UMORU ABDULKADIR
In a bid to control rising inflation and curb the level of liquidity in the country, the Central Bank of Nigeria (CBN) Friday at the end of its first Monetary Policy Committee (MPC) for the year, increased the Cash Reserve Ratio by 500 basis points to 27.5 per cent.
The CBN Governor, Mr.Godwin Emefiele, disclosed this while reading the communique at the end of the MPC meeting held Friday in Abuja.
While the apex bank raises the CRR to 27.5 per cent, it, however, retained the Monetary Policy Rate (MPR) at 13.5 per cent with other parameters as Liquidity ratio, and asymmetric corridor remains unchanged.
Emiefele explained that the decision of the MPC to raise the CRR was informed by recent inflationary pressure in the economy, adding that the decision to hold other rates was informed by the conviction of the committee members that there is a need to observe the response of the economy to several policies introduced by the Central Bank.
He stated that at the meeting nine out of the 11 members constituting the MPC voter to raise the CRR with MPR retained at 13.50 per cent, the asymmetric corridor of +200/-500 basis points around the MPR also retained, and Liquidity Ratio held at 30 per cent.
According to the CBN Governor, the Loan to Deposit ratio (LDR) raised alongside Open Market Operations (OMO) restriction pushed liquidity high in the economy, while border closure has also aggravated the inflation rate, which is inimical to growth.
“Inflation above the 12% will be inimical to output growth,” Emefiele stated.
Meanwhile, the nation’s inflation rate surged to 11.98 per cent (year-on-year) in December 2019, up from 11.85 per cent of the month of November, recording a fourth consecutive increase since September 2019.
Currently, the Inflation rates remain higher than the single-digit inflation of the CBN of between 6 and 9 per cent.
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