The Nigerian government offers 14% interest rates on its 1-year treasury bills. This is exorbitant, and could be the main factor in the unwillingness of Nigerian banks to lend to the Private sector. Earlier in this thread, i argued that the reason the free market was not generating development in Africa was because of a failing of the private sector itself, others suggested that it was a failure of the banks, now i will theorize that it is the governments fault, but not for the reasons often suggested ( lack of infrastructure) but rather high government Treasury Yields and their effects on interests rates all over the country.

Because the 1-year treasury is considered to be the safest investment in any country it inadvertently sets the minimum interest rate for any loan in that country. What incentive is there to loan money at 6% or 3% (like is done in the U.S) when you could get a much safer treasury bill for 14%? This creates a huge opportunity cost for money in the Nigerian financial system and makes banks unable to adequately fund growth and business in the private sector via loans. This is because they are charging suffocatingly high rates or are simply unwilling to lend.

Without this Cog in the Free market the system does not work properly, and the private sector is unable to bring growth, employment, and industrialization without assistance from the government.

So why are Nigerian treasury yields So high? It seems to be a a result of inflation, government debt and instability

Original thread. https://www.nairaland.com/1315575/free-market-economics-why-naija