In an effort to sustain economy recovery and arrest rising inflation in the country, the Central Bank of Nigeria, CBN, has announced a cut in the Monetary Policy Rate, MPR, from 12.5 to 11.5 per cent.
The CBN governor, Godwin Emefiele disclosed this on Tuesday while presenting the communique during the 275th MPR meeting.
He stated that the committee also retained Cash Reserve Ratio, CRR, at 27.5 per cent.
Projecting the outlook of the country’s economy, he stated that the country could enter into recession on the third quarter, while there would be growth in the fourth quarter of 2020 or first quarter of 2021.
According to him, the decision to reduce the MPR was made to sustain economic recovery efforts and to arrest rising inflation.
He said, “That recent inflationary pressures were not driven by monetary policies rather as a result of structural policies.
“Air and road transportation, accommodation, food services were worst hit by the lockdown occasioned by the COVID-19 pandemic.
“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.
He appealed to commercial banks to respond to the reduction of deposit rate by also reducing interest rates on borrowing to encourage borrowing for investments.
He further added that more aggressive funding of those sectors to will engender economic growth.