CBN restricts bank's lending powers, increases CRR from 22.5% to 32.5%

The announcement was made during the meeting of the Monetary Policy Committee of the CBN and is bound to take effect from today, Wednesday September 28, 2022.

The CBN is mandated to keep a percentage or proportion of a bank’s total cash deposit as reserves. This total deposit is referred to as the cash reserve ratio.

This cash mop-up from financial institutions will have a direct effect on the lending powers of the banks as there will be restrictions on the amount of money available to banks for lending to the economy.

According to the CBN governor, Godwin Emefiele, not less than N6.96 trillion is expected from all banks operating in the country as the apex bank has warned the financial institutions to fund their accounts in the ongoing exercise as banks that fail to do so may lose access to the foreign exchange market.

While explaining further, the bank chief added that the increase in the CRR by five percent to 32.5 percent means the monetary policy rate, MPR, has been moved up by 150 basis points.

What this means is that over 400 basis points have moved up the MPR over the last four months.

As of last month, the banks' total deposit with the CBN was N21.43 trillion.

All banks have been advised to fund their accounts latest by tomorrow, Thursday, September 29, 2022 as the CBN governor has warned on strict compliance with the new CRR directive.