MPC raises Cash Reserve Ratio by 500 basis points

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has raised the Cash Reserve Ratio by 500 basis points to 27.5%.

The Committee in a vote of 9 to 11 members agreed to increase the Cash Reserve Ratio (CRR) by 500bps to 27.5%.

However, Committee hold other policy parameters constant including the monetary policy rate (MPR) at 13.5%.

Liquidity Ratio remains unchanged at 30% while asymmetric corridor is still +200bps/-500bps around the MPR.

Godwin Emefiele, the CBN Governor disclosed this while reading the communique at the end of the first MPC meeting in the year 2020 on Friday in Abuja.

Emefiele said the decision of the MPC to raise the CRR is informed by recent inflationary pressure in the economy.

Also, the CBN Governor stated that the decision to hold other rates was informed by the conviction of the committee members that there is a need to observe the response of the economy to several policies introduced by the Central Bank.

The apex Bank chief confirmed that the Loan to Deposit ratio raised alongside restriction on some participants in its Open Market Operation pushed liquidity up

He added that border closure has also exacerbated the inflation rate, which is inimical to growth.

Analysts said this is a big push as deposits money banks operation would be caught in the benchmark increase that would sterilise deposits available for use.

More deposits are expected to be sterilize as implementation begins simultaneously, analysts said.

This is coming just at the time when the CBN demands that operators should release as much as 65% of total deposits to grow the economy.

Analysts at Afrinvest said this CRR increase is expected to quarantine between ₦812.6 to ₦855.3 billion from the banks’ vaults given total deposits ranging from ₦16.2 to ₦17.1 trillion as at September 2019.

MPC raises Cash Reserve By Sam Atanbiyi

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