The Central Bank of Nigeria (CBN), on Tuesday ordered banks to vacate a Post-No-Debit (PND) restriction earlier imposed on bank accounts of 440 individuals and companies.
This was as it communicated to banks that it would resume the enforcement of the Loan-to-Deposit Ratio (LDR) policy effective July 31, 2023.
However, citing key policy reviews particularly the recent deregulation of petrol price and transition to a unified and market-determined exchange rate – with the attendant inflationary concerns, the CBN’s Monetary Policy Committee (MPC) on Tuesday resolved to increase the Monetary Policy Rate (MPR), also known as the benchmark interest rate by 25 basis points to 18.75 per cent from 18.5 per cent.
The PND is an instrument through which the CBN gives powers to stop customers from operating their bank accounts, with the permission of the courts.
The central bank conveyed the vacation of restriction in circular, dated July 25, 2023 which was signed by A.M. Barau, on behalf of the CBN Director, Banking Supervision Department, and addressed to all banks.
The apex bank further mandated commercial banks to inform the concerned customers of the vacation accordingly.
Addressing journalists after the two-day Monetary Policy Committee (MPC) meeting in Abuja, the CBN acting Governor, Mr. Folashodun Shonubi, said the modest increase in the benchmark interest rate was targeted at curtailing potential uptick in inflationary pressures resulting from the policy changes.
Shonubi, also clarified that the current volatility witnessed in the foreign exchange market was driven by the fact that the market needs to find its level, adding that there’s a pent-up demand which current supply may not be sufficient to satisfy.
He said the floating of the naira and removal of petrol subsidy were likely to sustain upward pressure on domestic prices in the short to medium term especially considering the negative impact the proposed palliatives would have on liquidity.
The acting CBN governor also insisted that previous hike in MPR had continued to make quite a lot of difference by moderating the rate of increase in the prices of goods and commodities.
According to him, without the tightening stance, the headline would have spiraled out of control.
