The Monetary Policy Committee (MPC) has raised the Cash Reserve Ratio (CRR) upward by 500bps
The Committee in the first-rate decision of the year, took a different twist, electing to adjust the Cash Reserve Ratio (CRR) upward by 500bps, from 27% to 27.5%, while holding all other parameters at current levels.
At the crux of the committee’s consideration were events across the domestic and global landscapes which included, subdued growth across developed economies, insisting that better growth prospects are likely in 2020 given tamer risks relative to year 2019.
Analysts believe that the committee/s decision highlighted increasing concerns around sustained inflationary pressure which runs ahead of the CBN threshold of 6% – 8%, noting that its disposition reflects signs of the ineffectiveness of the monetary policy tools in curbing higher consumer prices.
However, not to lose grip of consumer price growth amidst concerns of increased liquidity in the system, 9 members of the monetary committee voted to adjust the CRR by 500 bps to 27.5%.
Elsewhere, although the committee expressed satisfaction in credit to the private sector, it re-emphasized the need for higher credit to small and medium scale businesses. Specifically, it stated that credit to the private sector grew by NGN2.00 trillion between May and December 2019.