Central Bank of Nigeria retains lending rate

The Central Bank of Nigeria has retained its benchmark lending rate at 11.5 per cent.

The Governor of the bank, Godwin Emefiele, announced this Tuesday after a meeting of the monetary policy committee of the bank.

The Nigerian economy fell, in the third quarter of 2020, into its second recession in four years, amidst the COVID-19 lockdowns and fall in crude oil prices.

The central bank has aimed to keep inflation between six and nine per cent and managed the naira which has lost significantly against the dollar in the last year.

On Monday, the currency exchanged for 475 at the parallel market, against the 383 central bank’s official rate. Inflation hit 15.75 per cent in December 2020, the highest in three years, according to the National Bureau of Statistics.

In May and September 2020, the bank cut the policy rate, which is the benchmark for all interest rates in the country, both by 100 basis points.

Governor Emefiele said the decision to retain the benchmark rate at the first MPC for the year was “unanimous”. The bank also held other monetary policy parameters.

The regulator left the Cash Reserve Ratio for commercial banks at 27.50 per cent and liquidity ratio at 30 per cent. The lending rate has a flexibility margin of between +100 and -700 basis points.

According to the Governor, Economic recovery is expected to progress considerably following the contraction. The bank encouraged the federal government to avoid a fresh round of lockdown amidst a second wave of COVID-19, to consolidate on economic gains achieved so far. 

It also encouraged commercial banks to “aggressively” intensify their efforts in providing credit facilities to small and medium enterprises, health, agriculture and manufacturing sectors.

This is expected to not only boost consumer spending but raise manufacturing output and positively impact on the GDP.