PART II: (a thread on interest rates)
Yes, you are right! We mentioned earlier that increased demand would reduce interest rates. As more people are willing to lend the FG money, they can give each person a lower interest rate.
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Yes, you are right! We mentioned earlier that increased demand would reduce interest rates. As more people are willing to lend the FG money, they can give each person a lower interest rate.
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All of this is why we are in the unusual position where a one-year treasury bill has an interest rate significantly lower than inflation.
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So, how does all of this affect you? Chances are that the returns on your savings and investment have fallen.
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How come? There are a few ways this can happen. If you save/invest in a mutual fund or Fintech investment, a lot of these funds/businesses ultimately invest in FG treasury bills and similar investment products.
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As the interest rates on these have fallen, your mutual fund of #Fintech products will give you a lower return!
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More importantly, they know that you can’t go and put your money elsewhere—basically everyone uses the government's treasury bill rates as a guide for interest rates on other investments.
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There is a silver lining for you though: you may be able to get loans at a cheaper rate from your bank or other financial institution.
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As treasury bills are less attractive to banks, they are more willing to give out loans to individuals and businesses, particularly as the CBN has basically been forcing them to do so in many ways.
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Don’t get too excited though. Banks know how volatile the economy is at the moment and will pick and choose the borrowers they deem less risky. Still, you might as well try and take advantage of lower interest rates.
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