By Bashir Olanrewaju
Tuesday, 22 September 2020
The Central Bank of Nigeria cut its monetary policy rate to 11.5 percent from 12.5 percent, reducing its charge on lending to banks for the second time this year in a bid to stimulate productive activities.
It was a move that went contrary to the expectation that the Monetary Policy Committee would increase the benchmark rate to curtail the quickening of inflation, which was at the highest in 27 months in August at 13.2 percent.
The committee was of the view that it was necessary to make the cost of borrowing cheaper and encourage lending to businesses instead of maintaining high interest rates that encouraged funds to sit idle, Godwin Emefiele, governor of the central bank, said on Tuesday at the MPC briefing in Abuja.
“Traditional monetary policy instruments are not helpful in addressing the type of inflationary pressure we are currently confronted with,” said Emefiele.. “What is useful is the kind of supply-side measures currently being implemented.”
Earlier in the month, the central bank lowered the minimum interest rate payable on savings deposits by a third. The regulator said it was in response to a trend of savings greatly outstripping credit, a sign that people were saving more to earn interest rather than invest in production