CRR: Zenith, First Bank, GTB, 4 Others Raise N2.14trn In 6 Months
With the Cash Reserve Ratio at 22.5 per cent, a total of seven Deposit Money Banks (DMBs) deposited N2.14 trillion with the Central Bank of Nigeria (CBN) between January and June 2017, LEADERSHIP can report.
CRR is the amount of funds that DMBs have to hold as reserves either in cash or as deposits with the apex bank. The CBN uses the CRR to drain out excess liquidity from the DMBs. The Monetary Policy Committee (MPC) of the CBN in March 2016 had resolved to raise the CRR to 22.5 per cent from 20 per cent, in a move aimed at tightening liquidity from the system.
The committee towards the end of 2015 reduced the CRR from 25 per cent to 20 per cent with a view to channeling the liquidity arising there to the real sector while in July 2015, the CRR was pegged at 31 per cent.
The seven DMBs had deposited a total sum of N2.1 trillion with CBN in 2016 and the funds are not available for use in day-to-day operations. According to LEADERSHIP investigations, Tier-I banks deposit with CBN continued to rise despite drop in customers’ deposit in the period under review.
Of the N2.14 trillion CRR with CBN, First Bank of Nigeria Holdings Plc, Guaranty Trust Bank Plc (GTBank) Plc and Zenith Bank Plc deposited estimated N1.2 trillion or 58.1 per cent. The breakdown revealed that, GTBank’s mandatory deposit (CRR) with CBN moved to N350.9 billion as at June 30, 2017 an increase of 7.3 per cent from N327 billion reported in 2016.
Zenith Bank’s CRR rose by 4.4 per cent to N467 billion as at June 30, 2017 from N447.49 billion in 2016 while First Bank of Nigeria Holdings Plc reported a drop of 22 per cent in mandatory deposit with CBN to N424.5 billion from 543 billion in 2016. The likes of United Bank for Africa Plc (UBA) deposit with CBN rose by 6.3 per cent to N342 as at June 30, 2017 from N321.9 billion in 2016.
Access Bank Plc restricted deposited with CBN gained 8.7 per cent from N250.8 billion reported in 2016 to N272.7 billion as at June 30, 2017. Stanbic IBTC Holdings and Fidelity Bank Plc deposited N127.6 billion and N154 billion to CBN, an increase of 43.8 per cent and 9.98 per cent over N88.77 billion and N140 billion reported last year.
While commenting on the MPC decision to increase the CRR to 22.5 per cent, the CBN governor, Mr. Godwin Emefiele noted that the committee noted that the excess liquidity in the banking system was contributing to the current pressure in the foreign exchange market with a strong pass-through to consumer prices.
“The committee further noted that, previous efforts to reflate the economy in order to spur growth, did not elicit the required response from DMBs, hence the surfeit of liquidity in the interbank market.
“Obviously, the attendant low rates at that market have not transmitted to the term structure of interest rates. Concerned about the need for low interest rates to support growth and employment, the committee urged the CBN to explore innovative ways of ensuring the unhindered flow of credit at low cost to key growth sectors, even as monetary policy has to, under the circumstance, address the liquidity surfeit in the banking system as well as the pressure on exchange rate and consumer prices.
“The committee hopes that fiscal and other structural policies would soon be deployed to strengthen the overall response of macroeconomic policy to the shocks.” The CBN has continued to invest the deposited funds to key sectors of the nation’s economy.
Hitherto, 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.”
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