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Why We Reduced MPR, Held Others – Gov Emefiele



The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), on Thursday, reviewed downwards Monetary Policy Rates from 13.5 percent to 12.5 percent.

It, however, held all other policy parameters constant.

Mr. Godwin Emefiele, the Governor of CBN made this known while reading the communiqué on the outcome of the meeting in Abuja.

Emefiele explained that seven members voted for a reduction of MPR by 100 basis points, two members went for 150 basis points and a member voted for 200 basis points.

He said the committee retained Asymmetric Corridor of +200 -500 basis points around the MPR.

He disclosed that MPC also retained Cash Reserves Ratio (CRR) at 27.5 percent as well as Liquidity Ratio at 30 percent.

According to him, the MPC noted that if all stimulus packages already announced by the apex bank are well utilised, it will produce impetus needed to boost economic recovery in the country.

“After reviewing the three options, the MPC noted the imperative to monetary policy at the May 2020 meeting was to strike a balance between supporting the recovery of output growth while maintaining stable price development across inflation.

“Other considerations were the exchange rates and market interest rates. To this end, the committee noted that CRR was recently adjusted upward as a means of tightening the stand of policy.

“In its response to COVID-19 pandemic, however, the bank reduced interest rates associated with all CBN interventions from nine to five percent.

“Increasing MPR at this stage will be counter-intuitive and it will result in upward pressure on retail market rates,” he explained.

The governor said that the committee maintained that although a sharp decline in output growth was expected in the second quarter of 2020.

He, however, noted that in the third quarter, if the current stimulus packages initiated by CBN were properly implemented, the economy would reverse to positive growth by the fourth quarter.

He added that there was optimism on the part of MPC that the country might not slide into recession.

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