The Central Bank of Nigeria (CBN) held its first Monetary Policy Committee (MPC) meeting of the year 2014 on Tuesday, the 21st January to further increase banks’ Cash Reserve Requirement (CRR) on public sector deposits from 50% to 75%. However, the CRR on private deposits was left unchanged at 12 percent.
The CRR is a financial guideline tool used to set the least deposits commercial banks must hold as treasury rather than lend out. It is usually functional to manage borrowing and interest rates by altering the amount of money in banks’ deduction to create loans.
Other key policy rates, however, were kept unaffected, with the Monetary Policy Rate (MPR), the standard for interest rates, upheld at 12 per cent, while the liquidity ratio was held at 30 per cent.
It said while the official rate of the naira opened with N157 to the dollar in 2013, it closed at N157.6, the rate at the BDC was diverse as it closed at N170 to the dollar from an opening point of N159.5, a depreciation of over 7 per cent.
CBN Governor, Mallam Sanusi Lamido Sanusi, told reporters at the end of the two-day meeting in Abuja that the new administration on CRR on public sector funds would upshot from February 4.
Sanusi, who read the committee’s statement, said all members voted for an increase in CRR on public sector deposits from 50 per cent to 75 per cent.
He also said the central bank had decided to take abrupt steps to rectify the supply-demand imbalance in the BDC fragment while upholding its focus on anti-money laundering (AML) activities.
The CBN governor further disposed on any panorama of a likely monetary easing this year, adding that 2014 would be a difficult period for both the monetary and fiscal authorities on the back of recent external sector developments.
He said: “The committee again expressed concern over the continued depletion of the Excess Crude account (ECA), which balance stood at less than $2.5 billion on January 17, 2014 evaluated with about $11.5 billion in December 2012.