By Adedapo Adesanya
The Central Bank of Nigeria (CBN) on Thursday, May 28 reduced its Monetary Policy Rate (MPR) to 12.5 percent as part of efforts to combat the economic effects of the coronavirus pandemic.
CBN Governor, Mr Godwin Emefiele, announced the reduction during a Monetary Policy Council (MPC) briefing on Thursday.
He said the new rate fell from the previous rate of 13.50 percent that was retained at the last meeting.
However, the bank retained its Cash Reserve Ratio (CRR) at 27.5 percent and Liquidity Ratio (LR) at 30 percent.
According to him, seven members of the MPC voted to cut the MPR by 100 basis points, while two members voted for a 150 basis points rate cut, with one member electing for a 200 basis rate cut.
Mr Emefiele added that the asymmetric corridor around the MPR will remain at +200/-500 basis points, while the Cash Reserves Ratio (CRR) at 27.5 percent and Liquidity Ratio (LR) at 30 percent.
The committee also considered developments in the global and domestic economy since its last meeting including, the negative impact of COVID-19 on global growth and the responses of global central banks’ to the COVID-19.
On the domestic front, the committee noted that sustained inflationary pressure in April: +8 basis points to 12.34 percent year-on-year, and weaker but still positive output growth in the first quarter of 2020, as well as a sustained decline in manufacturing PMI.
MPR is the interest rate at which CBN lends to the commercial banks and also the benchmark against which other lending rates in the economy are pegged.
A reduction in the MPR rate will make lending cheaper and help to further stimulate the economy that has been hit by the COVID-19 pandemic.
Some analysts, including those at Business Post, project that lending to commercial bank customers should, by this action, be cheaper and at interest rates within 16 percent to 20 percent.
Aduragbemi Omiyale