Research Document: NESG MPC Alert, September 2020

Posted Wed, Sep 23, 2020 4:00 PM

The Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) held its penultimate meeting for the year 2020 on September 21-22. At the meeting, 6 out of 10 committee members voted for a reduction in the Monetary Policy Rate (MPR) by 100 basis points to 11.5%. The committee with a vote of 9 to 1 members agreed to adjust the asymmetric corridor to +100/-700 basis points around the MPR from +200/-500 basis points. However, MPC members unanimously agreed to keep the Cash Reserve Ratio (CRR) and Liquidity Ratio at 27.5% and 30%, respectively. The current MPC decision represents the second time in the year 2020 that monetary policy stance would be more accommodative (see Figure 1). The MPC members met at a time when the Nigerian economy is battling with the fall-out from the coronavirus pandemic including economic contraction (at -6.1% in Q2’2020), high unemployment rate (at 27.1% in Q2’2020), rising inflation rate (at 13.2% in August 2020), declining foreign investment inflows (plunged to $1.3 billion in Q2’2020), widening trade deficits (stood at -1.8 trillion in Q2’2020), falling crude oil prices (down 44% year-to-date), weak external reserves (currently at $35.8 billion) and rising public debt (at N25.7 trillion in Q2’2020).