MON, JULY 20 2020-theG&BJournal– The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) kept its focus on the coronavirus pandemic and external vulnerabilities on Monday as it voted to retain the Monetary Policy Rates at 12.5%, and to hold all other parameters constant.
The MPC thus retained the Asymmetric Corridor of +200 and -500 basis points around the MPR, retained CRR at 27.5% and liquidity ratio at 30%.
‘’The Committee was also mindful of the cut of the policy rate at the last (in May 2020) MPC meeting and the need to allow time for a transmission effect to permeate the economy,’’ the CBN Governor, Godwin Emefiele, who read the MPC decision said.
According to Emefiele, ‘’further cut in the monetary policy rate may not necessarily lead to a corresponding decrease in market interest rates considering the current economic challenges,’’
He said the MPC agreed that the option of tightening at this time would contradict the noble initiative of expansion of affordable credit to the real sector, noting that this would heighten the cost of production which would translate to higher cost of goods and services and harder economic conditions for Nigerians.
He recalled that the MPC was guided in their decision in May by the imperative to strike a balance between supporting the recovery of output growth and reducing unemployment while maintaining stable prices.
He said the downward review in May 2020 of the MPC rate by 100 basis points to 12.5% to signal the loosening monetary policy stance is yielding positive impact as credit growth increased significantly in the economy. He said it has also yielded positive impact on households, SMEs and the manufacturing sector.
‘’Increasing rates at this stage will be counter intuitive and will result in upward pressure on market rates and cost of production.’’