Home Business and Economy CBN Sustains Interest Rate At 11.5%

CBN Sustains Interest Rate At 11.5%

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…as analysts fear a negative real interest rate of -11.5%
by Chris Njoku

The Monetary Policy Committee (MPC) has left the benchmark Monetary Policy Rate (MPR) and other monetary policy tools unchanged to spur economic growth in the fourth quarter of the year.

The Governor of the Central Bank of Nigeria, Mr Godwin Emefiele who disclosed this decision on Tuesday during a press conference at the end of a two-day MPC meeting revealed that the committee unanimously voted to retain the MPR. It also retained the Cash Reserve Ratio and Liquidity Ratio at 27.5 percent and 30 percent respectively.

At the last MPC meeting in September, the committee reduced the MPR from 12.5 percent to 11.5 percent. This is coming as Nigeria entered the second recession in five years as official figures published on Saturday show that the economy shrank again in the third quarter of this year.

This year’s recession, occasioned by the economic fallout of the COVID-19 pandemic, is worse than that of 2016. The National Bureau of Statistics, in its Gross Domestic Product report for Q3, said the GDP, the broadest measure of economic prosperity, fell by 3.62 in the three months to September.

Economists consider two consecutive quarters of shrinking GDP as the technical definition of a recession. For the first time in more than three years, the Nigerian economy shrank in the second quarter of this year as the GDP fell by 6.10 percent, compared with a growth of 1.87 percent in Q1.

The NBS had said in August that the economic decline in Q2 was largely attributable to significantly lower levels of both domestic and international economic activity resulting from nationwide shutdown efforts aimed at containing the COVID-19 pandemic.