The Central Bank of Nigeria (CBN) Thursday afternoon reviewed the Monetary Policy Rate (MPR) downward by 100 basis points downward to 12.5% from 13.5%, which had been retained two times this year, the last time being March.
According to Godwin Emefiele, the central bank’s chief, the CBN chose to adopt a lower MPR, which gauges the rate at which the apex bank lends to commercial banks and serves as the benchmark for other lending rates in the economy, as a monetary strategy aimed at reining in the adverse impact of the coronavirus pandemic.
He announced, rising from the 273rd session of the bank’s Monetary Policy Committee, the retention of the Cash Reserve Ratio (CRR) at 27.5 per cent and the Liquidity Ratio at 30 per cent.
The MPR measures the benchmark lending rate while the CRR is a metric for deciding the minimum portion of the total deposits of customers, held by commercial banks as reserves (cash or deposits) with the Central Bank.
The liquidity ratio is a financial metric for weighing a bank’s ability to pay off its short term debt obligations.
Seven out of the ten-member strong committee opted for a reduction in the rate from 13.5% to 12.5% while the other three voted for a deeper cut – two favouring a 150 basis points rate slash and one a rate reduction by 200 basis points.
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