Nigerian banks restricted balances with the Central Bank of Nigeria (CBN) soared by 85 percent to N8.83 trillion (December 2019: N4.75 trillion) as at 30 September 2020, representing the cash reserve requirement (CRR), according to data compiled by MoneyCentral.
The CRR is a mandatory cash deposit which should be held with the Central Bank of Nigeria, as a regulatory requirement.
CRR is non-interest bearing and is not available for use in bank’s day-to-day operations. As at 30 September 2020, the CRR in force was 27.5 percent (Dec 2019: 22.5%).
The data was compiled from 11 banks that have released 9 months 2020 results.
The banks are Guaranty Trust Bank (GTB), Access Bank, United Bank for Africa (UBA), FBN Holdings, Zenith Bank, Stanbic IBTC, Sterling Bank, Union Bank, Fidelity Bank, Wema Bank and Unity Bank.
FBN Holdings had the highest amount of restricted deposits with the CBN at N1.55 trillion. This was followed by Zenith Bank at N1.48 trillion, UBA at N1.47 trillion, Access Bank at N1.03 trillion and CTB at N1.01 trillion for the top 5.
The CBN has been using the reserve requirement regulation as a blunt tool to curb the money supply and keep inflation in check.
It also debits the accounts when lenders fail to extend 65 percent of their deposits as loans, a measure that was introduced to stimulate credit.
The punitive regulatory measure has put more pressure on banks’ ability to generate income.