The Central Bank of Nigeria (CBN) has cut interest rate to 12.5 per cent from 13.5 per cent after a meeting of Monetary Policy Committee (MPC) on Thursday.
The CBN Governor, Godwin Emefiele, who made the announcement said the Cash Reserve Ratio (CRR) remained unchanged at 27.5 per cent, liquidity ratio at 30 per cent and asymmetric corridor around the MPR at +200/-500 basis points.
“The MPC observed the weakening of the global macroeconomic environment due to the adverse impact of COVID-19 and drop in crude prices which has resulted in negative outputs for most economies.
“Excess liquidy engendered by loosening may overshoot the economy’s capacity and accelerate inflationary pressures, it nevertheless feels that given the slow rate of acceleration of inflation, the accommodative stance will stimulate aggregate demand and supply in a short term,” Emefiele stated.
He said, “This is because an accommodative stance through a lowering of policy rates will stimulate credit expansion to critically important sectors that will also stimulate employment and revive economic activities for quick growth recovery.
“Policymakers must take action to stimulate growth and recovery. For Nigeria, although first-quarter gross domestic product turned out pleasantly at 1.87% and the race of inflation somewhat moderated, Nigeria may escape a recession if concerted efforts are sustained to stimulate output.”