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BUSINESS & ECONOMY

Naira to Benefit from CRR Policy

The naira will be the biggest beneficiary of the 50 per cent rise in Cash Reserve Ratio (CRR) on public sector deposits, analysts have said. While there was no change to exchange rate policy, the CRR effect will be positive for the naira given the N650 billion immediate liquidity drop in the financial system.

The naira had a day after the CRR hike firmed to a four-week high against the dollar. The local currency closed at N159.9 to the dollar, its strongest since June 19. The CRR accounts for 10 per cent of banking sector deposits.

In an emailed report, Consolidated Discount House Limited raised strong fears on the naira’s stability, stressing that Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi, will ensure the defence of the local currency till his departure from the bank.

Beyond these, it said the depletion of the naira will have strong domino effects on the system. It would also lead to negative carry trade and higher import costs for local businesses. The report said the single digit inflationary outlook for the second half of the year is largely anchored on stable exchange rates.

Currencies analyst at Ecobank Nigeria, Olakunle Ezun said that by raising the public sector deposit CRR, the apex bank aims to slow growth in money supply and reduce inflationary pressures to sustain a comfortable level of inflation.

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