By Charles Ike-Okoh
TUE, 22 SEPT, 2020-theGBJournal-The Central Bank of Nigeria (CBN) has cut the Monetary Policy Rate (MPR) to 11.5% from 12.5%, signalling the pursuance of an accommodative posture.
The CBN Governor Godwin Emefiele announced the Monetary Policy Committee (MPC) decision on Tuesday but the cut has been unexpected because of the rising Inflation over the past few months, which reached a two-year high of 12.8% in July, thanks to accelerating food and transport prices.
The MPC decision centres on the need to complement fiscal policy with a view to restarting growth which has been severely hampered by the global coronavirus pandemic.
The MPC adjusted the Asymmetric Window from +200/-500 to +100 and 700 basis points around the MPR. The CRR is retained at 27.50% while the liquidity ratio also was retained at 30%.
The cut itself is a return to the MPC position in May 2020 when the rate was cut by 100 basis points to 12.5% amid arguments that ‘’loosening monetary policy stance was yielding positive impact as credit growth increased significantly in the economy.’’
The argument was carried forward today and reflected on Emefiele’s account of the banking sector performance in 2020 while briefing the media on the MPC rates decision.
He touched on wide ranging issues around the country’s banking system including the strategic health of Nigerian banks which he says ‘’remains strong and able to support the Nigerian economy.’’
He also spoke to the rising loans of the banking sector to the private sector which has risen from N15 trillion in June 2019 to N19.33 trillion in August 2020 as well as the total assets of the sector which has equally grown to N48 trillion in August 2020 from N38 trillion in June 2019.
Non-performing loans (NPLs) also has dropped from 9.4% in June 2019 to 6.1% in August.
All of these are the strong incentive needed to guide the MPC decision even as the apex bank struggles to strike a balance between supporting the recovery of output growth and reducing unemployment while maintaining stable prices.