CBN Restrategizes, Reduces Benchmark Lending Rate To 11.5%

The decision marks the second rate cut in 2020 and brings the MPR to its lowest level since February 2016; the change to the asymmetric corridor is the first since March 2016.

 Of the ten committee members, six voted to cut rate by 100bps, one voted for a 50bps rate cut, while three voted to maintain the rate.

While all members voted to retain the CRR and LR at their current levels, 9 members voted to change the Asymmetric corridor around the MPR while 1 member voted to leave it unchanged.

 The MPC in taking the decision  considered the declining domestic output and upward pressure on domestic prices, analysts at Cordros Research.
The Committee also highlighted the negative growth rate experienced by the country in Q2-20 and projected that the economy may continue to grapple with the effects of the pandemic throughout the rest of the year.

The Committee, however, expects the economy to enter into a positive growth territory between Q4-20 and Q1-21 based on the anticipated positive results from the coordinated and sustained interventions by the Federal Government and the Central Bank of Nigeria ,CBN.

On inflation the Committee expressed that the current inflationary pressure is not due to monetary factors, rather, it reflects the impact of structural rigidities and supply chain challenges.

Hence, traditional tools may not help address inflationary pressure. Instead, it will continue to favour supply-side measures to stimulate aggregate domestic production which will lower prices.
The Committee expressed confidence in the strength of the banking sector despite the persistence of the COVID-19 pandemic.

 It also expressed satisfaction in the growth of credit to the private sector and urged the banks to do more.

The Committee also highlighted the decline in the NPLs to 6.1 per cent as at the end of August 2020 compared to 9.4 per cent in the corresponding period of 2019 due to recoveries and write-offs.
The MPC supports coordinated interventions of the CBN and  federal government towards the manufacturing, health, solar power, construction and agricultural sectors.

Specifically, the Committee noted that so far, total disbursements have amounted to N3.50 trillion including COVID-19 targeted funds of N73.65 billion, disbursement to the Agriculture and SME fund of  N64.6 billion, N24.47 billion to the healthcare sector, and N2.13 billion to the creative industry which has set the economy towards the path of recovery. The committee also noted that the CBN has so far extended N1.80 trillion of N2.30 trillion needed for the 1-Year Economic Sustainability Plan (NESP) – developed by the Economic Sustainability Committee (ESC) – through its channels of participatory financial institutions