*** CBN cuts interest rate to 26.5%
By Tony Obiechina, Abuja
In a move to ease the financial pressure on businesses and households, the Monetary Policy Committee (MPC) has voted to reduce Nigeria’s benchmark interest rate, known as the Monetary Policy Rate (MPR), from 27 percent to 26.5 percent.
The Governor of the Central Bank of Nigeria (CBN) Mr. Olayemi Cardoso announced the decision on Tuesday after the committee’s 304th meeting.
This second slash in interest rate in five months marks a shift toward more relaxed lending conditions after a long period of aggressive rate hikes.
By lowering the rate by 50 basis points, the Central Bank hopes to make borrowing slightly cheaper for Nigerians while still keeping a firm grip on the economy.
The committee explained that this choice was made because it believes the plan to bring down the high cost of living is finally working. The MPC noted that the effects of previous strict policies are now being felt, and the naira is showing better stability in the exchange market.
“The Committee’s decision was based on a balanced evaluation of risks to the outlook, which suggests that the ongoing disinflation path will continue,” the CBN governor stated.
While the main interest rate was reduced, the Central Bank decided to keep other safety measures the same to ensure the banking system remains solid. The Cash Reserve Requirement (CRR)—which is the amount of money banks must keep with the Central Bank—was held at 45 percent for regular commercial banks and 16 percent for merchant banks.
The committee also adjusted the “Standing Facility Corridor,” which is the range of interest rates at which banks can borrow from or lend to the Central Bank. This range has now been set at +50 to -450 basis points around the new 26.5 percent rate.
Cardoso also disclosed that 20 banks have met the recapitalisation requirements set by the apex bank to this end, he commended the resilience of the banking sector.
By making these changes, the government aims to find a balance where prices of goods do not rise too quickly, but businesses can still get the loans they need to grow and create jobs.
The Central Bank expressed confidence that as long as the exchange rate remains stable and food continues to reach the markets, the economy will continue on this path of recover
While the main interest rate was reduced, the Central Bank decided to keep other safety measures the same to ensure the banking system remains solid. The Cash Reserve Requirement (CRR)—which is the amount of money banks must keep with the Central Bank—was held at 45 percent for regular commercial banks and 16 percent for merchant banks.
The committee also adjusted the “Standing Facility Corridor,” which is the range of interest rates at which banks can borrow from or lend to the Central Bank. This range has now been set at +50 to -450 basis points around the new 26.5 percent rate.
Cardoso also disclosed that 20 banks have met the recapitalisation requirements set by the apex bank to this end, he commended the resilience of the banking sector.
By making these changes, the government aims to find a balance where prices of goods do not rise too quickly, but businesses can still get the loans they need to grow and create jobs.
The Central Bank expressed confidence that as long as the exchange rate remains stable and food continues to reach the markets, the economy will continue on this path of recovery.
While the main interest rate was reduced, the Central Bank decided to keep other safety measures the same to ensure the banking system remains solid. The Cash Reserve Requirement (CRR)—which is the amount of money banks must keep with the Central Bank—was held at 45 percent for regular commercial banks and 16 percent for merchant banks.
The committee also adjusted the “Standing Facility Corridor,” which is the range of interest rates at which banks can borrow from or lend to the Central Bank. This range has now been set at +50 to -450 basis points around the new 26.5 percent rate.
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