=IwAR098o-XOsUmJnOZOKLYZZ_zdMOLk2iR8RYoxfeGvJRyoHdWCQ3TtyJtcF8

toujurs:
As tinubu dn fail you. hunger will finish you.

Saintinoo:


Good explanation from you there, now to counter some of your points.
An economy does not depend only on few players, politicians, banks executives, big businesswoman you mentioned do not bank their money in naira and most have their money stacked i n foreign accounts.

It will surprise you that it is the change from common man in Nigeria that constitute loanable fund in banks.

Inflation in Nigeria has little to do with how much the big boys spend. Inflation in Nigeria is more of a cost push type, prices are raising because it is more expenses to produce and imported goods are increased in price because of poor exchange rate. Now, this MPR increase will also inflation because the businesses who are willing to borrow at a higher interest rate will increase price.

Godwin Emefeile increased MPR, now Cardoso two times in two months, but it has no brought down inflation, rather inflation have increased to over 32%.

Now, let's analyze the inflation problem in Nigeria. The inflation in Nigeria is not as a result of too much money in circulation, you will ask, where is the money?

The inflation problem is as a result of low production and scarcity. Using more of monetary policy will not treat this problem. That is what CBN do not understand.

FG do not want to do the right thing to arrest inflation because it will not allow them to loot the economy the way they intend. Watch how inflation will increase for the month of March and April, then you will understand that the policy will flop, just as it flopped in the month of February.

adeabimbola700:
Economists in the house, please what does this mean to the Nigerian Economy?

Freethinker87:


Mr Economist.

While I understand the steps taken by the CBN to control inflation, I respectfully disagree with your perspective.

Increasing MPR to 25% means that banks will offer loans at over 32%. This new interest regime will be detrimental to businesses that rely heavily on loans for their operations.

With such high-interest rate, the cost of borrowing will go up, significantly reducing the overall liquidity available to businesses.

This will certainly lead to a slow-down in business operations, entrepreneurship, and consequently the economy like Chief Tinubu promised during the campaign. Nigeria does not have an excess liquidity problem, we're suffering from a FX scarcity.

It is highly unlikely that any legitimate business can survive, let alone thrive, under this condition. FGS businesses are struggling currently, with many multinationals shutting down operations in Nigeria. How much more SMEs?

Instead of mopping up money from the system, providing financial support and grants to businesses and entrepreneurs can stimulate the economy and eventually strengthen the Naira, but No! let's use our scarce FX to sponsor Hajj tourism to Mecca and import foreign SUVs for legislators while the illegitimate President and his wayward son travel in a 70-vehicle convoy.

InvertedHammer:

/
He used the prescription for asthma in Europe to try to cure cancer in Zimbabwe. In other words, he is using the textbook implementation (increase rate to mop excess liquidity) used by Western developed economies to fix Nigeria's voodoo economy. Comparatively Japan (the 4th largest economy in the world) just increased their monetary policy rate from negative to 0 - 0.1% and that's the first rate hike in 17 years. China's prime rate remains unchanged at 3.95%.

Perhaps someone can explain how a poor country trying to spur economic growth will increase her MPR to 24.75% Shylock rate. Nigerian economy is in coma and Cardoso is feeding it Sniper to quicken her death.

/

Freethinker87:


Mr Economist.

While I understand the steps taken by the CBN to control inflation, I respectfully disagree with your perspective.

Increasing MPR to 25% means that banks will offer loans at over 32%. This new interest regime will be detrimental to businesses that rely heavily on loans for their operations.

With such high-interest rate, the cost of borrowing will go up, significantly reducing the overall liquidity available to businesses.

This will certainly lead to a slow-down in business operations, entrepreneurship, and consequently the economy like Chief Tinubu promised during the campaign. Nigeria does not have an excess liquidity problem, we're suffering from a FX scarcity.

It is highly unlikely that any legitimate business can survive, let alone thrive, under this condition. FGS businesses are struggling currently, with many multinationals shutting down operations in Nigeria. How much more SMEs?

Instead of mopping up money from the system, providing financial support and grants to businesses and entrepreneurs can stimulate the economy and eventually strengthen the Naira, but No! let's use our scarce FX to sponsor Hajj tourism to Mecca and import foreign SUVs for legislators while the illegitimate President and his wayward son travel in a 70-vehicle convoy.

InvertedHammer:

/
He used the prescription for asthma in Europe to try to cure cancer in Zimbabwe. In other words, he is using the textbook implementation (increase rate to mop excess liquidity) used by Western developed economies to fix Nigeria's voodoo economy. Comparatively Japan (the 4th largest economy in the world) just increased their monetary policy rate from negative to 0 - 0.1% and that's the first rate hike in 17 years. China's prime rate remains unchanged at 3.95%.

Perhaps someone can explain how a poor country trying to spur economic growth will increase her MPR to 24.75% Shylock rate. Nigerian economy is in coma and Cardoso is feeding it Sniper to quicken her death.

/

OboOlora:

Trial and error financial techniques.
Pump $$$ from foreign reserves to save a dying naira so people can applaud you for a week.
Then watch the same $$$ rise in the next month and blame citizens for not buying unavailable local goods.