CBN cuts MPR by 50bps to stimulate economy

By Chioma Obinagwam

Nigeria’s apex bank, the Central Bank of Nigeria (CBN) has cut Monetary Policy Rate (MPR) by 50 basis points( bps ) to settle at 13.50 percent.

The apex bank’s Monetary Policy Committee (MPC) disclosed in its report on Tuesday.

MPR is an interest rate at which CBN lends to commercial banks and other clients; also known as benchmark interest rate.

Confiance News gathered from the report that the decision was reached at the end of its 266th meeting (the second this year), where the MPC voted to cut benchmark rate, the first time since September 2015 in a bid to stimulate the economy.

“In summary, the MPC decided by a vote of 6 (six) out of the eleven (11) members to 1. adjust the MPR by 50 basis points from 14.00 to 13.50 per cent,” the MPC stated in the report.

The Committee also agreed to retain the Asymmetric corridor around the MPR at +200/-500bps; Cash Reserves Ratio (CRR) at 22.5 percent and Liquidity Ratio (LR) at 30 percent.

It noted that several factors were considered before arriving at the decision.

According to the MPC, it was guided by developments in the global and domestic economy since its last meeting, which includes a weaker global growth momentum, dovish global central banks, and moderating U.S treasury yield.

On the domestic front, the Committee said that it considered the sustained drop in headline inflation rate in February that dropped 11.3 percent year on year (y/y) and elevated crude oil prices in addition to stable production.

Other considerations, on the domestic front include Forex (FX) stability amid strong external reserves in addition to sustained Gross Domestic Product (GDP) growth.

Whilst the committee expressed its satisfaction with the inflationary downtrend, it emphasized that growth remain largely fragile. Hence, the need to support ailing growth picture.