The Central Bank of Nigeria (CBN), rising from its Monetary Policy Committee (MPC) session Tuesday afternoon, lowered its lending rate to banks by 100 basis points to 11.5%, a policy shift that followed the headwinds of the coronavirus outbreak in August when the domestic credit growth rate slowed from 9.4% to 6.94%.
At its last meeting in July, the monetary authority had maintained the monetary policy rate at 12.5%.
A dramatic move unforeseen by analysts, the adjusted rate is the lowest in four years since 2016, and would press towards keeping inflation within target, even though this has not been achieved in five years.
Cost of living soared by 13.2% last month, higher than what analysts expected, but the CBN believed it had nothing to with low interest rates but rather with structural dynamics.
The economy is course for its first recession in four years if the Gross Domestic Product (GDP) slips further this quarter, raising concerns that moved the committee to action.
Six members consented to the rate cut of the ten panellists in attendance, CBN Governor Godwin Emefiele told an audience of stakeholders and industry watchers in Abuja. The downward review is the central bank’s second this year.
The regulator planned to take decisive actions to steady the exchange rate of the naira, which also had seen two devaluation rounds this year, the MPC said.
Nigeria’s GDP could shrink by 5.4% this year, said the International Monetary Fund, the most in forty years.
The MPC retained the cash reserve ratio at 27.5% and the liquidity ratio at 30%.
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