The national leader of the All Progressives Congress, Asiwaju Bola Tinubu, has called for the lowering of interest rates to mitigate the effects of economic dislocation caused by the COVID-19 pandemic.
In a position paper titled, “The Case against High Interest Rates in Time of Contagion,” Tinubu noted that the pandemic presents the most auspicious time to “correct” the interest rate.
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According to him, high-interest rates constitute “a fundamental drag on national economic growth.”
He said while lower rates would spur domestic investment and production while creating both jobs and wealth, high rates serve only to suppress job and wealth creation.
He said while the Central Bank of Nigeria had demonstrated its financial agility by establishing a growing number of special financing programs for various industries and sectors of the economy, those programmes exposed 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.
“The economic fallout from the coronavirus may present the best, most pressing case for revising the CBN’s high-interest-rate policy.
“The undue rates penalise domestic investment and consumer borrowing. This reduces both aggregate domestic supply and, to a lesser degree, aggregate domestic demand.
“The chronic gap between domestic supply and demand has been filled by bloated levels of imports and encouraged an overvalued exchange rate that the high interests have helped produce.”
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