Notably, an increase or reduction in the CRR could have several effects on banks and the overall economy.
While an increase in CRR will reduce the banks’ capacity to lend to borrowers, a reduction in CRR will make more funds available to the banks to lend to customers.
The CBN explained that the reduction in the CRR was expected to boost the banks’ ability to avail of increased infrastructure, real estate, and other long-term financing needed to support the development of the Nigerian economy.
The CBN circular with reference number: BSD/DlR/PUB/LAB/016/018, captioned “Review of the Cash Reserve Requirement (CRR) Regime for Merchant Banks,” was addressed to all merchant banks in Nigeria.
The letter read: “The Central Bank of Nigeria (CBN) hereby informs all Merchant Banks that it has approved a reduction in their cash reserve requirement from 32.5 per cent to 10 per cent effective August 1, 2023.
