TSA Implementation: CBN May Relax Monetary Policy

Experts have stated that the full implementation of the Treasury Single Account, TSA , is expected to see the Central Bank of Nigeria, CBN , relax its restrictive monetary policy stance, especially by slashing the cash reserve requirements (CRR), experts have stated.

The CRR is the minimum cash, as a percentage of customers’ deposits and notes that each commercial bank must set aside in reserve. This cash cannot be used for other purposes or lent out. It is currently at 31 per cent. Nigeria has the highest CRR in Africa. The central bank has over the years, used this instrument to sterilize a substantial amount of funds.

Last week, President Muhammadu Buhari ordered all federal ministries, departments and agencies (MDAs) to pay all government revenues and other receipts into a TSA with the central bank.

However, analysts at CSL Stocbrokers Limited, noted that the full compliance with the TSA directive implies improved monitoring of government funds which is expect will boost reserves and may result in the CBN relaxing its strict cash reserve requirement policies.”

Also, speaking in an interview on Monday, August 17, the Chief Executive Officer of Proshare Nigeria Limited, Femi Awoyemi, stressed the need for the central bank to reduce interest rate, slash the CRR and also strenghhten its supervisory role. He also argued that it was important that the country’s banking model is restructured in view of the TSA.

“It is imperative that we reverse our banking model back to what it used to be. And if we want to do that, the CBN, which is a beneficiary of the TSA, which allows it to exert significant influence over monetary policy, must change three things : its interest rate position, reduce its cash reserve ratio and most importantly, improve its supervision of banks,” he explained.

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