Economy: Interest rates hit lowest level in 6yrs

For the first time in about six years, the Central Bank of Nigeria (CBN) in a surprising move on Tuesday cut benchmark interest rate to 11 percent from 13 percent, in an effort to stimulate growth in the nation’s economy.

The bank’s monetary policy committee at the end of its two-day rate setting meeting, also announced a reduction in the cash reserve ratio for commercial banks to 20 percent from 25 percent, another move to try to inject liquidity into the banking system and encourage lending to firms and households

CBN governor, Godwin Emefiele said that the decision to cut both the policy rate and the harmonised cash reserve ratio, was to engineer growth by increasing the flow of lending to critical sectors of the economy like agriculture, solid minerals, critical social infrastructure and manufacturing.

Read also: CBN issues recapitalisation deadline to 3 banks

The central bank has been injecting cash into the banking system since October in a bid to stave off recession in Africa’s top oil producer, which has been hit hard by the sharp fall in crude prices over the last year.

“We must stimulate growth,” Emefiele said, adding that committee members had voted by a margin of eight to two in favour of the reduction.

The move took many in the market by surprise, as the apex bank also broadened its interest rate corridor to 200 basis points above the benchmark rate and 700 basis points below, which means it will borrow from commercial lenders at 4 percent and lend to them at 13 percent.

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