CBN holds back N10trn bank deposits as CRR in 9 months, 2021

THE Central Bank of Nigeria (CBN) has debited Deposit Money Banks an estimated amount of N10 trillion in Cash Reserve Requirement (CRR) for the first nine months of 2021.

The Monetary Policy Committee (MPC) of the CBN throughout 2019 maintained a CRR of 22.5 per cent but in early January 2020 it was increased to 27.5 per cent. The CRR is the amount the CBN debits from banks’ accounts in compliance with its monetary policy objective of mandatorily keeping cash on behalf of banks.

This is according to data contained in the money and credit statistics of the apex bank and breakdown of CRR debits from 10 of the prominent locally owned commercial banks in the country.

The banks reported a CRR of N8.04 trillion in the first nine months of 2021. The amount is 1.6 per cent higher than the N7.9 trillion held by the central bank in the entire 2020.

This is based on data pooled from the financial statements of the major banks listed on the Stock Exchange.

The banks include Access Bank, GT Bank, FBN Holdings, FCMB, UBA, and Sterling Bank. The others are Union Bank, Stanbic IBTC, Fidelity Bank, and Zenith Bank Plc.

Nigeria’s Central Bank by regulation forces banks to retain up to 30 per cent of their deposits in cash reserve requirement; meaning that the deposits are not accessed by the banks for loans and advances.

During the year,   an estimated N8 trillion was held by CBN as CRR debits from the 10 banks under review out of a total deposit of N34.3 trillion. This represents an average of 23.4 per cent compared to 25.7 per cent a year ago and much lower than the 27.5 per cent stipulated by the apex bank as CRR.

According to Nairametrics analysts, about N10 trillion is held by the CBN as CRR for all banks as contained in the money and credit statistics of the CBN. It was N11.1 trillion in the same period last year.

Despite the average being lower in the first nine months of the year, some banks did record a higher CRR compared to others.

Stanbic IBTC for example had about 44.6 per cent of its deposits kept with the central bank as CRR. The effect can be seen in Stanbic’s interest income over the years.

From recording an interest income of N91 billion in the first nine months of 2019, the bank’s income from interest dropped to N81.9 and N73 billion in the first nine months of 2020 and 2021, respectively. The CRR of N488 billion is also 59 per cent of its loan book of N827 billion.

Union Bank also reported a significantly higher CRR to deposits at 36.2 per cent after the apex bank kept N464 billion of its deposits. Other banks under review had CRR below the regulatory limits in the first nine months of the year.

Access Bank leads with the highest CRR of N1.37 trillion and is closely followed by Zenith bank and FBNH. They are also the top three banks in terms of customer deposits.