CBN Stops Daily CRR Debits of Access, GTB, UBA, Zenith, Other Banks' Account

CBN Stops Daily CRR Debits of Access, GTB, UBA, Zenith, Other Banks' Account

  • The Central Bank of Nigeria has decided to cease the daily debit of the cash reserve ratio of Nigerian banks
  • This decision means that Access Bank, UBA, GTBank, and other commercial banks in Nigeria will retain more customers' deposits
  • It is expected to serve as a significant boost for Nigerian companies in need of cash to finance their activities

Legit.ng journalist Dave Ibemere has over a decade of experience covering Tech, Energy, Stocks, Investments, and the Economy.

The Central Bank of Nigeria (CBN) has announced that it will stop daily Cash Reserve Requirement (CRR) debits for banks.

The apex bank said it will now adopt an updated CRR mechanism intended to facilitate banks' capacity for planning, monitoring and aligning with records with the CBN.

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CBN stops CRR debits
Nigerian banks to keep more customers' deposits. Photo credit: Ope Adetayo
Source: Facebook

This was disclosed in a letter addressed to all banks and signed by Adetona Adedeji, the acting director of the banking supervision department, on Friday, February 2, 2024.

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This comes months after the CBN slashed the cash reserve ratio of merchant banks in the country.

Part of the CBN circular reads:

"The Central Bank of Nigeria (CBN) is ceasing daily CRR debits and will be adopting an updated Cash Reserve Requirement (CRR) mechanism that is intended to facilitate your capacity for planning, monitoring, and aligning your records with the CBN.
"The determination of the segment of deposits subject to sterilization with the CBN as CRR will follow the processes outlined below:
"Phase 1- Utilization of the Incremental Approach: The extant ratios (commercial banks 32.5% and merchant banks 10%) will be applied to increases in the banks' weekly average adjusted deposits.

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"Phase 2-CRR levy of 50% of the lending shortfall will be enforced for banks that do not meet the minimum Loan to Deposit Ratio (LDR) as per our correspondence to all banks referenced BSD/DIR/GEN/LAB/12/049 dated September 30, 2019.
"The CBN will provide your bank with details of the applied charges and their underlying computation rationale."

How important is CRR?

A Cash Reserve Ratio is a specified minimum fraction of the total deposits of customers, which banks have to hold as reserves either in cash or as deposits with the central bank.

A higher percentage of CRR will reduce the banks' capacity to lend to borrowers, while a reduction in CRR will make more funds available to the banks to lend to customers.

CBN hopes its decision will boost companies' access to financing needed to support the development of the Nigerian economy.

Experts react

Speaking on CBN latest policy, Kelvin Emmanuel, an economist and public affairs analyst, expressed full support.

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He said:

"I think the CBN are on the right track, but it’s a long road back. There are no shortcuts. Dr Yemi Cardoso should not fold. The CBN Governor answers to the President and not to anyone else.
"If we are really serious, by Monday morning trade & exchange, banking supervision should be talking about discretionary CRR debits and outright suspension for dmbs that fail to bring their net open positions on long USD to prudential limits.
"We talk a lot about government, but the banks are part of the problem."

List of Nigerian banks that shut down

In another report, Legit.ng revealed that in the last 28 years, approximately 46 commercial and merchant banks have shut operations for various reasons.

The banks had their licenses revoked by the Central Bank of Nigeria between 1994 and 2006.

United Bank of Africa and Ecobank took control of two failed commercial banks.

Source: Legit.ng

Authors:
Dave Ibemere avatar

Dave Ibemere (Senior Business Editor) Dave Ibemere is a senior business editor at Legit.ng. He is a financial journalist with over a decade of experience in print and online media. He also holds a Master's degree from the University of Lagos. He is a member of the African Academy for Open-Source Investigation (AAOSI), the Nigerian Institute of Public Relations and other media think tank groups. He previously worked with The Guardian, BusinessDay, and headed the business desk at Ripples Nigeria. Email: dave.ibemere@corp.legit.ng.

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