Between last April and July, Central Bank of Nigeria (CBN) debited N2.476trillion from commercial banks as Cash Reserve Requirement (CRR) and as part of measures to strengthen the Naira.

This development has prompted some shareholders’ groups to warn the apex bank not to push the banks off the cliff.

In July, CBN  debited N216 billion from banks with excess cash holdings as part of measures to strengthen the local currency. In June, it was N460 billion from the accounts of lenders that failed to meet CRR targets for the previous month, May. This occurred barely a month after many banks were collectively debited N1.4 trillion for the same reason in April.

Banking sources had told a foreign news platform last month that the liquidity withdrawal came before the foreign currency auction.

“The central bank is trying to manage the foreign exchange (forex) rate, using CRR”, one banker said, adding that the debits had become frequent and over the 27.5 per cent limit. He said offshore lenders were the most affected by the levies since they don’t operate retail business and are debited from their corporate deposits or borrowings.

CRR is the amount CBN debits from banks’ accounts in compliance with its monetary policy objective of mandatorily keeping cash on behalf of the banks. The amount is not available for banks to use. By the CRR policy, banks have a mandate to keep 27.5 per cent of all deposits with CBN. It was 22.5 per cent last year, but it was jacked up to 27.5 per cent at January Monetary Policy Committee (MPC) meeting.

Due to this development, some banks have already forecast a decline in their profits this year. For instance, Fidelity Bank warned In April that 2020 profits would drop by 15 per cent.

Sterling Bank, early this month, stated that the amount of its customer deposits held by the CBN was about N215.5 billion, which “represents mandatory reserve deposits and are not available for use in the bank’s day-to-day operations”.

Fitch Ratings has also foreseen a 20 per cent hit in Nigerian banks’ revenue this year due to the CRR policy and forex scarcity.

It said that Nigeria’s banks would face rising borrowing costs as CBN’s measures to support Naira  squeeze banks already hit by Covid-19 pandemic and oil price shocks.

The rating agency had predicted that impaired loan ratios would rise sharply in 2020 with Nigerian banks most exposed to stress in the oil sector compared with their peers in emerging markets elsewhere.

Sun