By Chioma Obinagwam
The Central Bank of Nigeria (CBN) for the 15th time, has left interest rate unchanged in its efforts to control inflation, which is currently at 11.44 percent and stabilise the financial system.
The CBN governor, Godwin Emefiele, disclosed to journalists that the Monetary Policy Committee (MPC) resolved during its 265th meeting in Abuja to retain the monetary policy rate (MPR) at 14 per cent.
A stable financial system is one in which financial intermediaries, markets and market infrastructure facilitate the smooth flow of funds between savers and investors and, by doing so, help promote growth in economic activity.
Meanwhile, the MPR, the rate the CBN lends to commercial banks, has remained unchanged at 14 per cent for 30 consecutive months or 15 meetings of the MPC, since July 2016. It moved from 12 per cent in June 2016.
Mr. Emefiele said the committee also resolved to retain the Cash Reserve Ratio (CRR) at 22.5 per cent and liquidity ratio at 30 per cent, with an asymmetric corridor of +200/-500 basis points around the MPR.
The CRR is the funds kept with the CBN as a minimum deposit a commercial bank must hold as reserves, rather than lend out.
It is a monetary policy tool used to influence borrowing and interest rates by changing the amount of money at the banks’ disposal for loans purposes.
The CRR on private sector deposits is always lower (about 20 per cent), while CRR on public sector deposits is often higher (about 75 per cent).
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