CBN directs banks to keep 50% of public sector deposit as

…blames fake Naira notes in ATM on
banks
The Central Bank of Nigeria, yesterday,
further reduced the amount of money in
the economy by directing banks to keep
50 per cent of public sector deposits as
Cash Reserve Requirement, CRR.
The apex bank took this decision at the
end of its Monetary Policy Committee,
MPC, meeting in Abuja.
The Governor of the CBN, Mallam Sanusi
Lamido Sanusi, who announced this said
the CRR on private sector deposits
remained at 12 per cent. The Monetary
Policy Rate was also retained at 12 per
cent, with a corridor of +/- 200 basis
points.
Sanusi said the 50 per cent CRR "applies
to all federal, states and local government
deposits on the balance sheet of deposits
money banks."
The CRR represents portion of deposits
that banks must keep as cash and hence
cannot be used for lending. By increasing
CRR on public sector deposits, the apex
bank has reduced the amount of money
banks can lend, and thus reduce money
supply in the economy.
Defending the decision of the MPC to
tighten money supply by retaining the
MPR at 12 per cent, and raising CRR on
public sector deposits, Sanusi said the
decision was aimed at curbing excess
liquidity in the banking system.
He said: "The committee observed the
build-up in excess liquidity in the banking
system, and expressed concern over the
rising cost of liquidity management as
well as the sluggish growth in private
sector credit, which was traced to deposit
money banks, DMB's, appetite for
government securities.
"As election is coming up, the
government will be having a lot of
financial spending during the period. I
have said it before that there is likelihood
for the rate to go up than going down in
the immediate future".
"The fiscal spending of the government is
just the problem, the deficit in the first
half of this year is over 400 billion dollars
compared to 200 billion dollars during
same period last year. We have drawn
over 700 billion dollars from the excess
crude account at a time when the
government is borrowing more and saving
less. You don't expect monetary
authority to lower the rate of interest.
"The committee expressed strong
concerns about the risks posed to
government revenues from oil theft, less
than expected production, new
discoveries of shale oil, the fast increasing
number of African oil exporters, the
dwindling market for Nigerian crude as
well as the inevitability of a fall in global
oil prices as well as capital flow reversal,
which may impact the current global
(dollar) carry trade, for which Nigeria has
been a major beneficiary.
Meantine, the CBN has blamed
commercial banks for fake Naira notes in
the Automated Teller Machine, ATM.
The Governor of the bank, Sanusi Lamido
Sanusi, said this while fielding questions
from newsmen after the Monetary Policy
Committee, MPC, meeting.
Sanusi, who expressed worries over the
situation, said the dispense of fake naira
notes by the machines was an operational
issue of the commercial bank.
He, however, said the apex bank was
addressing the challenge.
"Fake naira notes in ATM is an operational
issue, the banks are supposed to process
the currency before they put it in the
machines. If they are processed, their
machines are supposed to identify fake
notes. So, if you find a fake note in an
ATM, it means that somebody in the
commercial bank did not do what he is
supposed to do".