30% Interest Rate: Listen To Dangote – Economists Tell Cardoso

Economists have advised the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, to listen to Aliko Dangote’s call against 30 percent interest rate policy.

Chairman of Tekedia Capital, Professor Ndubuisi Ekekwe, said the Chairman of  Dangote Group’s statement showed the African richest man understood the interest rate policy was wrong.

Aliko Dangote, the largest private sector employer, while commenting on CBN’s 30 percent interest rate, said no job would be created. He said the interest rate would further stifle Nigeria’s economy and provide jobs.

On Tuesday, at a three-day National Manufacturing Policy Summit organized by the Manufacturers Association of Nigeria (MAN), at the Banquet Hall of the State House, in Abuja, Dangote said, “Right now, at 30%, there is no way anybody can create jobs because we are actually stifling growth. So interest rate can remain at 30% but no growth will happen unless that interest rate comes down.”

Professor Ekekwe, on Wednesday, said Dangote’s position aligned with best economic policy. He said the CBN cannot address inflation by raising interest rates. He added that CBN’s policy would suffocate manufacturers who need loans to produce.

Ekekwe said Nigeria needs to produce more to address its inflation challenge.

He argued that such production would not be possible with high interest rate.

He said companies that sought out water, energy and security costs of production without government help could not survive at 30 percent interest rate.

“Even though we want to fight inflation, Nigeria must bring interest rates lower to make it possible for manufacturers to breathe, since if they do not breathe, we may not have the supply (yes, goods and services) we need to reduce inflation (ceteris paribus at constant demand). The World Bank has also come to the same conclusion,” Ekekwe wrote on Tekedia website.

“I read quarterly reports of dozens of companies from Nigeria, there is no way any company can take a loan at 30% interest rate, and still grow. It is impossible in this economy when you still have to be your own water board, electricity board, police, etc as there is really nothing the nation provides to companies these days!

“Now that Dangote has gone public, I do hope someone will review these policies,” the Chairman of Tekedia Capital added.

On his part, Dr Paul Alaje, a Chief Economist at SPM Professional – an economic development research firm, said CBN’s 30 percent interest rate showed the apex bank has been fighting inflation from the wrong side.

Dr Alaje, on Tuesday, said the federal government cannot create jobs by chasing inflation from the demand side. He added that Nigeria needs a production economy. This, he said, cannot be achieved with high interest rate.

The Chief Economist at SPM Professional said since the motive of the CBN and federal government is to create jobs, it must address the high cost of energy and reduce interest rates.

Dr Alaje, on his X handle, said, “Maybe now that Dangote has said the authorities would listen. How can you create jobs chasing inflation from the demand-side strategies of high interest rate and national blackout? Is it not ‘economagic’?”

“At least we now know that economics is not common sense. As poverty ravages further, I hope we do the right things. You want to reduce poverty, reduce and unemployment, reduce hunger, create jobs; the way to go is production, manufacturing, agro-processing, export and productivity. This can’t be without energy,” he added.

According to the National Bureau of Statistics (NBS), in May 2024, Nigeria’s “inflation rate increased to 33.95% relative to the April 2024 inflation rate which was 33.69%. The May 2024 inflation rate showed an increase of 0.26% points when compared to the April 2024 headline inflation rate.”