The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) yesterday left the Monetary Policy Rate (MPR) at 14% and all other variables unchanged. The Cash Reserve Ratio (CRR) was thus left at 22.5% and the Liquidity Ratio at 30%. The asymmetric corridor was left at Asymmetric +200 to 500 basis points.
The Monetary Policy Rate (MPR) is the rate at which the CBN lends to commercial banks. This, in turn, serves as the benchmark rate (in theory) which banks lend to customers. The Cash Reserve Ratio (CRR) is the proportion of a bank’s deposits it has to hold as deposits either in cash or with the CBN. Liquidity ratio is the ratio of a bank’s liquid assets to its liabilities. In other words, a bank’s cash balance plus assets that it can easily convert to cash to the total liabilities owed by the bank, which is typically deposits. The Asymmetric corridor is the range within which the MPR can either be raised or lowered.
The maximum the rates can thus be increased is 2%, and the lowest it can be lowered by is 5%. CBN Godwin Emefiele in his post MPC remarks also stated that the bank was putting finishing touches to the framework for the China swap deal. Standard Chartered Bank and Stanbic Ibtc (which has the Industrial and Commercial Bank of China as affi liate) have been chosen as settlement banks. In addition, the apex bank was working on a policy that would penalize banks wiThexcess liquidity in a bid to encourage lending to the real sector.
Emefiele stated that the MPC had left the rates unchanged for several reasons including: • The non-passage of the 2018 budget which would determine the country’s fiscal direction. • The rising trend of infl ation in global markets. • Expect liquidity inflow in the 2nd half of the year from the 2018 budget and pre-election spending.
