A former Chairman, Manufacturers Association of Nigeria, Ogun Chapter, Wale Adegbite, has urged the Central Bank of Nigeria (CBN) to also reduce the Cash Reserve Ratio (CRR) to make the recent reduction of the Monetary Policy Rate (MPR) meaningful.
Adegbite who gave the suggestion during an interview in Otta said that the reduction of the CRR would free more funds from the CBN for manufacturers who were in need of funds.
Adegbite was reacting to the CBN Governor, Mr Godwin Emefiele, who announced a reduction in the MPR from 14 per cent to 13.5 per cent after its Monetary Policy Committee (MPC) meeting on Tuesday in Abuja.
Reports show that this is the first time the lending rate has been altered since July 2016.
He said that the retention of the CRR at 22.5 per cent and Liquidity Ratio (LR) at 30 per cent would not achieve the desired purpose.
According to him, the objective of the CBN in reducing the lending rate is to reduce the lending rate to encourage people to borrow more.
Adegbite said the reduction in the MPR without a reduction in the CRR would not achieve the objective.
“This is because the banks always complain that 30 to 40 per cent of their deposits were locked up in the CBN due to high CRR at 22.5 per cent.
“It will be difficult to achieve these set goals if the CRR is not reduced simultaneously with the lending rate.
“Banks are always complaining that the bulk of their loan-able funds were kept by the apex bank.
“The reduction in the CRR will make it easier to lend more to the industrial sector or companies if the CRR is reduced,” he said.