Independence Shareholders Association of Nigeria (ISAN) has urged the Central Bank of Nigeria (CBN) to reduce Cash reserves requirement (CRR) to 15 per cent to enhance the performance of the financial sector of the economy.
The association also said that the apex bank expected to either reduce CRR or pay three per cent interest on the restricted banks deposits
to enable banks fulfil their task of lending to the real sector.
The ISAN’s National Coordinator Emeritus, Sir Sunny Nwosu who disclosed this call at press conference said that the continuous debit of banks under CRR is affecting the banking sector and making things more difficult for the sector to have sustainable intervention in the real sector.
Nwosu said ISAN at its emergency meeting resolved that the 27.5 percent CRR impact on active 4.9 million retail shareholders have resulted into dismal dividends, banks’ net interest income and the general economy.
Expressing the need for the Apex Bank to have a rethink on the CRR, the association said that the current situation in the nation’s economy
today makes it imperative for the Apex regulator to pay Interest on restricted deposits.
Describing restricted deposit as idle funds, the association argued that if these funds are with banks, certainly it will enhance their earnings, loans to real sector and returns for shareholders.
The association also said “If CBN can pay at least three per cent interest on the mandatory CRR deposits, it will go a long way in driving the real sector and the payment of robust dividends to shareholders,” .
He said ‘”after serious evaluation of the CRR and payment into AMCON sinking fund, ISAN insist that CBN should pay interest to banks on restricted deposits to enhance banks obligation to the real sector. In the alternative the apex bank should reduced the CRR to 15 percent to enable banks declare meaningful dividends that will encourage domestic investments.”
Nwosu stated that increase of CRR by five percent to 27.5 percent as against 22.5 percent have not yielded the expected desired economic results, adding that
available data showed that 10 banks were cumulatively debited N4.95 trillion and N7.78 trillion respectively in CRR between 2019 and 2020 alone.
Nwosu noted that the cumulative restricted deposits of banks so far as at 2020, if invested in treasury securities at five percent, would have N482 billion added to the Industry’s profit before taxation, adding that the industry’s return on average equity (ROE) would have increased by between 11 percent and 31.6 percent as at December 2020.
