Tinubu faults CBN’s management of interest rates, calls for reduction

A national leader of the ruling All Progressives Congress (APC), Bola Tinubu has taken a look at the nation’s economy and proffered solutions he said would spur it.

The former governor of Lagos State, in a lengthy statement on Sunday, analyzed the country’s economy, and concluded that there was a need to lower the general interest rates in order to boost the economy.

He commended the financial agility of the Central Bank of Nigeria (CBN) but faulted its management of existing interest rates, which he said, suppressed the economy.

“The Central Bank of Nigeria has demonstrated its financial agility by establishing a growing number of special financing programs for various industries and sectors of the economy. While these programs look good at first glance, they also expose important contradictions in the CBN’s position. The special schemes are an implicit admission that normal rates stifle investment borrowing and thus suppress the economy. The extraordinary schemes would not be required if the general interest rate was at a proper level.

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“By establishing the special programs, the CBN attempts the impossible. On one hand it defends the general rate as prudent. On the other, it proliferates special exceptions in order to spur investment borrowing that the general rate has heretofore stifled.

“This complex CBN rear-guard action does not serve the greater purpose. It merely prolongs the inevitable: We must retreat from high interest rates if we want investment borrowing to attain levels that actually increase private-sector growth and job creation.

This point bears repetition. If the financial sector functioned properly, servicing the needs of the economy in general, there would be no need to constantly resort to specialised sectoral plans (one for this industry, another for that industry and so on) for concessionary lending below regularly available rates of interest. Each such scheme is evidence that the overall financial system is fragmented in a manner that artificially reduces investment and the positive consequences increased investment has on growth, production and employment,” Tinubu said.

He also lamented, that “the schemes are akin to a homeowner who, confronted with severe structural damage, commissions a fresh coat of paint to obscure the obvious structural flaws. Just as the homeowner should focus on fixing the core problem to prevent the house from crumbling, the Bank should do the one great thing it can do to free the economy from an unpayable burden. It should reduce interest rates”.

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