Through Model Adigun
noticeable Fear gripped financial markets as the Central Bank of Nigeria (CBN) dumped an estimated N7 trillion charge on the banking sector, in line with the new Cash Reserve Ratio (CRR) it introduced at the last Monetary Policy Committee meeting in October .
This was just as the Nigerian stock market ended the third quarter of the year just ended in the red.
The new CRR direct debit is said to have already forced banks to raise their lending rates by up to 3 percent to around 38 percent in the week before last after being charged by CBN
The immediate impact of the new CRR measure, according to some analysts, is to reduce the amount of money banks have to lend to the economy as CBN struggles to contain inflationary pressures (currently at 20.52 percent in August) with an aggressive Attitude to tame contractionary monetary policy.
In response to the CBN rate hike, banks began raising lending rates by 3 to 4 percent while raising rates on customer deposits by just 1 percent.
CBN Governor Godwin Emefiele had briefed the media at the end of the latest Monetary Policy Committee (MPC) meeting in Abuja on Tuesday, instructing all banks in the country to ensure they have sufficient liquidity in their reserves to meet the new CRR to achieve goal.
“We expect that all banks in Nigeria have to fund their accounts by Thursday, in 48 hours. We will charge them at least 32.5 percent for CRR. “That means we will be taking liquidity out of their vaults by Thursday,” Emefiele said.
This follows an increase in regulatory minimums by 500 basis points, or 5 percent, to 32.5 percent versus 27.5 percent during the MPC session.
CRR is the minimum amount set by CBN that banks must hold from public deposits with the regulator.
With the new development, our reliable source at one of the banks said interest rates on new loans have risen by as much as 35 percent, while existing variable-rate loans have also been re-rated
“Money market rates continued to fluctuate, reflecting liquidity conditions in the banking system. Consequently, the monthly weighted average open repurchase rate (OBB) decreased from 14.15 percent in July to 13.21 percent in August 2022, while the interbank call rate in August 2022 increased to 15.00 percent from 13.00 percent in July.
The Capital Adequacy Ratio (CAR) and Liquidity Ratio (LR) remained above their regulatory limits in August 2022 at 13.4 and 40.1 percent, respectively,” the apex noted during the MPC meeting.
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