CBN quarantines banks’ N576.20bn through CRR

The Central Bank of Nigeria (CBN) last week debited some commercial banks to the tune of N576.20 billion through the Cash Reserve Requirement (CRR).

CRR is the minimum amount banks and merchant banks are expected to retain with the CBN from customer deposits and it carries no interest and is not available for use by the banks in their day-to-day operations.

According to market participants, system liquidity remained notably stable throughout the week, ending at a considerable sum of N862.82 billion despite the CRR debits.

The amount of CRR debited by the CBN from banks in Nigeria varies depending on the specific date and the bank’s individual circumstances.

The current CRR in Nigeria is 32.5 percent, effective May 26, 2023. This means banks must keep at least 32.5 percent of their total deposits in a non-interest-bearing account with the CBN.

The CBN doesn’t publicly disclose the exact amount of CRR debited from individual banks. However, there have been reports of significant CRR debits throughout 2023.

Meanwhile, amid excess liquidity fuelled by injections from Federation Account Allocation Committee (FAAC) in the last one month, Deposit Money Banks (DMBs) and merchant banks  deposited a whooping N2.41 trillion with the Central Bank of Nigeria (CBN).

The banks’ rush to deposit cash with the CBN is in a bid to abide by the apex bank’s regulation on Capital Adequacy Ratio (CAR).

Through the CBN’s Standing Deposit Facility (SDF), DMBs and merchant banks have deposited N2.41 trillion so far in November 2023, rather than lending to the real sector.

A SDF is an overnight deposit facility that allows DMBs and merchant banks to park excess liquidity (money) to CBN and earn interest.

According to financial data released by the CBN, DMBs and merchant banks, through the Standing Lending Facility (SLF), borrowed N377.71 billion from the CBN in the past 13-day.

Analysts say that increased liquidity position in the banking sector is influenced by injections via the Federation Account Allocation Committee (FAAC) of about N903.48 billion in September, N1.80 trillion in August and N1.89 trillion to the three tiers of government in July 2023.