October 27, 2020

Nigeria Economic Update (Issue 39)

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) voted to reduce the Monetary Policy Rate by 100 basis points, from 12.5 percent to 11.5 percent.ยน Other decisions taken by the MPC includes the retention of Cash Reserve Ratio (CRR) at 27.5 percent and retaining the liquidity ratio at 30 percent. These decisions were made in support of driving price stability and output growth. The MPC aims to use these policies to help reduce cost of capital in order for businesses to be able to afford loans. While the reduction in the MPR is expected to reflect in the interest rate of commercial banks, the banking sector may not be well-positioned to provide affordable loans. Considering that loans and advances to the oil sector accounts for about 30 percent of the risk assets in the banking industry, the disruption in the oil sector is likely to affect the ability of these companies to service their loans. Furthermore, banks are already being encouraged to offer debt moratorium by restructuring existing loans combined with the already high cash reserve ratio, making it difficult for them to make loans available. As such, revisions to CRR should be considered at the next MPC meeting.

Download Label
March 13, 2018 - 4:00 am
application/pdf
527.59 kB
v.1.7 (stable)



Related

 

Nigeria Economic Update (Issue 42)

The NSE market indices recorded a bear market rally for the third consecutive week in September. Specifically, All-share index and Market Capitalization increased marginally by 0.31 percent to close at 28,335.40 points and N9.73 trillion respectively on September 30, 2016. Major drivers of the rally include; increased trade-volume of financial, agricultural and consumer-goods securities. The continued rise in market indices may be connected to a sustained investor confidence in the agricultural and financial sectors on the account of the ongoing activities of the government and the CBN to stabilize the sectors.

Nigeria Economic Update (Issue 45)

Crude oil prices recorded increase during the review week. Global benchmark, Brent price increased from $61.42 to $63.522. Nigerias Bonny light gained 9.6 percent to trade at $64.78 per barrel. The weeks rise was at the backdrop of further prospective cuts agreement at OPECs meeting in November 2017 and political tensions and uncertainties in Saudi Arabia given that these events may likely reduce supply and support demand in the near term. Meanwhile, global crude oil market events have been favorable to Nigeria, as the price of bonny light at approximately $65 per barrel, reflects the highest in more than two years.