The Centre for the Promotion of Private Enterprise (CPPE) has described the Central Bank of Nigeria’s (CBN) decision to impose a 75 percent cash reserve ratio (CRR) on non-treasury single account (TSA) public sector deposits as a prudent safeguard against fiscal-driven liquidity shocks.
Non-TSA public sector deposits are government-related funds (ministries departments, agencies, parastatals, or state-owned entities) that are still kept in commercial banks instead of the TSA.
The new rule implies that the CBN is now requiring banks to set aside 75 percent of such non-TSA government deposits as reserves.
At its latest meeting, the monetary policy committee (MPC) announced a raft of policy adjustments, including the new CRR rule.
The committee also reduced the monetary policy rate (MPR) by 50 basis points to 27 percent, cut the CRR for commercial banks from 50 percent to 45 percent, retained the 16 percent CRR for merchant banks, and kept the liquidity ratio at 30 percent.
Reacting to the development, Muda Yusuf, chief executive of CPPE, said the new CRR measure was necessary to prevent volatility in money supply growth that could undermine recent progress in price stability.
“The 75 percent CRR on non-TSA public sector deposits is a prudent measure to prevent excessive fiscal-driven liquidity injections from destabilising the financial system,” Yusuf said.
He also described the reduction in interest rate as a “welcome and timely” intervention after months of aggressive monetary tightening.
The economist added that the broader easing of credit conditions, including the lower MPR and CRR for banks, would expand credit creation capacity, reduce lending rates, and improve access to finance for businesses, especially SMEs.
Yusuf noted that the shift came after five consecutive months of disinflation, giving the CBN room to prioritise growth and investment without jeopardising macroeconomic stability.
However, the CEO stressed that complementary fiscal measures were needed to sustain momentum.
He urged the government to consolidate its finances, ramp up infrastructure investment, strengthen the regulatory framework, and address insecurity, which remains a critical drag on private sector investment.
Yusuf also said MPC’s decision represents a strategic and timely pivot from stabilisation to growth acceleration, but without complementary fiscal and structural reforms, the full benefits may not be realised.
