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BANKING & FINANCECOVERNEWSLETTER

CBN Fixes Liquidity Ratio For Commercial Banks at 30%

The Central Bank of Nigeria, CBN, has said commercial banks will have to maintain minimum liquidity ratio of 30 per cent in line with regulatory requirement.

Liquidity ratios are a class of financial metrics used to determine a bank’s ability to pay off its short-term debts obligations. It is the total specified liquid assets of a bank divided by total current liabilities.

This new guideline is contained in the Monetary, Credit, Foreign Trade and Exchange Policy for fiscal years 2016/2017 released by the CBN.

However, the apex bank  said merchant and non-interest banks shall continue to maintain a minimum Liquidity Ratio (LR) of 20 and 10 per cent, respectively, subject to review from time to time.

According to the guidelines, discount houses shall continue to invest at least 60 per cent of their total liabilities in government securities in the 2016/2017 fiscal period, while the ratio of individual bank loans to deposits, is retained at 80 per cent.

It said the major tool for liquidity management will continue to be Open Market Operation (OMO) Auctions will be conducted through the sale and purchase of Treasury Bills and CBN Bills at the two-way quote trading platform.

 

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