LAGOS: Nigeria's central bank believes there is sufficient liquidity in the country's banking system although it is concerned that Africa's biggest economy is slowing, its monetary policy director said on Wednesday.
Moses Tule said the bank's decision last week to cut the cash reserve ratio to 25 percent from 31 percent had injected 300 billion naira ($1.51 billion) into the financial system.
Prior to the move, liquidity on the interbank market had dried up after commercial banks were ordered to move government revenue to a single account at the central bank this month, as part of President Muhammadu Buhari's anti-corruption drive.
That exacerbated problems felt by Africa's top oil exporter, which has been hit by a drop in crude revenues, the main source of funds for the state budget and imports of basic food items.
JP Morgan's decision to remove Nigeria from its influential emerging markets bond index (GBI-EM), which means investment funds tracking the index will sell Nigerian bonds, added to upward pressure on national borrowing costs.
"There's sufficient liquidity in the Nigerian banking system to take up whatever foreign investors may dump, so we are not disturbed," said Tule,
"By cutting the cash reserve ratio we introduced back more than 300 billion naira," he said adding, however, that the bank was "concerned that the economy is slowing".
Growth halved in the second quarter compared with the same period last year, prompting Central Bank Governor Godwin Emefiele to say at last week's monetary policy committee meeting that the economy was at risk of slipping into recession in 2016.
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