Nigerian economists are calling on the Central Bank of Nigeria (CBN) to improve the way liquidity is managed within the banking system, saying clearer coordination of monetary policy tools could strengthen the effectiveness of the financial system.
The call comes as the CBN continues to use monetary policy instruments to influence money supply, interest rates and liquidity conditions across the economy. Economists specifically pointed to the need for clearer links between the central bank’s liquidity-management tools and prevailing market rates.
One of the key areas under discussion is the Cash Reserve Requirement (CRR), which determines the portion of banks’ deposits that must be kept with the CBN rather than being deployed for lending.
Analysts said the way liquidity is injected into or withdrawn from the banking system can affect banks’ ability to provide credit to businesses and households, as well as influence borrowing costs.
The discussion follows the CBN’s recent reduction of the Monetary Policy Rate from 26.5 per cent to 23 per cent, a move that the Centre for the Promotion of Private Enterprise said could reduce financing costs and support investment in sectors including manufacturing, agriculture, construction and logistics.
The latest concerns therefore centre on how monetary policy changes can be transmitted more effectively to the wider economy, particularly businesses seeking affordable credit.
Economists say improved liquidity management, alongside clearer monetary-policy signals, could help create a more predictable environment for banks and businesses as Nigeria continues its broader economic reforms.
