Fact sheet of Nigeria’s MPC decision to Increases CRR by 500bps to 27.50%

Date:

MPC Observations:
• Slowdown in advanced economies amid weakness in manufacturing activities as well as existing trade tensions.
• Global growth supported by emerging economies such as Brazil, India and Russia.
• In the domestic economy, enhanced flow of credit to the private sector enhanced economic outlook – credit to the private sector rose by N2 trillion from May 2019 to December 2019.
• Non-Performing Loans of banks continued to decline amid lower interest rates
• Exclusion of nonbank financial institutions and HNIs from OMO activities led to lower interest rates, but improved equities market performance
• However, high unemployment, increased debt levels, rising insecurity and inflationary pressures remain a threat to economy growth.
MPC Considerations:
• The need to address the glut in financial system liquidity by increasing the Cash Reserve Ratio (CRR) in order to tame demand-pull inflationary pressure and aid foreign exchange stability.
• The need for the fiscal authority to support monetary policy objective of foreign exchange rate stability by reducing monthly FAAC distributions and diversifying its revenue sources.
MPC Decisions:
• Cash Reserve Ratio raised from 22.50% to 27.50%
• Monetary Policy Rate retained at 13.50%
• Liquidity Ratio retained at 30%
• Asymmetric band retained at +200 bps and – 500 bps around MPR
Analyst’s Opinion:
We welcome the decision of the MPC to increase the CRR by 500bps as this creates an outlet to ease built up pressure of increased financial system liquidity which was created by its restrictive OMO policies. In doing so, and by not reviewing the MPC upwards, we feel the monetary authority remains in alignment with the fiscal authority’s goal to boost output growth, in part, by making credit available at affordable cost to real sector players.

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Godwin Okafor
Godwin Okaforhttps://naija247news.com
Godwin Okafor is a veteran Financial Journalist, Internet Social Entrepreneur, and the visionary Founder of Naija247news Media Limited. With an extensive career spanning over 16 years in financial journalism, Godwin possesses a wealth of experience that seamlessly bridges both traditional and digital media landscapes. His journey in journalism commenced at Business Day, Nigeria, where he laid the foundation for his prolific career. In 2010, Godwin took a bold step by founding Naija247news Media, a platform that has since become a prominent player in delivering timely and accurate news. Educationally, Godwin Okafor holds a Bachelor's degree in Industrial Relations and Personnel Management from the prestigious Lagos State University, Ojo, Lagos. His commitment to continuous learning led him to the Lagos Business School, where he further honed his skills. Additionally, he is recognized as a Fellow of the University of Pennsylvania, having successfully completed the Wharton Seminar for Business Journalists. Throughout his illustrious career, Godwin has earned acclaim by winning numerous journalism awards, a testament to his dedication to excellence in reporting. Beyond his role as a Financial Journalist, Godwin Okafor wears the hat of the Chairman at Emmerich Resources Limited, the publishing entity behind Naija247news. His visionary leadership has played a pivotal role in shaping the media landscape and establishing Naija247news as a trusted source of information. Godwin Okafor's multifaceted expertise, commitment to journalistic integrity, and leadership in the realm of business journalism underscore his influential presence in both the media and entrepreneurial spheres.

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