The Central Bank of Nigeria (CBN) announced on Friday that it has reduced the Cash Reserve Ratio (CRR) for merchant banks from 32.5 percent to 10 percent.
In a letter dated July 14, 2023, Haruna Mustafa, the Director of Banking Supervision, informed all merchant banks of the revision.
The CRR is a requirement for commercial banks to maintain a minimum amount of deposits as reserves with the central bank. It is calculated as a percentage of the bank’s total deposits.
The adjustment in the CRR serves as a tool for the CBN to regulate the country’s money supply, control inflation, and manage liquidity. A higher CRR implies reduced liquidity for banks.
This recent move by the CBN represents a significant reversal of the previous increase in the CRR by the Monetary Policy Committee (MPC) in September, which raised it from 27.5 percent to 32.5 percent in an effort to curb inflationary pressures.
