New naira notes policy increases banks’ deposit with CBN to N579.27bn June

The new naira note policy introduced by former VBN governor Godwin Emefiele has increased banks deposit with the Central Bank of Nigeria (CBN) to N579.27 billion in June.This represents 25.4 per cent increase, compared to June.

The apex bank had before the general election withdrew a large quantity of the cash from the system with a view of replacing them with a newly design currecy.

But till date, most of the currency are still domiciled with the CBN, with even fewer new currecy.

However, the reported N579.27 billion deposit with CBN is 118.34 per cent Year-on-Year increase when compared to N265.31 billion banks and merchant banks deposit in June 2022.

In a total, banks and merchant banks have deposited N2.99 trillion in half year of 2023, representing an increase of 32.5 per cent from N2.26 trillion in first half of 2022.

DMBs and merchant banks through the Standing Deposit Facility (SDF) on daily basis deposit excess funds with the apex bank at an applicable interest rate of 4.5 per cent at an asymmetric corridor of +100/-700 basis points around the 18.5 per cent Monetary Policy Rate (MPR).

SDF is a monetary policy operation used by CBN’s around the world to absorb deposits from banks, without involving the use of government securities as collateral in return.

In the last six months of 2023, the trend revealed that banks’ deposit with CBN increased with less borrowing, despite the demand to meet the 65 per cent Loan-to-Deposit (LDR) requirement of the CBN.

Analysts attribute the decline in SLF to cash scarcity, stressing that banks and merchant banks were no longer enjoying the usual cash deposits that normally come from businesses and individuals that generate significant amount of cash for them to deposit with CBN.

Commenting, the Chief Executive officer, Wyoming Capital and Partners, Mr. Tajudeen Olayinka stated, “Economy has suffered so much from the problem created by CBN’s mismanagement of currency redesign program and deliberate cash scarcity.”