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Reading: N500bn to be withdrawn from banking system – CBN
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© OKN MEDIA PUBLISHING 2022 - All rights reserved
Business

N500bn to be withdrawn from banking system – CBN

Muhammad A. Aliyu By Muhammad A. Aliyu Published November 27, 2014
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The Central Bank of Nigeria (CBN) said it would withdraw N500 billion from the banking system through the recent increase in the cash reserve requirement of banks.

Mr Godwin Emefiele answering questions during his screening by the Senate for Central Bank Governorship in Abuja.
Deputy Governor (Corporate Services), CBN, Mr. Bayo Adelabu, disclosed this while addressing members of the House of Representatives Committee on Banking and Currency on an oversight visit to the Lagos office of the bank.
Monetary Policy Committee of the CBN, Tuesday, in addition to devaluing the naira by 8.3 per cent to N168 per dollar, raised the Monetary Policy Rate (MPR) to 13 per cent from 12 per cent, and the cash reserve requirement to 20 per cent from 15 per cent.
The decision to raise the MPR was, however, queried by members of the House Committee led by its chairman, Hon. Chukwudi Jones Victor Onyereri. The committee faulted the decision, saying it would lead to further hike in lending rates charged by banks in the country.
Adelabu, however, defended the decision of the apex bank, saying: “The decision of the MPC was the best we could do under the circumstance that the economy is presently.
“We noticed that a lot of things contributed to the pressure on the naira. Number one factor is the declining revenue from oil. Our source of revenue in this country is just oil and when oil price declined by about 25 per cent in the last one month, we expected that there would be pressure on the foreign reserves.
“We believe that the pressure on the naira, apart from the declining oil prices, is also as a result of liquidity in the banking industry whereby a lot of frivolous demands for foreign exchange are being made by customers of banks, because the banks are able to extend credits to them.
“We are saying no. We want you to lend to the critical and productive sectors of the economy, not trading, not to import toothpicks. So we are saying that the only thing we can do to reduce the capacity of the banks to grant loans to these customers for trading is to mop up more of the monies available to the banks, which is why we increased the CRR on private sector deposits to 20 per cent from 15 per cent, which will amount to about N500 billion withdrawal from the banking industry.
“We believe it will reduce the pressure on the foreign reserves. If we don’t do that, the impact on the common man is going to be increased cost of production. What the CBN is saying is that we need to become more patriotic. We should patronise locally made goods and services. We do not need to be importing everything.”

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