.Retains other economic parameters
.Decision will ensure the economy is afloat -Uwaleke
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Thursday reviewed downwards Monetary Policy Rates from 13.5 per cent to 12.5 per cent.
It, however, held all other economic parameters unchanged.
The MPR is the instrument used by the central bank through the MPC to control interest/ lending rates.
The Governor of CBN, Godwin Emefiele, made this known while reading the communique on the outcome of the meeting in Abuja.
Emefiele explained that seven members voted for a reduction of MPR by 100 basis points, two members went for 150 basis points and a member voted for 200 basis points.
He said the committee retained Asymmetric Corridor of +200 -500 basis points around the MPR.
He disclosed that MPC also retained Cash Reserves Ratio (CRR) at 27.5 per cent as well as Liquidity Ratio at 30 per cent.
According to him, the MPC noted that if all stimulus packages already announced by the apex bank are well utilised, it will produce impetus needed to boost economic recovery in the country.
“After reviewing the three options, the MPC noted the imperative to monetary policy at May 2020 the meeting was to strike a balance between supporting the recovery of output growth while maintaining stable price development across inflation.
“Other considerations were the exchange rates and market interest rates. To this end, the committee noted that CRR was recently adjusted upward as a means of tightening the stand of policy.
“In its response to COVID-19 pandemic, however, the bank reduced interest rates associated with all CBN interventions from nine to five per cent.
“Increasing MPR at this stage will be counter-intuitive and it will result in upward pressure on retail market rates,” he explained.
The governor said that the committee maintained that although a sharp decline in output growth was expected in the second quarter of 2020.
He, however, noted that in the third quarter, if the current stimulus packages initiated by CBN were properly implemented, the economy would reverse to positive growth by the fourth quarter.
He added that there was optimism on the part of MPC that the country might not slide into recession.
Commenting on the decision of the MPC to cut the interest rate, Professor of Capital Market at the Nasarawa State University Keffi and former Commissioner for Finance Imo State, Prof. Uche Uwaleke, believed the reduction is part of the CBN’s drive to ensure that the nation’s economy is kept afloat in the midst of the Coronavirus pandemic.
According to him, the MPC decision to cut the benchmark interest rate by 100 basis points down to 12.5 per cent, is a demonstration of the CBN’s sensitivity to stimulate the economy and enable it to withstand the negative impact of COVID-19 as well as the drop in oil revenue.
“Having signalled intention to adopt an accommodative stance in favour of growth, the CBN should put in place measures to ensure that it translates to lower lending rates by the banks to the real sectors of the economy”, he urged.
Meanwhile, the decision to cut the MPR came after several calls by analysts and experts for the CBN to reduce the benchmark lending rates, so that Small and Medium Enterprises (SMEs) can be able to continue operations and ensure the economy does not crumble.