Nigeria’s economy is primed to relapse into another recession come the third quarter of the year as a result of the negative impact of COVID-19 pandemic, hence the MPC’s decision to cut the lending rate.
This will help to “provide cheaper credit to critical sectors, improve aggregate demand, stimulate production, reduce unemployment and support the recovery of output growth.”
At the end of its September meeting, the MPC says the majority of its members voted to reduce the Monetary Policy Rate (MPR) by 100 basis points, from 12.5 per cent to 11.5 per cent, while adjusting its symmetric corridor around the MPR from +200 and -500 basis points to +100 and -700 basis points.
CBN, MPC further retained CRR at 27.50 per cent and liquidity ratio at 30 per cent.
Apex bank Governor, Godwin Emefiele disclosed this while briefing the journalist on the decisions of the Monetary Policy Committee (MPC).
He said strategic health of Nigerian banks remained strong and able to support the Nigerian economy.
Emefiele further stated that total loans in the Nigerian banking sector rose from N15 trillion in June 2019 to N19.33 trillion in August 2020.
He said that the total assets in the banking sector also rose from N38 trillion in June 2019 to N48 trillion in August 2020.
The CBN Governor added that the Non-Performing Loans (NPLs) in Nigeria’s banking sector dropped from 9.4 percent in June 2019 to 6.1 per cent in August 2020.
He disclosed that there was available funding, at low interest rates, for business owners in Nigeria, through their banks.
Emefiele reiterated the need to diversify Nigeria’s economy to grow its foreign revenue base.
The CBN Governor urged Nigerians to support the local production and consumption of food items in which the country has comparative advantage.
MPC restated commitment to complement fiscal policy with a view to restarting growth post-COVID 19.
The Apex bank governor added that in view of the declining growth in the economy and the rising inflation in recent times, the latest decision on the monetary policy fundamentals was a difficult one for the committee as it required a lot of trade-offs to ensure price stability and support the recovery of output growth.
Saying, the need to tighten the monetary policy stance is to help address the rise in domestic prices, by moderating upward pressure on prices and attract fresh capital into the economy and improve external reserves level.
On the option to consider easing, the CBN governor said the MPC was of the view that this would provide cheaper credit to improve aggregate demand, stimulate production, reduce unemployment and support the recovery of output growth.