The Central Bank of Nigeria (CBN) has slashed lending rate to 11.5 percent from 12.5 percent in an attempt to boost lending to real sector of the economy.
CBN Governor, Mr. Godwin Emefiele told journalists in Abuja on Tuesday that the decision to reduce the MPR was made to sustain economic recovery efforts and to arrest rising inflation.
He projected that the country could enter into recession on the third quarter, while there would be growth 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 rather 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 to encourage borrowing for investments.
He said 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 effort be put in place to continue to provide relief and funding to those sub sectors to catalyse growth,’’ he said.
“In summary, the MPC voted to: Reduce the MPR by 100 basis points from 12.5 to 11.5 per cent; Adjust the asymmetric corridor from +200/-500 basis points to +100/-700 basis points around the MPR; Retain the CRR at 27.5 per cent; and Retain the Liquidity Ratio at 30 per cent”.
The CBN boss noted that the corona virus pandemic created global health crisis which dovetailed into global economic crisis, stressing that the apex bank had reeled out several interventions, such as restructuring of loans, granting of targeted facilities, in order to mitigate the effects of the global economic crisis on Nigerian economy.
“We provided N100 billion for targeted facilities and today N78 billion has been disbursed to 130 thousand beneficiaries. For the N100 billion healthcare facility, N48 billion has been disbursed 16 pharmaceutical firms and 25 hospitals and we believe this will help to address some of our health and pharmaceutical crisis. Out of the N1 trillion Agric and manufacturing facility, we have so far disbursed N216 billion, and this has been disbursed to 53 manufacturing companies, 12 Agric related companies, and 13 service projects.
“On our agric and small enterprises fund, we have so far disbursed to 144 thousand beneficiaries N4 billion and these are the loans that we said we have granted by way of giving the real implements either for poultries, or for hairdressers and those that are doing fashion and the rest of them.
“For the creative industry, we have also granted loans for about 250 youths companies and they have benefitted to the tune of about N2.9 billion” he said.
Emefiele said the various interventions have had very positive impact on the economy, considering the positive GDP in the first quarter and the reduced contraction seen during the second quarter of 2020.
He said the CBN has found ways to reflate the economy by providing soft loans for Micro Small and Medium Enterprises (MSME) and other sectors of the economy, such health and Agriculture.
