THE CASE AGAINST HIGH INTEREST RATES IN TIME OF CONTAGION
THE TIME IS NOW – CORRECT THE INTEREST RATE
The current form of our financial system is antithetical to growth. Broad and diffused growth was not the goal. Such growth contravened the underlying tenet of military rule – tight, centralised control of political power and economic resources.
Defenders of the high interest rate policy claim high interest rates quell inflation and maintain sound exchange rates. Many local economists who remain wedded to a brand of conservative monetarism support this position.
Over time, high rates cause more inflation than they prevent. In the initial phase, high rates might lower inflation. Feedback loops created by the initial high rates will eventually encourage inflation.
If we went to a freely floating exchange rate, the naira would devalue. This means our currency is overvalued in terms of our trade with the outside world.
This overvalued exchange rate is buoyed by high interest rates.
Another consideration we must weigh regarding interest rates is how lowering rates along with other innovations may unlock the potential for real estate to be catalyst for economic growth at this moment.
High interest rates are a fundamental drag on national economic growth. Only our unreliable power supply may loom as a bigger impediment to national prosperity.