Nigeria: Interest Rate Cut and Implications for the Economy

The Monetary Policy Committee (MPC) of the Central bank of Nigeria (CBN) met on the 25th and 26th March 2019, against the backup of developments in the global and domestic environments in the first quarter of 2019. A major decision taken by MPC was to adjust downward the Monetary Policy Rate (MPR) by 50 basis points from 14.00 to 13.50 per cent.

The MPR has been held up at 14 per cent since July 2016. MPR is the benchmark for bank's lending rate to funds borrowers. Thus, a reduction in MPR should imply a reduction in bank lending rate. Lowering cost of borrowing encourages businesses to increase investment spending. It also gives banks incentives to lend to businesses and households and allow them to spend more.

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