The CBN Monetary Policy Committee has increased the Cash Reserve Ratio from 22.5% to 27.5%.
The Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, made this known while reading the communique at the end of the first MPC meeting in the year 2020. Meanwhile, other parameters such as Monetary Policy Rate (MPR), Liquidity ratio, and asymmetric corridor remain unchanged.
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 CBN.
According to Emefiele, the Loan to Deposit ratio raised alongside OMO restriction pushed liquidity high in the economy, while border closure has also exacerbated the inflation rate, which is inimical to growth.
Highlights of the MPC’s decision
- MPR was kept at 13.50%
- The asymmetric corridor of +200/-500 basis points around the MPR was retained.
- CRR was raised from 22.5% to 27.5%, up 500 basis points
- The Liquidity Ratio was also kept at 30%