Irony of Fiscal Dominance and the Threat of High Powered Money

In the end, a good number of banks failed and were subsequently liquidated
It shows the vulnerability of the banking system to dependence on Government deposits
And the corruption-riddled brokerage paid to Government officials and bank staff
The Banks and Government are losers in this elaborate and opaque spectrum
Definition of a Central Bank is the Bankers’ bank and the Government’s bank
Therefore Government deposits should naturally reside at the CBN only
In Nigeria, High powered money can be narrowed down to bank reserves plus currency held by the public
CBN’s new policy directive targets high powered money
50% CRR on Public Sector Deposits
Approximately N1trn debited from banking system
Short term impact:
Interest rates surge,
Naira appreciation,
Decline in ASI
Source of information: Financial Derivatives Company Limited
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