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CBN cuts merchant banks’ CRR to 10 per cent 

THE Central Bank of Nigeria (CBN) on Friday revised the Cash Reserve Ratio (CRR) of merchant banks to 10 percent from 32.5 percent.

    Director, Banking Supervision, Haruna Mustafa, disclosed this in a letter to all Merchant banks on Friday, July 14. The CRR is the share of a bank’s total customer deposit that must be deposited with the central bank.

   The new cut reverses significantly the increase in the CRR by the Monetary Policy Committee (MPC) last September from 27.5 percent to 32.5 percent to tame inflationary pressure.

    Prior to the increase last year, Nigeria’s CRR was one of the highest in the world at 27.5 per cent. The CBN hiked it by 500 basis points to 32.5 per cent from 27.5 per cent where it has been for two years.

   The suspended CBN Governor, Godwin Emefiele, had after the hike, gave the banks 48 hours ultimatum to fund their account before CBN, adding that failure to do so they would would be debited and sanctioned. 

   “If any bank fails to meet up with this expectation, the decision of the MPC is that we may need to preclude those banks from foreign exchange market from Friday onwards until they meet the 32.5 per cent,” he said.

    Nigerian banks as of March 2022, before the CRR hike to 32.5 per cent had a combined deposit base of N48.64 trillion. Implicintly, this means that as much as N15.8 trillion, being 32.5 percent of N48.64 trillion, will now be kept with the CBN as CRR, yielding zero return to the banks.

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