The Central Bank of Nigeria (CBN) has announced the reduction of the Monetary Policy Rate (MPR) from 12.5 per cent to 11.5 per cent.
The CBN Governor, Mr Godwin Emefiele, made the announcement on Tuesday, while presenting the communiqué of the 275th Monetary Policy Committee (MPC) meeting.
Emefiele said that the decision to reduce the MPR was made to sustain economic recovery efforts and arrest rising inflation in the country.
He projected that the country could enter into recession in the third quarter, while growth was expected in the fourth quarter of 2020 or first quarter of 2021.
The CBN governor said that the committee also retained Cash Reserve Ratio (CRR) at 27.5 per cent.
He said that recent inflationary pressures were not driven by monetary policies, adding that they were basically as a result of structural policies.
He called on commercial banks to respond to the reduction of deposit rate by also reducing interest rates on borrowing so as to encourage borrowing for investments.
Besides, Emefiele said that air and road transportation, accommodation, food services were worst hit by the lockdown occasioned by the COVID-19 pandemic.
He called for more aggressive funding of those sectors to engender economic growth.
“Management was directed to ensure that deposit money banks respond to lowering of interest on deposit rate by aggressively lowering cost of credit to borrowers.
“Sectors like air and road transportation, entertainment and accommodation, food services and education were most adversely affected by the lockdown.
“Committee suggested that more efforts be put in place to continue to provide relief and funding to those sub-sectors to catalyse growth,’’ he said.