Among four Sub-Saharan African countries, Nigeria’s banking sector has the highest CRR, at 15 per cent for private-sector customer deposits plus 75 per cent for public sector deposits, a report by Renaissance Capital (RenCap) has said.
In Ghana, the CRR is nine per cent; Kenya is 5.25 per cent and Rwanda five per cent.
RenCap said it could not rule out the possibility of further CRR hike as the regulator appears to be using the CRR as the primary monetary tool for mopping up excess liquidity.
“Our reading of the above is that the risk of a further hike in the CRR cannot be ruled out if the Monetary Policy Committee sees renewed pressure on the naira. The worst-case scenario, we believe, is that the CRR on public-sector deposits could be raised as high as 100 per cent, increasing our estimate of the blended CRR in Nigeria to 23 per cent. On our numbers, the hit to interest income over a year would increase to three to 14 per cent,” it said.
It said in view of increased market liquidity following the Asset Management Corporation of Nigeria (AMCON) bond maturity as well as an increased spread between the interbank foreign exchange rate and Bureau De Change rates, the move is not surprising.
“It is a clear demonstration of the CBN’s continued commit-ment to foreign exchange stability, even in a more difficult environment. Should the foreign exchange rate come under further pressure, key threats might be related to quantitative tapering, concern over the transition at the CBN, and ongoing concern about oil receipts as well as Nigeria’s political cycle – then more tightening cannot be ruled out,” it added.
SOURCE: THE NATION
