The Central Bank of Nigeria, CBN, has retained the Monetary Policy Rate, MPR, at 12 per cent with a corridor of +/- 200 basis points around the midpoint.
Governor of the bank, Mr. Godwin Emefiele, announced this yesterday at the end of the 97th Monetary Policy Committee, MPC, meeting in Abuja, said that the public sector Cash Reserve Requirement and the Private sector Cash Requirement remained at 75.0 per cent and 15.0 per cent, respectively.
“That banks were holding large excess reserves averaging over N300 billion even when there were ample opportunities for productive and profitable lending to the real sector of the economy.
“The situation is made worse with the injection of an additional N866 billion into the system through the redemption of maturing AMCON bonds in October.
“Given the apathy to lending, banks may be inclined more to placing these new funds in the SDF or use it to increase pressure on the exchange rate”, he said.
Banks were therefore advised to explore ways to lend such excess reserves to the real sector.
Emefiele said that the monetary regulators could be forced to further tighten monetary policy should the banks continue to defy entreaties to lend to the real sectors of the economy.
“Ordinarily, because of the size of liquidity we see in the system today, what we should have done actually is to tighten further but we would continue to monitor the liquidity system, and I can assure you that what we say in our agenda that interest rate would gradually come down is an objective that we would eventually pursue but we would continue to monitor what is happening in the Nigerian economy and all the parameters to determine whether or not we’ve attained the right time to move in that direction.
“We are going to continue to monitor what is happening in the environment. What we have seen is that instead of banks channeling what we call excess liquidity in the system into the productive or certain targeted sectors of the economy, what the banks are doing is either placing these monies in treasury bills or even investing them at the CBN window,” he said
