…emphasises lending to MSMEs
By Chioma Obinagwam
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), Nigeria’s apex monetary authority, has increased Cash Reserve Ratio (CRR) from 22.5 to 27.5 percent.
CRR is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the CBN.
The apex monetary authority also retained the monetary policy benchmark rate- MPR at 13.5 percent.
The Monetary Policy Committee (MPC) also increased the Cash Reserve Ratio (CRR) from 22.5 to 27.5 percent.
CBN Governor, Mr Godwin Emefiele, disclosed this during a press conference on Friday at the end of a two-day MPC meeting held at the bank’s headquarters in Abuja.
“The committee by a decision of nine members voted to alter cash reserve requirement by 500 basis point from 22.5 to 27.5 percent; while leaving all other policy parameters constant.
“MPC voted to retain the MPR at 13.5 percent, and retain the asymmetric corridor of +200 and -500 basis point around the MPR; and lastly, retain the liquidity ratio at 30 percent,” he noted.
He explained that nine of the committee members voted to retain the MPR and increase CRR owing to the rise in inflation.
“The committee by a decision of nine members voted to alter cash reserve requirement by 500 basis point from 22.5 to 27.5 percent; while leaving all other policy parameters constant.
“MPC voted to retain the MPR at 13.5 percent, and retain the asymmetric corridor of +200 and -500 basis point around the MPR; and lastly, retain the liquidity ratio at 30 percent,” he stressed.
The CBN Governor noted that the it would enable policy to react suitably to development as they occur in the near term.
Mr Emefiele added that the committee maintained MPR essentially for sustainable support to growth before any possible adjustment.
He stated, “This would enable policy to react suitably to development as they occur in the near term.
“Retaining the current policy position provides an avenue to evaluating the impact of the heterodox monetary and financial policies to support lending by the banking industry without altering policy rate.”
According to the governor, the committee noted that it will reduce the speed of economic recovery, relative to loosening, exert a drag on output growth as Deposit Money Banks continue to utilise bond sales, instead of engaging in financial intermediation to the private sector.
Meanwhile, although the committee expressed satisfaction in credit to the private sector, it re-emphasized the need for higher credit to small and medium scale businesses. Specifically, it stated that credit to the private sector grew by N2 trillion between May and December 2019.
