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CBN continues tight measures, increases CRR on private sector to 15 %

The MPC meeting was chaired by the CBN Acting Governor Sarah Alade.   The meeting voted unanimously for the monetary tightening stance, raising the bar for…

The MPC meeting was chaired by the CBN Acting Governor Sarah Alade.   
The meeting voted unanimously for the monetary tightening stance, raising the bar for private sector deposit (Cash Reserve Requirement) to 15 percent from 12 percent.
Other key decisions announced by the committee are keeping MPR at 12%, and retaining CRR for public sector deposit at 75%.
Addressing journalists after the meeting, Alade said members voted to keep MPR at 12%, while four members voted for an increase in MPR.
Seven members, she said, voted to retain the MPR corridor at +/-2%, while two members voted for an asymmetric corridor.
The decision by CBN to hike rate for private sector deposit took many analysts by surprise as they had variously predicted that further hike could be unleashed on public sector deposit by taking it to 100 percent.
She said that committee unanimously agreed that a continuation of a tight monetary policy was needed to consolidate recent gains.
She said: “Recent resurgence of core inflation in spite of the downward trend in headline inflation reinforces this position. Thus, prudent monetary stance would also facilitate better reserve and exchange rate management in an environment where Fed tapering increases pressure on emerging economies financial markets.”
 She said the MPC welcomed the growth expectations but expressed concern that the industrial sector has continued to lag behind.
She added: “The Committee noted that growth remained consistently in favour of the agricultural sector, noting that the continued achievement of relative exchange rate stability and single digit inflation in 2014 given the risks in the horizon will require extra-ordinary measures. The committee viewed some of the developments as positive optimism by the market relative to other emerging market economies. While tension in Ukraine over Russia’s claims to Crimea remained serious, direct trade and financial links between Nigeria and the duo remained largely limited. Thus, the risk could come from rising oil and gas prices which were deemed positive shocks.”
Sadi Mahmood, economist, said the decision by the apex bank not to increase the CRR to 100% was to avoid the possible impact on the manufacturing sector, noting that many manufacturers complained of the shortage of fund.

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