The Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC), on Tuesday, resolved to tweak its controlling lending rate while retaining its liquidity ratio and cash reserve requirement, to make more money available for lending to critical sectors as the economy braces for a looming recession in the third quarter.
In a surprising move, the CBN reduced its benchmark lending rate by 100 basis points to 11.5% at Tuesday’s rate setting meeting. The bank’s Monetary Policy Committee said it has adjusted the asymmetric corridor to +100 and -700 from +200 and -500 around the monetary policy rate (MPR).
Six members voted to reduce the rate, one member to increase the rate while three voted to hold rates. The committee however left liquidity ratio at 30% and cash reserve ratio at 27.5%.
According to the National Bureau of Statistics, Africa’s biggest economy’s GDP contracted by 6.1% (year-on-year) in real terms in the second quarter of this year. Analysts claim Nigeria’s monetary policy meeting has taken this decision to stimulate the economy which has been battered by low crude oil prices and dollar shortages.