THE Central Bank of Nigeria (CBN’s) review of the Cash Reserve Ratio (CRR) to 10 percent for Merchant Banks to boost long-term financing has received commendation.
An economic expert, Professor UchennaUwaleke, said the development will place the wholesale banks in a stronger position to attend to the financing needs of the real sector.
Professor Uwaleke, while shedding more light to his stance stated, “By the same token, the CBN should consider reducing the CRR for DMBs from 32.5 percent to say, 25 percent in view of the high MPR.
“The huge evidence of non-monetary influence on inflation supports this recommendation.
“Furthermore, it’s a no-brainer that increased liquidity in the banking sector following a reduction in the CRR has the potential of lowering interest rates with positive pass-through to the stock market”.
The CBN had announced in a circular dated July 14, 2023, and signed by CBN Director, Banking Supervision Department, Mr. Haruna Mustafa and directed to all merchant banks a reduction in the Cash Reserve Requirement (CRR) of merchant banks to 10 percent from the current 32.5 percent.
The change will take effect from August 1.
The CRR is a monetary policy tool used by central banks to manage and regulate the money supply in an economy in reference to the portion of deposits that banks are required to hold with the central bank.
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