The Central Bank of Nigeria (CBN) Wednesday said it suspended the cash reserve average policy for the computation of banks’ cash reserve ratio (CRR) following Monday’s upward review of the proportion of depositors’ balances banks must have in their vaults.

The apex bank disclosed this in a circular dated October 11, 2011, with reference: “FMD/DIR/GEN/CIR/02/004,” signed by the Acting Director, Financial Markets Departments, CBN, E.U. Ukeje, a copy of which was posted on its website.

The circular titled: ‘Suspension of Reserve Averaging Scheme and Change in Cash Reserve Requirement, “addressed to all deposit money banks (DMBs), explained that the latest circular, superseded an earlier circular, which was dated March 3, 2011, on the above subject.

The CBN had increased the CRR, which is the proportion of cash banks are statutorily allowed to hold in their vaults, to 8 per cent from 4 per cent. It had among others, also raised the Monetary Policy Rate (MPR) – benchmark interest rate – from 9.25 per cent to 12 per cent.

It circular stated: “Sequel to the decisions reached at the extraordinary meeting of the Monetary Policy Committee (MPC) held on October 10, 2011, all DMBs are hereby notified that the reserve averaging scheme has been suspended with effect from October 12, 2011 (yesterday). Also, the computation is now on monthly basis while maintenance is on daily basis.”

On the new computation and maintenance of the CRR, it said:  “At the beginning of each maintenance period, each bank will be advised of its CRR based on a simple average of its daily adjusted deposit liabilities of the preceding maintenance period and the applicable ratio announced by the CBN. The bank’s account would be debited with the applicable CRR requirement and the amount sterilised during the maintenance period.”

Meanwhile, the naira appreciated further at yesterday’s session of the Wholesale Dutch Auction System (WDAS) as the regulator met all the demand for the greenback by currency dealers.

Currency dealers had said that the restrictive monetary tightening measures adopted by the CBN on Monday were an expression of its determination to support the naira.

THISDAY findings showed that whereas total demand for the greenback at the regulated bi-weekly auction stood at $591.666 million, the regulator was able to meet the entire amount put forward by currency dealers.

Consequently, the naira gained remarkably by N6.91 against the dollar, to close at N150 to a dollar yesterday, as against the N156.90 to a dollar it stood on Monday.

The naira also gained N1.80 to close at N157.10 against the dollar at the interbank yesterday, compared with the N158.90 to a dollar it stood the preceding day.

Source: ThisDay/Obinna Chima