CBN reduces lending rate to 11.5%
NEWSMAN, Abuja – Central Bank of Nigeria (CBN) has resolved to reduce the Monetary Policy Rate (lending rate) from 12.5% to 11.5%.
CBN Governor, Godwin Emefiele made the disclosure at a virtual media briefing after the Monetary Policy Committee meeting on Tuesday.
The committee also voted to retain the Cash Reserve Ratio and Liquidity Ratio at 27.5 per cent and 30 per cent respectively, adding that the decision to reduce the MPR was made to sustain economic recovery efforts and to arrest rising inflation.
He projected that the country could enter into a recession in the third quarter, while there would be growth in the fourth quarter of 2020 or the first quarter of 2021.
He added that the recent inflationary pressures were not driven by monetary policies rather as a result of structural policies, while calling on commercial banks to respond to the reduction of deposit rate by also reducing interest rates on borrowing to encourage borrowing for investments.
CBN Boss said air and road transportation, accommodation, food services were worst hit by the lockdown occasioned by the COVID-19 pandemic, hence called for more aggressive funding of those sectors to engender economic growth.
“Management was directed to ensure that deposit money banks respond to lowering of interest on deposit rate by aggressively lowering cost of credit to borrowers.
“Sectors like air and road transportation, entertainment and accommodation, food services, and education were most adversely affected by the lockdown.
“Committee suggested that more effort be put in place to continue to provide relief and funding to those sub-sectors to catalyse growth,’’ he said.
According to him, the committee retained all other policy parameters, except the asymmetric corridor that changed from +200 and -500 basis points to +100 and -700 basis points around the MPR. The liquidity ratio was left at 30% and Cash Reserve Ratio (CRR) retained at to 27.5%.
Emefiele said the decision to reduce the MPR was to sustain ongoing economic recovery efforts and arrest rising inflation.
He proposed that Nigeria will enter a V-shaped recession, meaning it be entered into and exited almost immediately.
This means that Nigeria will enter recession in the third quarter of this year and there will be growth in the fourth quarter or first quarter of 2021.