CBN injects N150bn into economy as global financial crisis persists
Addressing newsmen Thursday at the end of its 58th Monetary Policy Committee (MPC) meeting in Abuja, Governor of the apex bank, Professor Chukwuma Soludo, said the committee had also moved to improve the liquidity in the economy by reducing the Cash Reserve Requirements from four per cent to two per cent and the liquidity ratio from 40 per cent to 30 per cent
According to the governor, the committee took the measures to forestall any unforeseen development in view of the high degree of uncertainty in international financial markets.
He said that as anxiety mounted over development in the international financial system, Nigeria could not afford to watch the industry without doing anything.
Soludo, however, assured Nigerian depositors that the Nigerian economy was sound because the economic fundamentals remained very strong.
This was even as he confirmed that the foreign exchange reserves had risen to US $63.0 billion, representing about 16 months of foreign disbursement just as the inflow of foreign investment remained strong at about US $8.5million by the end of August 2008, compared to US $5.8 billion for the corresponding period of 2007.
The governor observed that the increase in interest rates in August was mainly due to pressure of liquidity in the financial markets in general and the inter-bank market in particular.
Other steps taken to lubricate the system included the reduction of the Monetary Policy Rate (MPR) from 10.25 per cent to 9.75 per cent as well as the reduction of Cash Reserve Requirement (CRR) from four per cent to two per cent. These measures, according to the Apex Bank boss, take immediate affect
The MPC, he said, also decided to reduce the liquidity ratio from 40 per cent to 30 per cent while allowing repo transactions against eligible securities for 90 days, 180 days and 160 days.
Soludo noted that henceforth, CBN would buy and sell securities through the two-way quotes, a thing the apex bank had never done.
In the same vein, the CBN boss revealed that the international financial markets were presently marked by a high degree of uncertainty as evidenced by the effects of the stress and weakness of a number of financial institutions in the US and European economies.
"A number of existing financial institutions have also now come under intense public scrutiny. Credit crunch continues to persist in most industrialized economies forcing central banks in these countries to provide substantial financial support. The financial crisis has slowed down the industrialized economies.
Reflecting the sharp fall in demand, crude oil prices have been softening in the international markets in recent weeks (below US$100 per barrel), even as consumer inflation continues to be relatively high in relation to target levels" Soludo said.