The Central Bank of Nigeria (CBN) has removed from banks’ accounts a whopping N7.02 trillion, for failing to meet the expected deposit in their current accounts.
CBN provides a specific Cash Reserve Requirement (CRR) for each commercial bank in the nation. Each bank is required to retain a specific amount of its deposits in the current account of the central bank.
The CRR for banks is put at 27.5 per cent, which many financial analysts consider very high since the money cannot be accessed for loans and other financial dealings.
The banks surveyed include: Access Bank Plc, Guaranty Trust Bank (GTBank), United Bank for Africa (UBA) Plc, FCMB group and Sterling Bank Plc.
Others are: Union Bank of Nigeria Plc, Stanbic IBTC Holdings Plc, Fidelity Bank Plc, and Zenith Bank Plc.
Data from the audited accounts of the listed banks revealed that Access Bank, followed by Zenith bank suffered the highest debits in 2021, among other 10 banks, while Sterling bank suffered the lowest debit.
Access Bank reported 12 per cent increase in restricted deposits with CBN in 2021 to N1.47 trillion while Zenith Bank reported N1.25trillion CRR deposit with CBN.
GTBank, the banking subsidiary of Guaranty Trust Holding company reported N953 billion CRR debit with CBN.
UBA suffered a debit of N915.15billion in 2021, a decline of 13 per cent from N1.05trillion reported in 2020.
Union Bank of Nigeria and Stanbic IBTC reported 28per cent and 22 per cent increase in deposits kept with the central bank as CRR in 2021, respectively.
The effect can be seen in both banks’ profits reported in the year under review.
Other banks are, Fidelity Bank with N686.1billion CRR debit from CBN in 2021,Wema Bank N313.8billion in 2021, FCMB Group with N309.63billion CRR debit.
Sterling Bank reported N243.87billion mandatory reserve deposits with CBN.
Analysts at GTCO in its report titled, “Nigeria Macro-economic outlook for 2022,” explained that the reason for the tight system liquidity is the CBN’s discretionary CRR debits which posed a huge challenge to credit growth for most banks.
According to them, “A rough estimate of the industry’s effective CRR position suggests that about 50per cent of total naira deposits are sterilised with the CBN as CRR and Special Bills.
“Going into 2022, the general build-up to the 2023 Elections will very likely result in a system awash with liquidity. We believe that the apex bank will tighten the system from the second half of the year just as political campaigns start, to mop-up excess liquidity from the system.
“Although it is unlikely that the CBN will slow down on its discretional CRR debits, we expect more banks to approach the apex bank for the release of a portion of their ‘excess’ CRR to assist them in funding their transactions, payment of regulatory levies/fees, etc”, they said.