CBN cuts interest rate to 11 % to stimulate growth

The Central Bank of Nigeria (CBN) slashed the benchmark interest rate otherwise known as Monetary Policy Rate (MPR) to 11 per cent from 13 per cent at its 247th meeting of the Monetary Policy Committee in Abuja yesterday.
The action is the first time in the last 6 years aimed at stimulating growth in Africa’s biggest economy.
The economy has been battling slow growth since the beginning of the year. Several ratings by IMF and other development institutions earlier reduced the growth forecast of the country’s economy.
The apex bank also reduced Cash Reserve Requirement (CRR) from 25 per cent to 20 per cent in order to increase liquidity in the system.
The CBN Governor, Godwin Emefiele said while reading the communiqué that the liquidity arising from the reduction of the CRR will only be released to the banks that are willing to channel it to employment generating activities in the economy such as agriculture, infrastructure and solid minerals.
The Committee at the end of the meeting noted with satisfaction the stability, soundness and resilience of the banking system even against adverse global financial conditions.
“Given the situation, the MPC emphasized the necessity of focusing on financial market stability and proactive engagement of policy and administrative levers needed to support the environment in which market institutions operate. On their part, market institutions are encouraged to employ more stringent criteria in evaluating their portfolio and business decisions.”
According to a lecturer in Economics Department, Ahmadu Bello University, Mallam Muttaka Usman although the decision may assist the real sector to some extend but more needed to be done in order to ensure fast growth for the economy.
Usman said the major questions that concern the economy is not yet addressed, saying that government is the largest spender in the economy and with the non-release of the capital expenditure, coupled  with the delay in salaries payments, there is no way the economy will expect a dramatic growth.
Other decisions by the MPC was changing the symmetric corridor of 200 basis points around the MPR to an asymmetric corridor of +200 basis points and -700 basis points, around the MPR.
Emefiele said this will discourage the banks to keep their funds with CBN rather than taking it out and lend it to the real sector.
“What the banks do is just dump their money on CBN and earn 11 per cent – and I use the words – for doing nothing,” Emefiele said.