REDUCTION OF MONETARY POLICY RATE (MPR): ORGANISED PRIVATE SECTOR APPLAUDS THE MPC
The major decision from the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) at its May, 2020 meeting was the reduction of the Monetary Policy Rate (MPR) from 13.5% to 12.5%. We believe that this development signal a pro-growth response, that could lead to reduction in the cost of credit, increase investment and impact positively on output growth, in order to address the current global challenges. The MPC held other key parameters unchanged. Cash Reserve Requirement (CRR) re mained at 22.7%, while the liquidity ratio was kept at 30%. Retained the asymmetric corridor around the MPR at +200/-500bps.
With the negative effects of COVID-19, twin challenge of the global oil prices, and over-exposure of our economy to external shocks, this decision, is a welcome development that the monetary authority by easing its policy in order to protect the economy.
We applaud the current decision of the Monetary Policy Committee, which aligned perfectly with the Association’s earlier recommendation. It is our belief, that the Committee understands that high interest rate is a risk to the economy at this time.
We, therefore, called for synergy between the fiscal and monetary policy in order to move the economy, which is already in bleeding stage. Development of more robust and coordinated stimulus packages for the sectors that are worst hit by the pandemic, and opening up the non-oil economy for more productivity, to reduce the shock expected from falling global oil prices, would be a welcome development in pulling the economy from nose-diving into recession.