CBN’s currency rate reduces to 11.5%

The Nigerian Central Bank’s (CBN) rate has decreased from 12.5 to 11.5% by the Monetary Policy (MPR), which indicated a decrease of 100 basis points in the cost of funding.

The CBN Governor Godwin Emefiele revealed this yesterday in Abuja, following his two-day meeting, during the presentation of the decisions of the Monetary Policy Committee (MPC).

The Committee retained the liquidity and the cash reserve ratios, at respectively 27,5% and 30%.

Elefiele explained the rationale for the reduction: “In considering the three policies, the members considered the loose option complementing the Bank’s objective to continue the economic recovery and to limit COVID-19’s negative impact.

“Furthermore, liquidity injections are intended to encourage lending to sectors of the economy with a vital effect and provide momentum for growth in output and economic recovery.”

In relation to the increase in inflation, Emefiele pointed out that up to now, evidence has not linked the increase in inflation with money but has shown that the overwhelming causes behind this inflationary pressure are non-monetary issues (structural elements).

“It means that traditional monetary policy instruments are not useful in dealing with the kind of inflationary pressures that we presently face,” he added.

The type of supply-side measures being adopted at present is beneficial. The MPC expects a downward adjustment in MPR to pressurize our deposit money institutions further, therefore lowering credit costs for supporting growth.”

In relation to the increase in inflation, Emefiele pointed out that up to now, evidence has not linked the increase in inflation with money but has shown that the overwhelming causes behind this inflationary pressure are non-monetary issues (structural elements).

“It means that traditional monetary policy instruments are not useful in dealing with the kind of inflationary pressures that we presently face,” he added.

The type of supply-side measures being adopted at present is beneficial. The MPC expects a downward adjustment in MPR to pressurize our deposit money institutions further, therefore lowering credit costs for supporting growth.”

He said that broad chances for a worldwide recovery remain unsure as the headwinds linked to COVID-19 continue to reduce hopes for short-term recovery, particularly as fresh signs of the second surge in infection rate remain unknown.

“The continued volatility of the global oil prices, expected to remain until the end of 2020, reflected in oil future deliveries, indicates the probability of a worldwide unorderly recovery,” stated Martin Emefiele.

The CBN emphasized the necessity to combine large-scale monetary and fiscal policies in order to limit the rise in inflation and countervailing global economic problems.

“There will be targeted fiscal authorities investments to resurrect essential infrastructure to enhance business ease around the country.”

“The MPC also believes that tax authorities may build on past efforts and develop a clear strategy for attracting investment from the private sector. However, the Bank will continue to take appropriate actions to ensure the economic harmful risk of inflation is managed.”