The Central Bank of Nigeria (CBN) announced a cut in the Monetary Policy Rate (MPR) from 12.5 per cent to 11.5 per cent on Monday.
Central Bank Governor Godwin Emefiele announced this while presenting the communiqué the 275th Monetary Policy Committee (MPC) meeting on Tuesday.
Mr Emefiele said that the decision to reduce the MPR was made to sustain economic recovery efforts and to stem the rapid rise ininflation.
He projected that the country could enter into recession in the third quarter, while there would be slight growth in the fourth quarter of 2020 or first quarter of 2021.
Mr Emefiele said that the committee also retained Cash Reserve Ratio (CRR) at 27.5 per cent. He said that recent inflationary pressures were not driven by monetary policies but structural policies.
He asked commercial banks to respond to the CBN’s decision to cut rates by implementing cuts in lending rates to encourage borrowing and stimulate the economy.
Mr Emefiele said that certain sectors such as those involved in air and road transportation, accommodation and food services were heavily affected by economic disruptions brought about by the COVID-19 pandemic. He called for more aggressive funding of those sectors to stimulate economic growth.
“Management was directed to ensure that deposit money banks respond to lowering of interest on deposit rate by aggressively lowering cost of credit to borrowers.
“Sectors like air and road transportation, entertainment and accommodation, food services and education were most adversely affected by the lockdown.
“Committee suggested that more effort be put in place to continue to provide relief and funding to those sub sectors to catalyse growth,” he said.