- MPC reduces MPR by 50 basis points from 27.50% to 27%
BY EDMOND ODOK – The Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, has confirmed that 14 Nigerian banks fully met the new capital requirement in the ongoing recapitalisation exercise.
The new minimum capital base requirement for banks, with tiers depending on licence type, was unveiled by the Cardoso-led apex Bank on March 28, 2024 as part of efforts to bolster the banking system and safeguard the sector against risks.
This is as the CBN also explained that the development was meant to realign the banks in line with the nation’s overarching objective of establishing a trillion-dollar economy in the coming years.
Cardoso gave the confirmation while presenting a communiqué from the 302nd meeting of Monetary Policy Committee (MPC) of the CBN on Tuesday in Abuja.
He said the MPC acknowledged the significant progress made in the ongoing bank recapitalisation exercise, especially with 14 banks fully meeting the new capital requirement, adding, “They, therefore, urged the CBN to continue the implementation of policies and initiatives that would ensure the successful completion of the ongoing recapitalisation exercise.”
The CBN Governor said the Committee also noted the successful termination of forbearance measures and waivers on single obligors, which has helped to promote transparency, risk management, and long-term financial stability in the banking system.
According to him, “The MPC reassured the public that the impact of the removal of forbearance is transitory and does not pose any threat to the soundness and stability of the banking system, price, and other domestic developments.”
Besides the success recorded in the recapitalization exercise, Cardoso had announced the MPC’s decision to reduce the Monetary Policy Rate (MPR) by 50 basis points to 27 per cent from 27.50 per cent.
He said also adjusted are the standing facilities corridor around the MPR to +250/- 250 basis points and the Cash Reserve Ratio (CRR) for commercial banks to 45 per cent from 50 per cent.
However, the Committee retained the CRR for Merchant banks at 16 per cent, while leaving the Liquidity Ratio unchanged at 30 per cent.
He further said the MPC introduced a 75 per cent CRR on non-TSA public sector deposits to enhance liquidity management, explaining that its decision to lower the MPR was predicated on the sustained disinflation recorded in the past five months.
Additionally, the CBN boss said projections of declining inflation for the rest of 2025 and the need to support economic recovery efforts were among the reasons that also informed the MPC’s decision.
Recalled that prior to the latest recapitalization exercise, the CBN last raised the minimum capital requirement for all banks from two billion Naira to N25 billion in year 2004.
The move then led to a major consolidation in the banking sector, with the number of banks shrinking from 89 to 25 through a series of mergers and acquisitions.
Significantly, given the current recapitalisation exercise, commercial banks with international authorisation now have a new capital requirement of N500 billion.
On their part, Commercial banks with national authorisation have N200 billion as capital requirement, while commercial banks with regional authorisation have N50 billion as capital requirement.
Similarly, the requirement also stretches to Merchant banks with N50 billion; Non-interest banks (national) with N20 billion and Non-interest banks (regional) with N10 billion.
