The MPC on Tuesday, May 19, harmonized both the private sector and public sector CRR at 31 per cent. Prior to the harmonization, while the private sector CRR was at 20 per cent, the CRR on public sector funds was at 75 per cent. The latest MPC decision meant that both CRR have been unified at 31 per cent.
However, the committee retained the monetary policy rate (MPR) at 13 per cent with a corridor of +/- 200 basis points around the mid-point and also retained the liquidity ratio at 30 per cent.
Following the development, a report by WSTC Financial Services Limited explained: “We believe that the full implementation of the treasury single account will further worsen the implication of the new CRR structure on banks. This is because the full impact of the treasury single account implies a 100 per cent sterilisation of federal government deposits from the financial institutions. These deposits would have ordinarily had a dampening effect on the 11 percentage point increase in private sector CRR.”
On the other hand, some economists and financial market operators anticipate that the MPC decision would help inject some liquidity back into the banking system.