IMF supports CBN CRR policy, proposes higher TPM


The International Monetary Fund (IMF) says it welcomes the Nigerian central bank’s policy of restricting foreign exchange liquidity and increasing the cash reserve requirement (CRR).

The IMF mentioned this in the final 2022 Article IV Mission Statement.

At the last meeting of the monetary policy committee held on September 27, 2022, the main bank of Nigeria agreed to increase its benchmark monetary policy rate to 15.5% and also increase the CRR by 32.5%.

The central bank made this decision as part of its collective strategy to address Nigeria’s skyrocketing inflation rate. At said meeting, the members of the committee unanimously voted to raise the Monetary Policy Rate (TPM) and the Cash Requirement (CRR).

What the IMF says: The International Monetary Fund (IMF) is siding with the central bank’s policy of raising the rate by about 4% now (from May 2022).

  • “The mission welcomed the steps taken by the Central Bank of Nigeria (CBN) to restrict liquidity and curb inflationary pressures by raising the monetary policy rate (MPR) in a cumulative 400 basis points and raising the cash reserve ratio (CRR).”
  • The IMF is also of the opinion that despite the 400 basis point increase in the MPR, it is still well below the rate of inflation, suggesting that it is not enough to fuel credit expansion.
  • “However, general conditions remain accommodative: the MPR is below inflation and the funding provided to the budget and the CBN’s targeted lending schemes continue to drive strong monetary expansion.”
  • In recommending the way forward, the IMF also suggested that the central bank should consider a further MPR increase. “to send an adjustment signal” as well as the phasing out of intervention programs that many have blamed for heating up the economy.

What does this mean: The IMF’s support for the central bank’s tighter monetary policy will be a big boost for the main bank which is meeting this week to decide the next course of action in the fight against inflation.

  • Analysts believe the central bank may consider another rate hike when it meets on Monday and Tuesday of this week.
  • This is also supported by the Nigerian inflation rate, which has risen again to 21.09%, taking a toll on the main bank’s stocks to stem the rise.
  • But while the central bank will like the IMF’s opinion on its policy, Nigerian banks will not.
  • Commercial banks have suffered trillions of naira in central bank debits and have complained that this reduces their net interest income.

About the IMF final statement: A concluding statement describes the preliminary conclusions of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. The IMF also affirms that the views expressed in this statement are those of IMF staff and do not necessarily represent the views of the IMF Executive Board.

The charge IMF supports CBN CRR policy, proposes higher TPM first appeared in Nairametry.


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