At the just concluded Monetary Policy Committee (MPC) meeting today, members voted to harmonize the public and private sector Cash Reserve Ratio (CRR) at 31%. The Cash Reserve Ratio is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves with the central bank.

The likely effect of this is tight liquidity and an increase in the cost of funds for banks. In layman's language, this is expected to intensify the hunger of banks for customers' deposits.

The Monetary Policy Committee is the highest policy making committee of the Central Bank of Nigeria (CBN) with the following mandate: Review economic and financial conditions in the economy; determine appropriate stance of policy in the short to medium term; review regularly, the CBN monetary policy framework and adopt changes when necessary. It also communicates monetary/financial policy decisions effectively to the public and ensure the credibility of the model of transmission mechanism of monetary policy.

Summarily, the MPC voted to:

(i) Retain the MPR at 13 per cent with a corridor of +/- 200 basis points around the midpoint;

(ii) Retain the Liquidity Ratio at 30 per cent; and

(iii) Harmonize the CRR on public and private sector deposits at 31.0 per cent.


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