CBN maintains 12.5% lending rate

The Central Bank of Nigeria on Monday retained its monetary rate, which guides lending, by leaving its headline rate at 12.5 per cent along with every other parameter around the Monetary Policy Rate.

This was the high point of its Monetary Policy Committee meeting on Monday.

In May, the apex bank loosened its stance by lowering the lending rate by 100 basis points from 13.5 per cent as part of its COVID-19 intervention to make access to credit cheaper, particularly to entrepreneurs. The policy is expected to boost start-ups and expand existing businesses to create jobs.

At the end of the meeting, the MPC explained in a communiqué, “The committee reviewed the policy options before it and argued that the option of tightening at this time would contradict the noble initiative of expansion of affordable credit to the real sector. This would heighten the cost of production, which will translate to higher prices of goods and services as well as harder economic condition for people.

“On the other hand, loosening monetary stance would provide the desired succour for stimulating growth and rapid recovery, but with implications for domestic private investment and capital mobilisation to support the huge domestic financing gap. Further cut in MPR may not necessarily lead to a corresponding decrease in market interest rate, considering the current economic challenges.”

The committee noted that the earlier downward adjustment of the MPR by 100 basis points to 12.5 per cent to signal the loosening monetary policy stance was yielding results, as credit increased significantly in the economy.

“In summary, the MPC voted to retain the MPR at 12.5 per cent, retain the asymmetric corridor of +200/-500 basis points around the MPR, retain the CRR at 27.5 per cent, and retain the Liquidity Ratio at 30 per cent,” the communiqué added.

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