#COVID19: Tinubu Advocates Reduction Of Interest Rates, Provision Of Tax Reliefs

The National Leader of the All Progressives Congress (APC), Bola Tinubu, is of the opinion that if the COVID-19 crisis is to have any positive economic aspect, then it should be that Nigeria used this moment to drive down interest rates.

Chief Tinubu in a lengthy communique on Sunday, advised the Regime to avail tax reliefs that would aid financial institutions in the country to reduce their interest rates.

In his statement, the elder statesman noted that by doing this, the government will saving the nation from a monumental drag on national economic growth.

According to him, lower rates will increase domestic investment and production, as well as create jobs.

While noting that lower rates may have some negative short-term impact on inflation and the exchange rate, the former governor of Lagos argued that the economic dislocations caused by the coronavirus will serve to mitigate those temporary negative consequences.

Below is the full statement by Asiwaju Bola Ahmed Tinubu:

1. ECONOMIC POLICY

THE CASE AGAINST HIGH INTEREST RATES IN TIME OF CONTAGION

THE TIME IS NOW – CORRECT THE INTEREST RATE

— Bola Ahmed Tinubu (@AsiwajuTinubu) May 3, 2020

3. 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 & encouraged an overvalued exchange rate that the high interests have helped produce.

— Bola Ahmed Tinubu (@AsiwajuTinubu) May 3, 2020

5. Over time, as compound interest payments become due on these foreign investments, the nation will lose an ever-increasing amount of money to satisfy foreign debt obligations. In the short run, high rates seem to attract foreign capital and spur the economy…

— Bola Ahmed Tinubu (@AsiwajuTinubu) May 3, 2020

7. They stifle domestic investment and incomes while pushing up inflation and exposing an ever-increasing share of our financial system to foreign manipulation and dependence.

— Bola Ahmed Tinubu (@AsiwajuTinubu) May 3, 2020

9. 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.

— Bola Ahmed Tinubu (@AsiwajuTinubu) May 3, 2020

11. 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.

— Bola Ahmed Tinubu (@AsiwajuTinubu) May 3, 2020

13. The modern global economy is built on credit. Prosperous nations have built success based on the sustained ability to use credit to generate high levels of domestic investment as well as allow for significant consumer financing.

— Bola Ahmed Tinubu (@AsiwajuTinubu) May 3, 2020

15. There were no nodes of power truly independent from the centre. Nor did this situation foster creative and innovative economic thinking leading to sufficient business start-ups that might have grown and diversified the economy.

— Bola Ahmed Tinubu (@AsiwajuTinubu) May 3, 2020

17. As such, we are in a situation where the banking system is not sufficiently governed by the rational dynamics of economic maximization. Without optimal financial sector support, the productive economy has failed to grow as it should.

— Bola Ahmed Tinubu (@AsiwajuTinubu) May 3, 2020

19. However, that school of thought has been discredited by the failures of Thatcherite policies of the UK in the 1980s, by monetary policies implemented to cure the 2008 financial crisis and by the financial policy moves being undertaken today to fight the coronavirus.

— Bola Ahmed Tinubu (@AsiwajuTinubu) May 3, 2020

21. EXCHANGE RATE AND THE ECONOMY

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.

— Bola Ahmed Tinubu (@AsiwajuTinubu) May 3, 2020

23. CONCLUSION

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.

— Bola Ahmed Tinubu (@AsiwajuTinubu) May 3, 2020

25. However, in a twist of irony, the economic dislocations caused by the coronavirus serve to mitigate those temporary negative consequences. If there is a time to reduce interest rates, that time is now.

— Bola Ahmed Tinubu (@AsiwajuTinubu) May 3, 2020