CBN Reduces Interest Rate By 50bps

banksGodwin Emefiele CBN Governor
  • CBN Reduces Interest Rate By 50bps

The Central Bank of Nigeria on Tuesday lowered the interest rate for the first time in over three years.

The apex bank reduced the interest rate by 50 basis points from 14 percent to 13.50 percent at the 266th Monetary Policy Committee (MPC) meeting in Abuja.

Mr Godwin Emefiele, the Governor, Central Bank of Nigeria, who spoke with the press after the meeting, said improved macro factors necessitate an adjustment in borrowing cost.

The central bank had left interest rate at 14 percent for years, citing rising inflation rate and the need to lure foreign investors into the economy to further deepen and sustain growth in a largely import-dependent economy.

However, improved crude oil outlook in recent months and the surged in risk associated with developed economies have strengthened policymakers’ confidence that the nation will remain attractive to interested foreign investors in the near-term — as the new rate of 13.5 percent is still considerably high when compared to offerings from developed economies.

The decision was after numerous data from developed economies showed the U.S. Federal Reserve, the European Central Bank, Bank of England, the People’s Bank of China and Bank of Japan won’t be raising rates any time soon. Economic growth in developed economies has shown signs of slow down and experts are already predicting a recession in the U.S., while China, the world’s second largest economy, is already struggling with weak growth and high debt.

All these coupled with Brexit uncertainty, Trade dispute and the weak growth in Euro-area are expected to aid capital inflows into emerging economies like Nigeria, South Africa, New Zealand, etc. in the near-term.

The CBN led MPC decision is expected to be effective in the near-term, ease over-concentration on fixed income market and aid private sector growth.

Therefore, the Central Bank of Nigeria lowered borrowing cost to stimulate job creation and bolster economic growth while at the same time sustaining capital importation.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya

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