CBN confirms liquidity in banking system

The Central Bank of Nigeria (CBN) has confirmed that there is sufficient liquidity in the nation’s banking system and that it is concerned that the economy is slowing.

Mr. Moses Tule, the CBN’s monetary policy director, said that the decision taken by the apex bank to cut the Cash Reserve Ratio to 25 percent from 31 percent last week, had injected N300 billion (about $1.51 billion) into the financial system.

Report on Thursday said that before the CRR was reduced to 25 percent, liquidity on the interbank market had dried up after commercial banks were given a deadline of September 15 to move government revenue to a single account at the central bank, as part of President Muhammadu Buhari’s anti-corruption drive.

“There’s sufficient liquidity in the Nigerian banking system to take up whatever foreign investors may dump, so we are not disturbed,” said Tule.

“By cutting the cash reserve ratio we introduced back more than 300 billion naira,” he said, adding, however, that the bank was “concerned that the economy is slowing”.

Growth halved in the second quarter compared with the same period last year, prompting Central Bank Governor Godwin Emefiele to say at last week’s monetary policy committee meeting that the economy was at risk of slipping into recession in 2016.

The CBN also adjusted its exchange rate peg on Wednesday to N196.95 against the dollar from the 197 set since July.

The adjustment is the sixth since the central bank introduced tight controls on the foreign exchange market in February.