The Central Bank of Nigeria on Tuesday reduced the Monetary Policy Rate by 100 basis points from 12.5 per cent to 11.5 per cent after its two-day Monetary Policy Committee meeting in Abuja.
The 10 members of the committee who were in attendance voted to retain the Cash Reserve Ratio and Liquidity Ratio at 27.5 per cent and 30 per cent respectively.
The MPC adjusted the asymmetric corridor from +200/-500 basis points to +100/-700 basis points around the MPR.
The Central Bank Governor, Godwin Emefiele, disclosed these while presenting the communiqué after the meeting.
He said, “At present, fiscal policy is constrained and so cannot, on its own, lift the economy out of contraction or recession given the paucity of funds arising from weak revenue base, current low crude oil prices, lack of fiscal buffers and high burden of debt services.”
He said the committee expressed deep concern on the continued uptick in inflation for the twelfth consecutive month as headline inflation (year-on-year) rose to 13.22 per cent in August from 12.82 per cent in July 2020.
“The increase in headline inflation was largely driven by the persistent increase in the food component, which rose to 16 per cent in August 2020 from 15.48 per cent in July 2020,” he said.
Emefiele said the committee stressed the urgent need for a combination of broad-based monetary and fiscal policy measures to curb the rise in inflation and contraction in output growth.
Explaining further, he said, “In the light of this, reducing MPR will signal to the Deposit Money Banks to lend more to stimulate growth, increase aggregate supply, which should dampen prices in the immediate term.”