By James Emejo in Abuja
The Central Bank of Nigeria (CBN) Friday resolved to raise the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) by 500 basis points to 27.5 per cent from the current 22.5 per cent.
The apex bank however, kept other monetary policy instruments unchanged by retaining the Monetary Policy Rate (MPR) otherwise known as interest rate at 13.5 per cent as well as the Liquidity Ratio at 30 per cent.
Addressing journalists after the two-day meeting of the maiden Monetary Policy Committee (MPC) meeting for the year, CBN Governor, Mr. Godwin Emefiele, said the decision to increase the CRR was a response to the growing threat of inflation, especially in view of the excess liquidity expected in the system following the anticipated effect of the Value Added Tax (VAT) which was recently increased by the federal government from 5 per cent to 7.5 per cent and which takes effect by February 2020.
Also of liquidity concern to the committee is the pending maturing security bills which could all together add as much as N12 trillion to existing liquidity in the system.