Africa Press-Nigeria:<\/p>\n
Financial analysts on Friday said the reduction of the monetary policy rate from 13.5 to 12.5 per cent, as announced by the Central Bank of Nigeria would expand the level of output in the economy and to some extent address inflation trend occasioned by the COVID- 19.<\/p>\n
The CBN on Thursday reduced the lending rate to 12.5 per cent but retained the liquidity ratio at 30 per cent, cash reserve requirement at 27.5 per cent and the asymmetric corridor at +200\/-500 basis points around the MPR.<\/p>\n
Speaking in an interview with NAN, the Managing Director, BIC Consultancy Services, Boniface Chizea, said the reduction would increase the amount of money and credit in circulation.<\/p>\n
\u201cThe reduction is uncommonly steep by an unusual 100 basis points. A reduction from 13.5% to 12.5%, the lowest rate in four years. The committee advanced the reason as the need to reflate the economy.<\/p>\n
\u201cWhat the unfolding scenario portends is that citizens should brace up for a spike on the rate of inflation which had already been on the uptick as substantial liquidity is being injected into the economy as a result of the quantitative easing.<\/p>\n
\u201cThe gradual unlocking of the economy to resume activities might result in the anticipated contraction of the economy not being as steep as feared.<\/p>\n
\u201cBy this move it is clear that focus on the rate of exchange particularly with regard to the attractiveness of investments to foreign investors is for once not a major thrust of policy.<\/p>\n
\u201cWell at least we now have some movement in the critical indices as opposed to the fact that they have remained sticky for a long time now,\u2019\u2019 Mr Chizea said.<\/p>\n
According to him, it is important that we witness focused implementation so that the expectations of a reflated economy will be achieved in the not distant future.<\/p>\n
In the same vein, the Managing Director of Cowry Assets Management Ltd., Johnson Chukwu, said the reduced rate would allow credit flow into the economy.<\/p>\n
\u201cThe key thing the MPC did is to send a message to the economy that it is ready to adopt a bit of an accommodative policy. That is, it is the intention of the CBN that credit should flow to the economy at the same pace.<\/p>\n
\u201cThat is the primary motivation of reducing the MPR from 13.50 per cent to 12.50 per cent.<\/p>\n
\u201cTo send a message to economic operators that the intention of the CBN is to have an interest rate environment where customers can borrow at lower rates,\u201d he said.<\/p>\n
A former CBN director, Titus Okunrounmu, commended the central bank for reducing the interest rate.<\/p>\n
Mr Okunrounmu, a former Director, Budgetary Department at CBN, made the commendation in an interview with the News Agency of Nigeria (NAN) in Ota, Ogun, on Friday.<\/p>\n
According to him, the downward review of interest rate to 12.5 per cent by the apex bank will encourage private investment to boost the nation\u2019s economy.<\/p>\n
He said the apex bank was trying to induce those who are critically in need of loan facilities, to come and invest.<\/p>\n
He said that the CBN decision to reduce the interest rate was an attempt to further encourage people to take credit and loans as the nation\u2019s economic activities had slowed under the lockdown situation.<\/p>\n
\u201cWith COVID-19 pandemic associated with lockdown, no investor will be willing to invest money in the country until the environment is conducive for investment,\u2019\u2019 Mr Okunrounmu said.<\/p>\n
He noted that productivity and investment would be higher with lower interest rate rather than higher interest rate, thus making the economy to grow faster.<\/p>\n
Mr Okunrounmu, however, said with more investment, industry and agricultural sectors among others would further ease while the unemployment rate will reduce.<\/p>\n
Similarly, the Nigeria Employers\u2019 Consultative Association hailed the decision.<\/p>\n
Its director-general, Timothy Olawale, gave the commendation on Friday in Lagos.<\/p>\n
Mr Olawale said the development signalled a pro-growth response.<\/p>\n
Mr Olawale said such a move could lead to reduction in the cost of credit, increase investment and impact positively on output growth to address the current global challenges.<\/p>\n
\u201cWith the negative effects of COVID-19, the twin challenges of the global oil prices and over-exposure of our economy to external shocks, this decision is a welcomed development by the monetary authority to protect the economy.<\/p>\n","protected":false},"excerpt":{"rendered":"
Africa Press-Nigeria: Financial analysts on Friday said the reduction of the monetary policy rate from 13.5 to 12.5 per cent, as announced by the Central Bank of Nigeria would expand the level of output in the economy and to some extent address inflation trend occasioned by the COVID- 19. The CBN on Thursday reduced the […]<\/p>\n","protected":false},"author":62,"featured_media":8947,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,15],"tags":[503,1451],"class_list":["post-25660","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","tag-cbn","tag-covid-19"],"yoast_head":"\n