CBN Raises CRR to Curtail Inflation

  • CBN Raises CRR to Curtail Inflation

The Central Bank of Nigeria (CBN) led Monetary Policy Committee (MPC) on Friday raised Cash Reserve Requirement (CRR) to curtail raising inflation rate and enhance the efficiency of Loan-to-Deposit Ratio (LDR) policy.

According to the eleven member committee, the recent Open Market Operation (OMO) policy would increase the money in circulation and further weigh on raising consumer prices that presently stood at 11.98 percent, up from 11.24 percent recorded in September.

The committe said “by increasing the CRR at this time is fortuitous as it will help address monetary-induced inflation whilst retaining the benefits from the Bank’s LDR policy, which has been successful in significantly increasing credit to the private sector as well as pushing market interest rates downwards.”

The committee, therefore, raised the CRR by 500 basis points from 22.5 percent to 27.5 percent. While arguing that loosening interest rate further would hurt consumer prices and the ongoing policy of the apex bank.

On global economy, the eleven member committee agreed that headwinds from developed economies and middle east recent happenings would continue to disrupt local economy in 2020. However, they projected moderate growth for the nation in 2020, saying with the success recorded at the Nigerian Stock Exchange (NSE) in January, the economy would build on that momentum in 2020.

Monetary Policy Rate (MPR) was left unchanged at 13.5 percent while Liquidity Ratio remain at 30 percent. They agreed to maintain asymmetric corridor of +200/-500 basis points around the MPR.

They added that, “this will enable policy to react suitably to developments as they occur in the near term. In addition, retaining the current policy position provides avenues to evaluating the impact of the heterodox monetary and financial policies to support lending by the banking industry without altering the policy rate.”

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]

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