The Central Bank of Nigeria monetary policy committee on Tuesday reduced the Monetary Policy Rate which is also known as the main interest rate from 14 per cent to 13.5 per cent.
The MPR, which is utilized to determine bank lending rates and the cost of credit for borrowers, had been held at a high list of 14 per cent since July 2016 when it risen by 200 basis points from 12 per cent.
The CBN Governor, Mr Godwin Emefiele, made the decision of the MPC at the end of a two-day meeting in Abuja, stating that six members out of 11 who attended the meeting accepted to drop the current monetary policy stance.
Emefiele said while the MPR was dropped to 13.5 per cent, the committee decided to keep the Cash Reserves Ratio at 22.5 per cent, the liquidity ratio at 30 per cent; and the asymmetric window at +200 and -500 basis points around the MPR.
He said, “The MPC decided by a vote of six out of 11 members to drop the monetary policy rate by 50 basis points, that is 0.5 per cent. Two members voted to drop the rate by 0.25 per cent, while one member voted to drop it by one per cent. Two members, however, voted to maintain the MPR at its current level.”
Emefiele further said the decision to reduce the rate was taken in the overall interest of the economy, as there was a need to have a refocus on monetary tightening.
A professor of Economics at the Olabisi Onabanjo University, Ago Iwoye, Sheriffdeen Tella, described the MPR reduction as too low, saying, “It won’t have any effect because the economy is still very harsh, and it cannot bring about any significant change or engender industrial growth.”
Noting that the cost of production had remained high in the country, he said the government should explore more ways to assist businesses to increase their level of production.