Interest rates are “What you pay for borrowing money and what banks pay you for saving money with them” (Bank of England)
Thursday 5th November, 2020 the Bank of England cut down it’s interest rates to 0.1% which is lower than 1% and Nigeria’s Interest rate is at 11.5%.
This wild difference has got people complaining about the margin between the two countries interest rates, it has really provoked Alot of interest.
These are few advantages of a low interest rate
- It encourages people to borrow more money from the Bank to either invest or spend
- It encourages more money in circulation, reduces deflation
- It also discourages people to save their money in banks knowing that the money saved won’t yield them more interest as usual and would seek for new ways to increase returns on investment.
Also this also happens to cause a depreciation in the exchange rate of the country’s currency.
Although Nigeria has always had a flair for increasing their interest rate which might have affected the mindset to invest or borrow from Banks knowing that the money that would be borrowed has to yield enough return to comfortably pay the interest and have enough profit to spare for the Investor.
Time would tell if there would be a convenient Interest rate to encourage borrowing and investment.
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