The Monetary Policy Committee (MPC) in the first-rate decision of the year, Friday took a different twist, electing to adjust the Cash Reserve Ratio (CRR) upward by 500bps to 27.5% from 22.5 per cent. retaining the Monetary Policy Rate (MPR) benchmark at 13.5 per cent.
The Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele, announced this during a press conference at the end of a two-day Monetary Policy Committee (MPC) meeting held at the apex bank’s headquarters in Abuja.
He said all the nine 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.
Mr Emefiele added that the committee maintained MPR essentially for sustainable support to growth before any possible adjustment.
He said, “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.