May 18, (THEWILL) – A member of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC), Edward Adamu, has said that the sterilisation of banks’ funds under the Cash Reserve Ratio (CRR) policy of the CBN should be intensified.
The CRR is the share of banks’ total deposit to be reserved with the central bank which is not accessible to banks for lending. It is ‘quarantined’ for the purpose of controlling the volume of money in circulation.
Nigeria’s current CRR is 32.5 percent as of March 2023, the rate it had maintained since it jumped from 27.5 percent in September 2022.
Adamu’s position was contained in the CBN Communique No. 147 containing the outcome of its by-monthly MPC meeting held on 20th and 21st March, 2023, published Wednesday.
The Quantity Surveyor and Business Strategist said his opinion was based on the liquidity glut seen in the economy in the earlier part of the year.
His words, “At end-February 2023, foreign assets (net) grew by about 29 per cent over end-December 2022. In January, the aggregate grew by 7.14 per cent after months of decline.
“Similarly, domestic credit (net) grew by 5.7 per cent in February 2023 over its level at end-December 2022, which annualised to about 34 per cent, surpassing the programme by about 18 percentage
points.
“These statistics lead me to the conclusion that there continues to be room for further tightening of financing conditions in the economy.
“I see the need to increase the intensity of sterilization primarily to dampen the impact on money supply on the renewed growth in foreign assets, to restore system liquidity to its optimal level in consonance with the upward direction of the monetary policy rate (MPR).”
The Quantity Surveyor and Business Strategist also raised concerns over the raging inflation which hit 22.2 percent in April.
He called for urgent measures to contain the high rate of inflation to contain the threat to the Bank’s monetary policy initiatives.
“In the domestic economy, inflation remains the most important challenge for policy despite several upward policy rate adjustments.
“Headline inflation rose to 21.9 per cent in February 2023 from 21.8 per cent in January, driven essentially by food inflation which increased to 24.35% from 24.32% in January.
“Earlier, in December 2022, when headline inflation moderated, it was followed by an uptick in January 2023. Staff projections suggest that domestic inflation may not have peaked after all,” he said.
The Communique contained the views of the 12 MPC members, including the CBN Governor, Godwin Emefiele, who signed the document.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
