Again, CBN Retains Benchmark Lending Rate At 11.5%

The Monetary Policy Committee of the Central Bank of Nigeria has  retained interest rate at 11.5 per cent following low consumer spending.

The MPC made the decision on Tuesday at the end of its 277th meeting held in Abuja.

The authorities had in September 2020 unexpectedly cut the monetary policy rate by 100 basis points to 11.5 per cent from the previously held rate which was 12.5 per cent.

This is an unconventional policy adopted by the apex bank at the detriment of the inflationary pressure on the Nigerian economy, experts said. Inflation currently stands at 15.75 per cent.

CBN Governor Godwin Emefiele said the committee’s priority was to boost spendings across different sectors to accelerate economic recovery.

The committee also urged the banks to boost lending to aid recovery.

The MPC said it was faced with the dilemma of stagflation, inflationary pressure and to continue reversing price stability.

Emefiele said, “At this meeting, MPC was, as in the last meeting, confronted with a policy dilemma as to whether to aggressively combat the inflationary pressure or support measures currently aimed at stimulating growth and reversing the recession.

“Although the economy is currently in a stagflation environment with simultaneous occurrence of inflationary pressures and contracting output, the MPC resolved to reverse both developments and continue pursuing price stability in growing the economy.

“MPC was of the view, that whereas there may be wisdom in loosening, given that the impact of the global Covid-19 pandemic has resulted in constrained activities, disruption to supply chain and suppress aggregate demand, an accommodative stance may be 13 Classified as Confidential required to stimulate credit expansion and boost recovery in the short term.”

The MPC also retained the asymmetric corridor of +100/-700 basis points around the MPR; retain the CRR at 27.5 per cent and retain the Liquidity Ratio at 30 per cent.