CBN Reduces Lending Rate from 13.5 to 12.5 Percent

by James Ikenna…….

The Central Bank of Nigeria (CBN) has reduced its benchmark lending rate from 13.5 percent to 12.5 percent. The CBN Governor said this on Thursday.

According to him, 10 members of the monetary policy committee backed the reduction. It is the first cut since March 2019

The Committee, however, retained the Cash Reserve Ratio (CRR) and the Liquidity Ratio (LR) at 27.5 percent and 30 percent respectively. The Committee also retained the Asymmetric band at plus 200 basis points and minus 500 basis points around the MPR.     

Emefiele, who disclosed these at the end of the MPC meeting, said that  seven members of the committee voted to cut the MPR by 100 basis points, while two members voted for a 150bps rate cut, with one member electing for a 200bps rate cut.

Expectations are that the economy will contract by as much as 8.9 percent this year, but Emefiele said the country could avoid a recession.

He said the economy could contract in the second and third quarters but recover in the fourth with the fiscal and monetary policy measures put in place by the authorities.

The decision surprised analysts. The central bank has kept interest rates tight for the last two years to curb inflation, support the naira and attract foreign investors to its debt marke