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BANKING & FINANCE

CBN Harmonises Cash Reserve Requirements for Public, Private Sectors At 31 Percent

As part of efforts to stimulate financial market liquidity and spur economic growth, the Central Bank of Nigeria’s (CBN’s) monetary policy committee (MPC) on Tuesday, May 19, harmonised both the private sector and public sector cash reserve requirements (CRR) at 31 per cent.

Before, while the private sector CRR was at 20 per cent, the CRR on public sector funds was at 75 per cent. However with the latest MPC decision, both CRR have been unified at 31 per cent.

Some economists and financial market operators anticipate that the MPC decision would help inject some liquidity back into the banking system, even as they noted that banks that are more reliant on public sector deposits would be the key beneficiaries of this additional injection of liquidity.

Speaking to journalists at the end of the 244th MPC meeting in Abuja, the CBN Governor, Godwin Ifeanyi Emefiele, explained that the 31 per cent CRR is just a composite rate.

He noted that the action would enable the central bank achieve the efficacy of the CRR rate regime, adding that the MPC members considered that the current discriminatory CRR on public and private sector deposits had not only constrained the policy space but could inspire moral hazard by private market participants.

“What we’ve done is to just have a composite rate. So there’s no need for us to have CRR for both private and public sector deposits. The 31 per cent is just a composite rate, which just brings it together and there’s no need for anybody to continue to wonder if they are taking CRR based on public sector or on private sector,” the CBN governor said.

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