Who needs an MPR cut when market interest rates are way below the rate of inflation?
The MPR is an anchor rate that pulls all other interest rates in the market. Ironically, the MPR has become an anchor without a ship (economy) to pull. T/Bills, deposit and lending rates have plummeted by an average of 400basis points leading to a borrower’s euphoria.
However, there is a problem, the banks have not opened the credit spigot and borrowers cannot wait to draw down the loans on the one hand.
On the other hand, investors and savers are looking desperately for alternative asset classes. This is reducing the Marginal Propensity to Save whilst increasing the Marginal Propensity to Consume and Import. The prognosis is that either we see a surge in credit and growth or we witness outflows from the system. In all cases the financial sector is in for an effervescent year-end for 2019 and an interesting 2020.
The inverse relationship between being resource rich and well managed
In the IMF Regional Outlook October 2019, African non-resource rich countries grew faster than resource intensive countries. The same trend is noticeable in Nigeria where we see resource rich states (oil producers) are also the states with the highest misery index. Non-resource rich states are ironically the best states to live i.e. the lowest misery index. The question is why the paradox? This is partially attributable to factors such as fiscal abuse, complacency, governance breaches and a false sense of entitlement.
In the slides, the fallout of the 19th status quo decision since 2016 and the resource curse was discussed on the Channels TV News at 10 by Bismarck Rewane.
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