By KAYODE TOKEDE, Lagos
With the Cash Reserve Ratio (CRR) at 22.5 per cent, 11 commercial banks in the country have deposited N2.34 trillion to the Central Bank of Nigeria (CBN) coffers in one year, LEADERSHIP investigation has revealed.
Cash reserve Ratio (CRR) is the amount of funds that commercial banks have to hold as reserves either in cash or as deposits with the CBN. If the central bank decides to increase the CRR, the available amount with the banks comes down. The CBN uses the CRR to drain out excessive money from the system.
In a move aimed at reducing excess liquidity in the system, which the CBN had blamed for the current pressure in the foreign exchange market, CRR was increased from 20 per cent in 2015 to 22.5 per cent in 2016.
Analysis by our correspondent revealed that Tier-1 commercial banks recorded an average of N390 billion deposits with CBN in 2016. The top four Tier-1 banks are Zenith Bank Plc, United Bank for Africa Plc (UBA), FBN Holdings and Access Bank Plc.
The four banks in 2016 deposited N1.56 trillion with the CBN, 11 per cent above N1.4 trillion deposited in 2015. The breakdown revealed that Zenith Bank mandatory deposit with CBN appreciated by 11 per cent from N403 billion to N447.5 billion in 2016 while UBA’s deposit with CBN closed at N321 billion in 2016 from N276.7 billion in 2015.
The other two commercial banks, FBN Holdings had deposit N542 billion with CBN in 2016, 13.7 per cent increase over N477 billion in 2016 and Access Bank mandatory deposit inched up by 0.4 per cent to N250.8 billion from N249.96 billion in 2015.
On the other hand, Tier-2 banks recorded mixed deposit with CBN as some reduced their exposure to public funds.
Commercial banks under this category include Sterling Bank Plc, Wema Bank Plc, FCMB Group Plc, Fidelity Bank Plc, Diamond Bank Plc, Unity Bank Plc and Stanbic IBTC Holdings Plc.
Sterling Bank mandatory deposit with CBN grew by 11.9 per cent to N94.48 billion as against N84.4 billion in 2015 while Wema Bank deposit dropped by 14.9 per cent to N48.16 billion from N56.6 billion in 20015.
Further findings showed that FCMB Group and Fidelity Bank mandatory deposit with CBN appreciated by 11.1 per cent and 12.6 per cent to N139 billion and N170 billion in 2016 as against N125 billion and N151 billion in 2015 respectively.
Unity Bank mandatory deposit with CBN was the highest among all the 11 banks. The Bank mandatory deposit rose significantly by 171.4 per cent from N14.87 billion in 2015 to N40.37 billion in 2016.
However, Diamond Bank mandatory deposit thus dropped by 0.8 per cent to N204 billion from N206 billion in 2015 while Stanbic IBTC Holdings mandatory deposit moved from N104 billion to N88.77 billion in 2016.
Findings on the CBN website revealed that CRR in the country was in an average of 10.19 per cent from 2007 until 2017, reaching an all-time high of 31 per cent in May of 2015 and a record low of one per cent in April of 2009.
The late Monetary Policy Meeting held last week maintained the CRR at 22.25 per cent.
In a chat with our correspondent yesterday, the managing director, Highcap Securities Limited, Mr. David Adnori said the mandatory deposit by Banks into CBN’s has sustained liquidity in the economy.
He noted that the CBN had to strike a balance of how many public funds that include government deposit that are being accessible by the banks.
He said: The major reason CBN increased CRR to 2.5 per cent is for banks to discharge their obligations to customers efficiently. The CRR increased from 20 per cent to 22.5 per cent is to safe guide customers deposit with CBN. A lot of money is borrowed out by banks and the mandatory deposit with CBN is to protect cash withdrawal.”
Also commenting, chief executive officer, Enterprise Stockbrokers Plc, Rotimi Fakayejo, said, “ CBN’s CRR at 22.5 per cent had considers money supply within the system, a move to curb inflation rate. The CBN is still on course maintaining the CRR at 22.5 per cent and interest rate at 14 per cent. Any attempt to bring down the CRR and interest rate will be catastrophe.”