To revive the Nigerian economy which has been battered by the COVID -19 outbreak and low oil price, the Central Bank of Nigeria (CBN) in its May Monetary Policy Committee (MPC) meeting slashed the country’s benchmark interest rate by 100 basis points to 12.5percent from 13.5percent, first easing since March 2019 and the largest since 2015.
The measure by the apex bank is to spur lending to the economy which faces imminent recession.
Farmers in the country have lauded the move of the apex bank on the recent interest rate cut, saying it is the right step as it will help businesses survive the difficult moment of the virus outbreak and low oil price.
They added that it will also spur lending to the agricultural sector as agribusinesses can now access loans at a cheaper rate with a longer moratorium period.
“The move by the CBN is a good one for the economy as it will stimulate borrowings for investments,” said AfricanFarmer Mogaji, head-agribusiness group, Lagos Chamber of Commerce and Industry.
“With this and the previous reduction of interest rate on intervention funds as well as the N50billion credit facility and extended moratorium by the apex bank, farmers and other actors in the sector will be able to access cheap credits,” Mogaji said.
He stated that the recent policies by the apex bank will stimulate economic growth as a cut in the benchmark lending rate reduces banks’ lending rates to borrowers.
The monetary policy rate (MPR) is the benchmark interest rate that is used to determine banks’ lending rates and the cost of credit for borrowers, he says.
The agricultural sector recorded a 2.2percent growth rate in the first quarter of 2020, contributing N3.7trillion to the country’s gross domestic product for the period.
The sector’s overall contribution to the country’s GDP in real terms for the period stood at 21.9percent in the first quarter of 2020, slightly higher than its contribution in the first quarters of 2019 and 2018 respectively.
Experts say that agricultural contribution to the GDP can be further boosted with the measures undertaking by CBN to support businesses, noting that the extension on loan moratorium and reduction of interest rate on intervention funds will further boost farmers’ output.
Prince Olabode Adetoyi, chief executive officer of Hi-Nutrient Limited gave kudos to the apex bank for its recent interest rate cut and extension on loan moratorium among others.
Adetoyi says it will help farmers especially in the poultry subsector who have been negatively impacted by the COVID-19 pandemic recover from the economic fallout of the virus.
He stated that if the lower interest rate is combined with our measures by the government, farmers’ productivity will be boosted, leading to the sector contributing more to the country’s economic growth amid and post COVID-19.
“We give kudos to the government for coming up with various measures to support businesses, especially on the benchmark interest rate cut and extension of loan moratorium, this will ensure businesses survive amid the pandemic,” Adeoti who is also the vice president of the Nigerian poultry association said.
He called on the apex bank to ensure that money deposit banks reduce their lending rate as the benchmark rate has been reduced.
He noted that banks are quick to increase interest rates anytime the benchmark rate is increased but will fail to reduce it when there is a cut.
He added that much more is still needed to be done to support farmers and ensure that the sector creates jobs and diversify the economy away from oil.