The Central Bank of Nigeria (CBN), following its 5 percent increase in the Cash Reserve Ratio (CRR) to 32.5 percent, has ordered the deposit money banks to fund their accounts on latest Thursday as it plans to debit them for CRR.
This is according to the statement of the Central Bank’s Governor, Godwin Emefiele, after reading the communique of the Monetary Policy Committee meeting on Tuesday 27th September 2022.
The Central Bank of Nigeria has adopted a two-pronged approach to curtailing inflation. The apex bank raised interest rates by 150 basis points to 15.5 percent. It also jacked up the CRR to 32.5 percent (representing a 5 percent increase) as it aims at mopping-up liquidity out of the banks.
The CBN urged the deposit money banks to comply without delay or face a forex ban. Banks who fail to fund their account by the stipulated time (Thursday 29, 2022) may be sidelined from carrying out transactions on the foreign exchange market.
What the Governor is saying
“We expect that this decision at the meeting must be seen to be potent and must achieve the effects that the MPC thinks it should.”
“CBN expects all banks to fund their accounts by Thursday (48 hours) because they will be debited for CRR.”
“The CBN will take their CRR to 35 percent which means we are going to take liquidity out of their vaults by Thursday.”
“This message is meant to underscore the fact that MPC says this aggressive decision to rein inflation must yield result. We do not want to face Nigerians in the next few months and begin to take the blame for not being able to rein inflation in spite of all the rate hikes.”
The CBN noted that the aggressive increase in MPR and the CRR was to combat rising inflation in the country which has been moving aggressively for several months.