CBN Approves Release of Excess Cash Reserve Ratio to Banks

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CBN Approves Release of Excess Cash Reserve Ratio to Banks

CBN Approves Release of Excess Cash Reserve Ratio to Banks

The Central Bank of Nigeria (CBN) has approved the release of excess above minimum regulatory cash reserve ratio from the deposit money banks.

At 27.5%, the monetary policy committee sustained cash reserve requirement (CRR) with the CBN, but average effective ratio has been higher, according to some banks.

The release of the fund, will raise liquidity in banks following multiple times debits for failure to meet 65% loan to deposit ratio target.

The increased CRR due to failure to meet the loan target has put strain on banks’ lending capacity, a development analysts claim work against decision to stimulate economic growth.

In a commentary, Chapel Hill Denham confirmed that it received a circular from the CBN which stated that the Apex bank has approved the release of the excess above regulatory minimum CRR of banks.

Reacting, analysts at the investment firm said they think this is a further attempt by the CBN to continue its growth pursuit by aggressively pushing liquidity to the system.

Chapel Hill Denham then explained that the preceding will be achieved through the issuance of special Bills with features such as Tenor of 90-day, subject to roll over at the instance of the CBN.

Also, Zero-coupon, with an implied yield to be worked out by the Bank and tradable instrument that will be discountable at the CBN window, and the instrument will qualify as liquid assets.

The CBN announces the introduction of Special Bills as part of efforts to deepen the financial markets and avail the monetary authority with an additional liquidity management tool.

Read Also: CBN Moves against Non-Repatriation of Exporters’ FX Proceeds

CBN however said the instrument will qualify as liquid assets in the computation of liquidity ratio for deposit money banks.

The apex bank hints it will continue to ensure optimal regulation of systemic liquidity and promote efficient financial markets in support of economic recovery and sustained growth.