CBN ready to adopt accommodative policy with new MPR rate – experts

Financial analysts have said the reduction of the monetary policy rate from 13.5 to 12.5 per cent, as announced by the Central Bank of Nigeria on Thursday shows that it is ready to adopt a bit of an accommodative policy.

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.

Reacting to the decision, the Managing Director of Cowry Assets Management Ltd., Johnson Chukwu, said the reduced rate would allow credit flow into the economy.

“The 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.

“That is the primary motivation of reducing the MPR from 13.50 per cent to 12.50 per cent. To 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,” he said.

Similarly, the Managing Director, BIC Consultancy Services, Boniface Chizea, said the reduction would increase the amount of money and credit in circulation.

“What 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.

“Well 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,’’ Chizea said.

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.

In his own reaction, former CBN director, Titus Okunrounmu, commended the central bank for reducing the interest rate.

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’s economy.

He said the apex bank was trying to induce those who are critically in need of loan facilities, to come and invest.

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’s economic activities had slowed under the lockdown situation.

 

NO COMMENTS

LEAVE A REPLY