The Central Bank of Nigeria (CBN) has announced a major cut to its headline lending rates to spur economic growth as the Novel Coronavirus pandemic continues to weaken Africa’s largest economy.
The CBN at the end of its Monetary Policy Committee (MPC) meeting is that the lending rate will now by 12.5% as opposed to 13.5% showing that the prime lending rate has been cut by a staggering 7.4%.
At the MPC meeting, seven of the 10 members of the bank’s monetary policy committee backed a 100 basis point cut, two voted for 150 basis points and one for 200 basis points, said the governor, Godwin Emefiele.
Africa’s largest economy has been on a downward spiral after global shutdowns led to a plunge in the price of crude oil, a commodity that generates over 90% of Nigeria’s dollar earnings.
At the Thursday briefing, The CBN Governor, Mr. Godwin Emefiele, said the lower rate would “stimulate credit expansion to critically important sectors”, which in turn would also stimulate employment and revive economic activity for a quick recovery in economic growth.
Last week, Nigeria’s finance minister, Zainab Shamsuna Ahmed, said the government expects the economy to contract by as much as 8.9% this year, however, Emefiele said the country could avoid a recession.
While this current rate cut is the first since March of 2019, it is the highest cut since 2015, before Nigeria’s economy spiraled into its worst recession in more than 20 years.
There is no sign that the economy could dodge another recession, however, the Nigerian statistics office said the country’s gross domestic product (GDP) rose by 1.87% on a year on year basis in the first quarter of this year, a surprise to many analysts who had predicted a large crash in the GDP.