CBN Lowers Interest Rates, First Time In 5yrs

The Central Bank of Nigeria’s, CBN,  Monetary Policy Committee, MPC,  has reduced the benchmark interest rate, from 27.5 per cent to 27 per cent. It was the first time the committee has taken such decision in five years.

The MPC took the decision on Tuesday during its 302^nd meeting held in Abuja, the nation’s capital. The decision was unanimously supported  by the 12 members of the committee.

In July, the CBN Governor, Yemi Cardoso announced that  Committee had decided to  maintain the interest rate at 27.5 percent, to further curtail inflation and stabilize the naira.

Cardoso, while announcing the decision of the MPC to cut the rate by 50 basic point disclosed that it was done because of declining inflation in the country, which he said has decelerated in the last five months.

This, he said, was due to the CBN policies including monetary policy tightening, exchange rate stability, foreign capital inflow into the country, among others.

MPC said: “Other factors that contributed to the deceleration include the continued moderation in the price of PMS and the notable increase in crude oil production.

“In the view of the committee, the stability in the macroeconomic environment offered some headroom for monetary policy to support economic growth and recovery.”

“Notwithstanding the consistent deceleration in inflation, the Committee said it observed the persistent reduction of excess liquidity in the banking system, resulting largely from fiscal releases emerging from improving revenues.

“Being mindful of the need to preserve the prevailing macroeconomic stability, the MPC noted the risk posed by the excess liquidity in the banking system.

“Members noted that the effective functioning of the inter-banking system is critical to enhance transmission of the monetary policy.

“This, therefore, informed the decision to adjust the width of the standing facilities corridor to boost inter-banking market transactions and the stability of the market.”

Meanwhile, the MPC also reduced the Cash Reserve Requirement, CRR, for commercial banks to 45 percent, down from 50 percent, while retaining the CRR for merchant banks at 16 percent.

Also, the Committee  introduced a 75 percent CRR on non-Treasury Single Account , TSA.