CBN slams 50% CRR on public sector deposits
The Central Bank of Nigeria (CBN) has announced a 50 per cent Cash Reserve Requirement on public sector deposits, a move seen as by analysts as a choice of tightening monetary policy over devaluation of naira.
The 50 per cent CRR for public sector deposits is in addition to the subsisting 12 per cent CRR on all deposits.
This is the key policy shift by the Monetary Policy Committee of the apex bank, which elected to keep the monetary policy rate (MPR) unchanged at 12.0% for the 15th consecutive month.
Nine out of the 10 MPC members that voted, choose to keep the MPR unchanged, in line with the forecast of financial experts.
MPC also noted the naira weakness in recent weeks, which it attributed to a selloff in EM currencies.
'However, it has observed some moderation in the demand for FX in the market. Which explains why there was no talk of a devaluation as we expected.,' analysts from Renaissance Capital noted on Tuesday.
According to the MPC, real GDP growth strengthened to 6.7% YoY in 2Q13, from 6.6% YoY in 1Q13 and 6.3% YoY a year earlier. Non-oil sector remains driver of growth. Oil's contribution to GDP continues to decline.
The CBN eggheads also noted the moderating pressures of inflation, which is at a 5-yr low.. On the fiscal policy side, the MPC expressed concern about how below par oil production and a weaker oil price is undermining government revenue. That said, the MPC commends the government on fiscal consolidation.
Given the MPC's benign inflation rate outlook and it's view that pressure on the FX market is moderating, Renaissance Capital analysts believe that the MPC will maintain the policy rate at 12.0% until YE13, .