Asiwaju Bola Tinubu, the national leader of the All Progressives Congress, has said the Central Bank of Nigeria should seize the opportunity of the coronavirus crisis to lower interest rates in a bid to boost the nation’s economy.
Tinubu also urged the federal government to demand a renegotiation of existing loans or debt relief from the World Bank and other development finance institutions.
“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,” he said in a statement on Sunday.
Tinubu said the country must retreat from high interest rates “if we want investment borrowing to attain levels that actually increase private-sector growth and job creation.”
According to Tinubu, high interest rates, along with an unreliable power supply, combine to form a steep obstacle to sufficient real-sector investment, growth and productivity.
He said the country had become too reliant on foreign borrowing, and had created a highly imbalanced and imperfect economy.
Tinubu said, “On one hand, high rates are used to scare domestic investment borrowing, thus undermining income, production and consumption.
“On the other hand, high interest rates are used to attract foreign creditors who must be repaid with an increasing percentage of our intake of dollars.”
He said to stimulate their economies, the central banks of all major economies had driven their prime interest rates below one per cent and nearer to zero per cent.
“These central banks are lending vast amounts at low rates just to support their industries and firms,” he said,
He said, “My position has always been one of reticence to foreign denominated-debt due to repayment challenges.
“However, if we need foreign currency to buy items essential to protecting the nation from the coronavirus, now is the time to borrow.
“The World Bank and other DFIs have said they will grant loans at concessionary rates. We should hold them to their words and demand a renegotiation of existing loans or debt relief.”
Tinubu said the financial authorities should consider formulating regulations that banks must reduce the high interest rates on existing business loans to the new lower general rate.