The Central Bank of Nigeria has implemented a significant monetary policy adjustment, introducing a 75 percent cash reserve ratio on non-Treasury Single Accounts. This move follows the bank’s first interest rate cut since 2023, announced after the 302nd Monetary Policy Committee meeting.

Governor of the Central Bank disclosed the details of the monetary policy adjustments in a press conference on Tuesday. The committee’s decision to moderate downward monetary policy measures aims to stimulate economic growth. The Monetary Policy Committee slashed the interest rate by 50 basis points, reducing it to 27 percent from the previous 27.50 percent.

In addition to the interest rate cut, the committee adjusted the Cash Reserve Ratio for Deposit Money Banks to 45 percent and for Merchant Banks to 16 percent. The asymmetric corridor was also adjusted to +250/-250 basis points around the Monetary Policy Rate. However, the liquidity ratio remained unchanged at 30 percent.

This development is significant, as it marks the fifth time the interest rate has been moderated, with the most recent adjustment occurring in August when the rate decreased to 21.12 percent. The introduction of a 75 percent cash reserve ratio on non-Treasury Single Accounts is a notable step, as it will impact the banking sector’s liquidity and ability to extend credit.

The Central Bank of Nigeria’s decision to adjust its monetary policy is part of its efforts to balance economic growth with price stability. The adjustments aim to increase lending to key sectors of the economy, promoting growth and development. As the Nigerian economy continues to evolve, the Central Bank’s monetary policy decisions will remain crucial in shaping the country’s economic trajectory.

The Monetary Policy Committee’s decisions are guided by the need to maintain a stable economy, considering both domestic and global economic trends. The committee’s adjustments to the cash reserve ratio, interest rate, and asymmetric corridor demonstrate its commitment to using monetary policy tools to achieve economic objectives. As the economy responds to these changes, the Central Bank will likely continue to monitor and adjust its policies to ensure a stable and growing economy.