NIGERIA- The Central Bank of Nigeria, CBN, has increased the Cash Reserves Ratio, CRR, of banks from 22.5 per cent to 27.5 per cent.
The alteration was effected by the highest policy making committee of the Bank known as the Monetary Policy Committee of the CBN.
The Cash Reserve Ratio is the share of a bank’s total deposit that commer in the form of liquid cash.
The CRR is used by the Central Bank to ensure that a part of customer deposits with commercial banks is constantly maintained at the apex financial institution and is hence, secure.
Godwin Emefiele, Central Bank of Nigeria, CBN’s Governor, while addressing journalists shortly after the committee’s meeting said the move was aimed at mopping up excess liquidity from the banking system which had become a threat to inflation.
Emefiele further revealed that the decision was reached after nine members of the committee voted to alter the CRR from 22.5 per cent to 27.5 per cent.
He explained that apart from the CRR that was increased, the committee decided to retain the Monetary Policy Rate at 13.5 per cent.
Also retained are the Liquidity Ratio which was left at 30 per cent; and the Asymmetric Window which was left at +200 and -500 basis points around the MPR.
The Monetary Policy Committee is the highest policy making committee of the Bank and is composed of The Governor of the Bank who shall be the Chairman; The four Deputy Governors of the Bank; Two members of the Board of Directors of the Bank; Three members appointed by the President and Two members appointed by the Governor
The committee has the following mandate: Review economic and financial conditions in the economy; Determine appropriate stance of policy in the short to medium term; Review regularly, the CBN monetary policy framework and adopt changes when necessary.
It is also tasked with the responsibility of communicating monetary/financial policy decisions effectively to the public and ensure the credibility of the model of transmission mechanism of monetary policy.
