The Cash Reserve Ratio (CRR) for merchant banks has undergone a considerable adjustment by the Central Bank of Nigeria (CBN). Haruna Mustafa, director of banking supervision, declared that the CRR for merchant banks has decreased from 32.5 percent to 10 percent in a letter dated July 14, 2023.
The CRR is the percentage of total customer deposits held as reserves at the central bank by a bank. The central bank can control inflationary pressures in the economy and the quantity of money available for lending by modifying the CRR.
The Monetary Policy Committee (MPC) had increased the CRR in September of the previous year, but the CBN has since reversed that decision. In an effort to combat inflation at the time, the CRR was increased from 27.5 percent to 32.5 percent.
It is anticipated that the CRR reduction for commercial banks will affect the liquidity available for lending and could potentially boost economic activity. The CBN has taken this action to encourage the extension of credit and spur economic growth.