Godwin Emefiele, CBN Governor
Godwin Emefiele, CBN Governor

THE Central Bank of Nigeria (CBN)
concluded its two day policy meeting
last week leaving Monetary Policy Rate
(MPR) and its symmetric corridor at 13%
and 200bps respectively by unanimous
vote. However, the MPC surprised on
CRR, electing to harmonise both public
(75%) and private (20%) to a single 31%
of banking sector deposits by a 9-2 vote.
The apex bank noted the need to prevent
moral hazard problems by private participants by the discriminatory CRR
regime and that the current CRR regime
constrained the efficacy of monetary
policy.
While on the face the CRR harmonisation
appears as an easing, our analysis
churns out a contrary view. Importantly,
the sequestration of FGN deposits on
implementation of TSA in February 2015
shrank public sector deposits (-15pps
MoM) to 10% (2014 average: 22%) of total
banking sector deposits of N13 trillion.
Further aided by slower fiscal revenues,
the analysis show that blended CRR to total deposits has averaged 25% since
the end of February vs. 28% average
over 2014. With private sector deposits
at 91% of banking system deposits
as at April 2015, the net impact of the
move to ‘harmonise’ CRR effectively
raises the weighted average rate to 31%.
Consequently, analyst suggests that the
‘CRR merger’ should translate into net
debit to the tune of nearly N800 billion.
With bill maturities of N581 billion in
June (OMO: 37%), the net debits imply
less liquid financial conditions over the coming weeks suggesting greater
scope for yield uptick in the near
term.
Across banking coverage, the
MPC action holds divergent
implications as the cutback
in public CRR implies a
‘tactical easing’ whilst on the
counterfactual for banks with
larger private sector deposits, the
raised CRR poses fresh liquidity
concerns. On an absolute basis,
FBNH and Zenith with N563
billion and N508 billion in
restricted should earn some
reprieve whilst UBA and
Diamond could face a higher
deposit cull by the CBN on the
raised private CRR using FY 14
numbers.


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