In its second bi-monthly meeting held on March 25 and 26 this year, the Monetary Policy Committee of the Central Bank of Nigeria has agreed to reduce the Monetary Policy Rate from 14 per cent to 13.5 per cent. The MPR, which is used to determine bank lending rates and the cost of credit for borrowers, had been held at a record high of 14 per cent since July 2016 when it was hiked by 200 basis points from 12 per cent.
The Governor of the central bank of Nigeria, Godwin Emefiele announced the decision of the committee at the end of a two-day meeting held at the apex bank’s headquarters in Abuja.
He explained that six out of the 11 members that attended the meeting agreed to reduce the current monetary policy stance.
While the MPR was reduced to 13.5 per cent, the committee decided to retain the Cash Reserve Ratio at 22.5 per cent, Liquidity Ratio at 30 per cent, and the Asymmetric Window at +200 and -500 basis points around the MPR.
According to the governor of central bank of Nigeria, the Committee considered developments in the global and domestic economy since its last meeting, including weaker global growth momentum, Dovish global central banks, and moderating U.S treasury yield. On the domestic front, the Committee noted the sustained drop in headline inflation rate in February to 11.3%, elevated crude oil prices and stable production, foreign exchange stability amid strong external reserves and the sustained GDP growth. He added that whilst the committee expressed its satisfaction with the inflationary downtrend, it emphasized that growth remained largely fragile and stressed the need to support the ailing growth picture.
In addition, he stated that ““The MPC noted the positive moderate outlook for growth and the risk in the horizon. The committee also noted that having achieved a relatively stable exchange rate with price stability, it is imperative that the monetary policy should explore the next steps necessary for enhancing growth, reducing unemployment and diversifying the base of the Nigerian economy”.
On the issue of minimum wage, the governor said while the committee welcomed the passage of the national minimum wage bill by the National Assembly, there was a need for its speedy implementation in order to boost aggregate demand. He stressed the need for the government to settle the debts owed to contractors in order to reduce the level of non-performing loans in the banking sector.