The Central Bank of Nigeria (CBN) has foreclosed possibility of financial assistance by way of expanding the discount window to any bank experiencing tight liquidity occasioned by the recent implementation of the 50 percent cash reserve requirement (CRR).

The regulator will also not intervene in the interbank market, which with discount window, have become banks to meet the financial gap created by the withdrawal of about N1 trillion by CBN from the system recently.

However, the CBN, through Kingsley Moghalu, Deputy Governor, Financial System Stability, has insisted that the onus was on the banks to prove their mettle based on their strengths and weaknesses and on various business models adopted by them, adding that the new policy was aimed at managing strategic risk in the banking sector.

 “The CBN directive increasing CRR on public sector money in commercial banks is, in fact, an exercise in managing strategic risk in the banking sector,” Moghalu said.

Samir Gadio, emerging markets strategist, Standard Bank, London, observed that although CBN was committed to currency stability, which it sees as its nominal monetary policy anchor, a further naira weakness will probably result in additional direct and indirect measures to tighten liquidity conditions, particularly if foreign reserves were to come under more meaningful pressure.

Director of CBO Capital Partners, Chukka Mordi, also comment that the implications of the policy were not very pretty for those banks that rely on public sector funds for liquidity, stressing that the rate moved so significantly, shows that there are still sufficient liquidity from their equity and deposits, hence their reliance on the interbank market.