CBN cuts CRR to 25% on TSA adoption, keeps MPR at 13%

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In its efforts to boost liquidity that has been impacted by the adoption of the Treasury Single Account (TSA), the Central Bank of Nigeria (CBN) yesterday slashed its Cash Reserves Requirement (CRR) on deposit from 31 per cent to 25 per cent as part of efforts to maintain the economy 
The CRR is the amount commercial banks must pay from their public and private sector accounts into the central bank.

The central bank, however, kept the Monetary Policy Rate (MPR), its lending anchor rate to the commercial banks, at 13 per cent and a liquidity ratio of 30 per cent.

The decisions were the highlights of  a two-day meeting of the Monetary Policy Committee (MPC) of the CBN where the Central Bank Governor, Godwin Emefiele also allayed fears that the implementation of the TSA had created liquidity squeeze in the system.

He also dispelled rumors that some Ministries, Departments and Agencies (MDAs) have been exempted from the TSA policy, noting that the CBN has not received such memo. He advised all MDAs to transfer their funds to the CBN as demanded by the policy.

“There have been a lot of speculations on the amount of funds  that have been moved from the market to the CBN.  The truth is that the amount that was moved  was less than the amount that people have been quoting on the pages of the newspapers. The TSA  is an ongoing exercise.  The  amount as at 15th  of September is less than what it is at today the  22nd;  but what we are saying is that a lot of people had predicted  liquidity squeeze  as a result of TSA . The data the committee reviewed between yesterday (Monday) and today (Tuesday) shows that  liquidity ration indeed increased moderately.   That was why the committee came to the conclusion  that the impact of movement of the funds from the banks to CBN on liquidity is sort of moderate,” he stated.

Emefiele allayed fears over the safety of the banks in view of the takeoff of the TSA police, adding that, ” the liquidity ratio that we saw based on data that was presented to us showed that the Nigerian banks are safe; Nigerian banks are healthy  and still very strong and we will continue to monitor  their liquidity  from time to time to ensure they do not slide into a difficult terrain.”

He said the economy had begun to respond positively to the forex restriction imposed on some 41 items as a tomato paste company that had shut down has reopened.

“In the case of some 41 items that have been excluded from official sources as well some parallel segment of the foreign exchange, I repeat the CBN does not have the official power to ban importation of such times; but the impact is positive because we have begun to see  people who before now had closed their factories as a result of uncompetitiveness  of their  products compared to prices of imported times now open their shops and employed more people thereby creating employment  and  boosting the business  environment.

“Some of us may have read about  Erisco Tomato Company that  advertised for employment  after we announced forex exclusion for paste.   There are also many companies  overseas, who seeing that it is going to be difficult to produce in their countries that are considering  moving  down here.   They are  beginning  to think of relocating their machines to Nigeria to produce here.   Those are the positive side; but no doubt,  there would be initial pains, but we are optimistic   that in due course the pains would ease,” the CBN  governor said.
AUTHOR: Bayo Adesanya.

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