The Central Bank of Nigeria (CBN) has wielded the big stick for the first time in 2022, debiting Zenith Bank Plc, First City Monument Bank (FCMB) Limited, and 12 other banks N356.1 billion for failing to meet their 27.5 percent Cash Reserve Requirement (CRR) obligation.
The fresh debit, which was reliably gathered to have occurred last Friday, has enraged many banking stakeholders, as the apex bank recently suspended debiting banks for failing to meet the requirement.
According to data obtained, Zenith Bank and Providus Bank were the most affected, while Fidelity Bank Plc was the least affected.
According to the breakdown, Zenith Bank and Providus were both debited N170 billion and N40 billion, respectively. FCMB has N39 billion, First Bank of Nigeria Limited has N27 billion, Guaranty Trust Bank Plc has N20 billion, and Citibank has N12 billion.
Stanbic IBTC Bank, Union Bank of Nigeria Plc, and Polaris Banks each received N10 billion, while Keystone Bank received N6 billion, Ecobank Nigeria received N5 billion, Sterling Bank Plc received N3.6 billion, Fidelity Bank received N2 billion, and Nova Merchant Bank received N1.5 billion.
The CBN last debited 16 banks and two merchant banks for N175 billion in mid-December 2021.
Zenith Bank was the most debited bank on November 17, 2021, according to CBN data, followed by Access Bank Plc and United Bank for Africa Plc (UBA).
Zenith Bank received N90 billion, Access Bank received N25 billion, Unity Bank Plc received N500 million, FCMB Limited received N5 billion, Stanbic Bank received N4 billion, Polaris received N3 billion, and UBA received N25 billion.
On December 8, 2021, the CBN debited N29.6 billion from seven banks and two merchant banks.
Analysts believe cash reserves have historically ranged between 5% and 10% of LCY deposits.
Agusto & Co. analysts explained in a report titled “Economic outlook for 2022. Our storyline” that: “At the end of 2021, mandatory CRR of banks stood at around 35% of LCY deposits.”
Historically, cash reserves ranged between 5% and 10% of LCY deposits. LCY deposits currently account for 8% and 4.25 % of total deposits in Ghana and Kenya, respectively.
In addition to these mandatory CRR, Nigerian banks hold “special bills” issued by the CBN, which bear interest at 0.5% per year. These “special bills” are not easily convertible into cash and serve primarily as interest-bearing cash reserves.
“At the end of 2021, we estimate that cash reserves (including interest-bearing cash reserves) accounted for approximately 50% of LCY deposits.” We do not believe the CBN will significantly reduce this ratio in 2022, as it continues to see it as a major tool for maintaining “stable” exchange rates.”