By G9ija

The Central Bank of Nigeria (CBN) has reduced interest rate from 12.5 per cent to 11.5 per cent.

The measure, according to the apex bank, was taken after its Monetary Policy Committee’s (MPC) meeting in Abuja on Tuesday. It explained that the cut was taken to “provide cheaper credit” to Nigerians and businesses.

The CBN, after another meeting with anchor/processors, commodity associations, and Participating Financial Institutions (PFIs), also restated its commitment to encourage farmers to remain in business.

It, therefore, warned that any bank that failed to finance agriculture would be sanctioned.

To encourage farmers, the apex bank said it was ready to share on an equal basis, any loss recorded by them through its Anchor Borrowers Programme (ABP).

Addressing reporters at the end of its bi-monthly MPC meeting in Abuja, CBN Governor Godwin Emefiele explained that to arrive at the 11.5 interest rate, the committee opted to “provide cheaper credit to improve aggregate demand, stimulate production, reduce unemployment and support the recovery of output growth.”

Emefiele explained that the committee which last May pegged the interest rate at 12.5 percent agreed that with inflation trending upwards, easing of the policy stance (reducing interest rate) might exacerbate the current inflationary pressure through an increase in money supply.

According to him, the MPC decided to reduce the MPR by 100 basis points to 11.5 percent and adjust the asymmetric corridor to +100/-700 around the MPR.

It however, retained both the Cash Reserve Ratio (CRR) and Liquidity Ratio at 27.5 percent and 30 percent respectively.

The MPC, reiterated, that “evidence has not supported the rising inflation to monetary factors but rather, evidence suggests non-monetary factors (structural factors) as the overwhelming reasons accounting for the inflationary pressure.”

The implication the CBN governor noted “is that traditional monetary policy instruments are not helpful in addressing the type of inflationary pressure we are currently confronted with.”

He argued that “what is useful is the kind of supply-side measures currently being implemented.”

The MPC, said Emefiele, also expects that a downward adjustment in MPR might be necessary to further put pressure on our deposit money banks to lower the cost of credit in aid of growth.”

He added that the MPC expressed optimism that the CBN’s intervention initiatives to stimulate the economy “will significantly ease the adverse impacts of the COVID-19 pandemic and set the economy on a path of recovery.”

The CBN Director, Development Finance, Mr. Yusuf Yila, also said after the bank’s 2020 dry season stakeholders’ forum attended by anchor/processors, commodity associations and participating financial institutions (PFIs)  that the apex bank would no longer tolerate any shortcomings in its drive to encourage farmers to remain in business through improved financing.

Yila said the decision by the CBN to share risks arising within “a farming season” demonstrates the apex bank’s commitment to drive food sufficiency in the country.