CBN to review CRR on public sector deposits upwards

Sanusi Lamido Sanusi
Sanusi Lamido Sanusi

Governor of Central Bank of Nigeria (CBN), Malam Sanusi Lamido Sanusi, has disclosed that there might be an upward review of the Cash Reserve Requirement (CRR) on Public sector deposit.
Speaking at the Udo Udoma & Bello Osagie Barristers and Solicitors’ 30th anniversary on Wednesday in Lagos, the CBN governor said the CRR deposit might be reviewed from 75 per cent to100 per cent.

The Online Free Dictionary defines CRR as, “The required percentage of reserves (deposits) that banks and thrifts must hold in cash or in deposits at the Federal Reserve. This requirement is set by the Fed. Any changes in the required percentage are used to influence credit conditions. An increased percentage requirement means fewer funds available for lending and a resultant rise in interest rates.”


Sanusi said that the development could arise if the present percentage by the Monetary Policy Committee (MPC) to ensure stability did not yield the expected result  on the nation’s economy, adding that the apex bank might also raise the CRR on private sector deposit from 12 per cent to 15 per cent.
Identifying the biggest problem in Nigeria’s macro economy at the moment as undue exchange rate fluctuations, the CBN boss stressed that government’s spending increases daily while the excess crude oil account fell from $11.5 billion to $2.5 billion in one year.
He lamented that while banks got cheap public sector deposits, these financial institutions gave less return on their private sector deposit, saying, “If you look at the spread between deposit and lending rates, it is just crazy.


“Secondly, government money will have to ultimately have to come to the central bank; you’ve got to create a single account and it is vulnerable to oil price shock. If today the rate of oil price crashed and government revenue collapse, many of those banks will go under if they don’t get the discipline of taking it as part of their core deposits.”
Sanusi explained that there are many reasons negatively affecting Nigeria’s economy apart from exchange and inflation rates saying it included the low interest rates. Expressing the need for the country to ensure stability of the naira, he said there was need to block all the leakages in the oil sector in order to build up Nigeria’s external reserve. “We are not working to have a strong or weak naira but we are only interested to have a stable currency that would encourage investment in the country,” he said.


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