VENTURES AFRICA – The Central Bank of Nigeria yesterday effected a new monetary policy which saw the country’s Cash Reserve Ratio (CRR) on public funds deposits rise to 75 percent, thereby withdrawing close to N1 trillion ( $6.1 billion ) from the economy. The CRR, which is the required cash banks are expected to keep with the apex bank, was recently increased from 50 percent to 75 percent for public funds while still maintaining 30 percent and 12 percent on liquidity ratio and CRR respectively. The policy was effected by the Monetary Policy Committee as a means to curb constant spike in the demand for dollars and reduce excessive cash flows in the system. The withdrawal of these funds means the amount available to banks for daily transaction reduces. This might in turn have an effect on interest rates in the country. "We often see lending rates rise in response to the Monetary Policy Rate (MPR) set by the CBN in its efforts to tighten money supply to reign in inflation, but a very little corresponding increase in rates banks pay depositors," Nigerian daily ThisDay quoted CBN Deputy Governor, Financial System Stability, Dr. Kingsley Moghalu , as saying. The implementation of the policy amongst other reasons is meant to bridge the gap between the rate of lending and deposits by banks. In a chat with Thisday Live, the Managing Director, Cowry Assets Management Limited , Johnson Chukwu said the increase will have little or no effect, and the Monetary Policy Committee should be prepared to increase the Public Sector deposit CRR to 100 percent and deploy other monetary tools when election expenses increase. Although the policy will cause banks to adjust their operations, it will also help them to focus on the private sector and can pump funds into other sectors of Nigeria’s economy that have shown signs of growth.
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