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Financial Services

CBN imposes fresh CRR debits on banks to the tune of N118 billion

These debits have inevitably tightened liquidity in the banking system and bankers are complaining.



CRR Debits

On July 3rd, 2020, the Central Bank of Nigeria (CBN) once again debited many banks in Nigeria in line with its Cash Reserve Ratio (CRR) compliance requirement. This time around, about 14 banks were debited to the tune of N118 billion.

These banks are:

  • Access Bank Plc: N3 billion
  • Guaranty Trust Bank Plc: N15 billion
  • First Bank of Nigeria Ltd: N12.4 billion
  • Ecobank Nigeria: N7 billion
  • Sterling Bank Plc: N5 billion
  • Fidelity Bank Plc: N11 billion
  • Union Bank of Nigeria Plc: N12.5 billion
  • First City Monument Bank Ltd: N10 billion
  • CitiBank Nigeria Ltd: N10.2 billion
  • Stanbic IBTC Bank: N15 billion
  • Zenith Bank Plc: N7 billion
  • Wema Bank Plc: N3 billion
  • Titan Trust Bank: N2.5 billion
  • Rand Merchant Bank Nigeria Ltd: N4 billion

More details on these debits

These constant CRR debits, which typically herald the apex bank’s FX auctions as Nairametrics was made to understand, have served to significantly reduce liquidity in the system. An insider who informed Nairametrics about the latest debit said “the liquidity within the system is now very tight”. As a matter of fact, liquidity is now reportedly below N100 billion.

Apparently, the CBN is using these weekly CRR debits to mop up liquidity in the system. In other words, these debits help to prevent banks from coming to the FX auctions with lots of cash. Too much FX demands tend to put the apex bank under pressure.

Note that inasmuch as the CBN is trying hard to stabilise the FX markets, these constant debits have inevitably affected banks negatively by leaving them cash-strapped. Our source, who was quoted above, earlier complained about these ‘indiscriminate debits’ when he said:

“These are huge amounts that are leaving the banking sector. It’s a squeeze on the banks. A bank like First Bank, for instance, has about N1.4 trillion in CRR with the Central Bank. And there is Zenith Bank with equally as much as N1.5 trillion. These are monies that banks can potentially put in loans at 52% at 30%, or even put in money market instruments at maybe 10%. So, for a shareholder of these banks, this CRR debits are impairing the banks’ ability to increase their earnings because now are not able to use the funds that are legitimately theirs to create money for their shareholders. And the question is that under what framework is the Central Bank choosing to take people’s money?”

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Banks’ stakeholders have also collectively complained

Meanwhile, bank stakeholders have also collectively complained about these incessant CRR debits by the Central Bank of Nigeria. As Nairametrics reported yesterday, the negative impacts of CBN’s constant CRR debits were among some of the issues raised by banks’ stakeholders during Standard Chartered Bank’s 2020 Africa Investor’s Conference.

It is important to point out that many banks in the country, including the likes of First Bank, now have billions of their customers’ debits sterilised for the sake of CRR compliance.

Understanding CRR

The cash reserve requirement is the minimum amount banks are expected to leave retained with the Central Bank of Nigeria from customer deposits. In January, the CRR was increased by 5% to 27.5%  by the CBN Monetary Policy Committee (MPC) who explained that the decision was intended to address monetary-induced inflation whilst retaining the benefits from the CBN’s LDR policy.

Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs. He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor. Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan. If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

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Financial Services

Fitch forecasts that banks’ earnings will be hit hard by CBN’s CRR policy, others

The CRR debits on Nigerian banks have exceeded the N2 trillion mark in 2020 alone.



Foremost International Rating Firm, Fitch Ratings, has forecast that punitive policies by the Central Bank of Nigeria (CBN), especially the Cash Reserve Ratio (CRR) debits on Nigerian banks, will negatively impact on their earnings.

According to the rating firm, this is coming at a time when most other countries are giving banks extra leeway to fight the economic fallout of the coronavirus.

READ MORE: CBN maintains MPR at 14% for the 11th consecutive time

The Senior Director for Europe, Middle East and Africa at Fitch, Mahin Dissanayake, in an interview, said:

“The Central Bank of Nigeria has been highly interventionist. Where peers like South Africa and Kenya followed the global trend of giving banks more room to lend, Nigeria hasn’t budged. Instead, it stuck with a cash reserve ratio that compels lenders to park 27.5% of their deposits with the central bank.’

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“The CRR is unique and hugely punitive. The regulation is aimed at reducing the amount of money in the financial system to keep inflation in check.’’

READ MORE: Loan: CBN disburses over N300 billion to SMEs, health, agric, manufacturing sectors

Dissanayake pointed out that keeping those huge idle cash with the CBN in a non-interest yielding account puts a lot of pressure on the earnings of the banks, as they would have been put to better use through ventures such as lending. The inability of the banks to meet the requirements of the apex bank results in the debiting of the banks’ accounts with the shortfall.

The CBN also debits the accounts of banks who fail to meet the 65% loan to deposit ratio (LDR) regulation, a policy which is aimed at stimulating credit in the economy.

READ ALSO: Nigerian banks have written off N1.9 trillion impaired loans in past 4 years

The CRR debits on Nigerian banks have exceeded the N2 trillion mark in 2020 alone, some of which are speculated to be aimed at reducing the capacity of the lenders to participate in the foreign exchange market and as a result reducing the pressure on the naira.


According to an earlier report from Nairametrics, some analysts suggest that the CBN debits the accounts of banks arbitrarily without adhering to the 22.5% CRR, just to manage the liquidity in the system.

Dissanayake disclosed that enforcement of these policies and penalties have caused an effective hit on capital to between 40% and 50%.

He said, “Nigerian banks compared to other markets operate in a volatile environment. The banks have to deal with economic shocks, short credit cycles and persistent problems in the oil sector. They also have to deal with policy actions, policy uncertainty and regulatory risks.”

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He, however, said that the positive side of this is that the strong revenue-generating capacity in a large Nigerian economy allows the banks to absorb the higher cost of risk even when income from interest charges on loans deteriorate.

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The financial results for the first half of the year saw Nigerian banks record trading and foreign exchange revaluation gains which had neutralized the lower yields on government bond holdings, slower loan growth and fewer transactions from customers due to the effect of the coronavirus pandemic.

Dissanayake forecasted an estimated 20% decline in revenue, with a decline as well in profitability. The degree of decline in profitability will depend on the extent of loan impairment charges and the size of trading and translation gains.

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Company Results

Sterling Bank reveals N215 billion sequestered by CBN as CRR Debits

Sterling Bank Plc, one of Nigeria’s tier 2 banks reported that the Central Bank of Nigeria’s CBN restricted about N215.5 billion of its customer deposits as of June 2020.



Sterling Bank

Sterling Bank Plc, one of Nigeria’s tier 2 banks reported that the Central Bank of Nigeria’s CBN restricted about N215.5 billion of its customer deposits as of June 2020.

The bank reported this in its 2020 half-year interim results published on the website of the Nigerian Stock Exchange. According to the data, Sterling Bank’s confirmed the amount of its customer deposits now held by the CBN is about N215.5 billion and explained it “represent mandatory reserve deposits and are not available for use in the bank’s day-to-day operations” which can be interpreted as Cash Reserve Requirement “CRR”.

READ ALSO: CBN debits banks another N459.7 billion for failure to meet CRR target

Sterling Bank Data

  • Deposits from Customers – N915.3b (N892. 6billion)
  • Loans to customers – N615 billion (Dec 2019: N618.7 billion)
  • Sterling Bank CRR – N215.5 billion (Dec 2019: N122.1 billion)
  • Sterling Bank got debited N93 billion so far this year
  • This breaks down to about N71.1 billion and N21.9 billion debited in the first and second quarters respectively.
  • CRR as a percentage of deposits as at June 2020 – 23.5%

READ MORE: As AMCON nears possible ‘liquidation’, what should we expect?

CBN CRR Policy

The central bank of Nigeria increased its cash reserve requirement (CRR) to 27.5% from 22.5% at the monetary policy committee meeting held on January 23rd to 24th. The CRR is the amount the CBN debits from banks accounts in compliance with its monetary policy objective of mandatorily keeping cash on behalf of banks. The amount is not available for banks to use.

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Sterling Bank Results

The Bank also published its 2020 second-quarter results showing net interest income was up 16% to N18 billion.

  • Pre-tax profits also rose 24% YoY to N3.3 billion despite the Covid-19 pandemic induced economic lockdowns.
  • Despite the improved profits, the bank did report a spike in its provisions for impairments jumping almost 3 folds to N5.3 billion.
  • To put this into context, Sterling Bank suffered an impairment of N5.8 billion in the whole of 2019.
  • Sterling Bank’s cost to income ratio remains high at about 86%.

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3 major ways COVID-19 will affect Banks’ 2020 profits

The oil price crash coupled with border closures have worsened Nigeria’s FX deficit.



Q1 2020, Disrupting Nigerian banks, Evolution of Nigerian banks in 59-years , GTB, UBA, Zenith, Access Banks’ salary advance loans, Can a company operate without a website in 2019? , Banks refund N3.09 billion to customers over claims on excess charges, fraud, others  , Bank CEOs applaud NCC’s decision to suspend USSD charges, GTBank, Zenith, Access, FBN, 10 others spend over N8 billion on CSR, Banking: Evolving trends in the bankers’ market, GTBank, Access, FBNH, Standard Chartered wrestle over women entrepreneurs , GTBank, Access Bank, Zenith, FBN, 16 others disburse CBN’s N610.4 billion to farmers , Credit to government declines, as Credit to private sector hits N25.8 trillion, Banking sector NPLs down, loans up, Non-Performing Loans in Agriculture, construction, others rose to N143.76 billion, Asset seizure: Banks begins recovery of N6.125 trillion borrowed to the oil sector, Customer Experience: GTB, FCMB, Citibank, others emerge best banks in 2019, Nigeria’s top 5 banks spent more than N40 billion on adverts in 2019, Nigerian banks face risky future over low oil prices, coronavirus, Testing the financial strength of Nigerian banks

The last has definitely not been heard of the economic impact of COVID-19, despite the seeming normalcy that is beginning to return to the economy post lockdown. The Nigerian banking industry, which has consistently been the most profitable single sector traded on the NSE and accounts for over 50% of investors’ stock traded daily, may be set for hard times ahead notwithstanding their 2020 Q1 profits and their best efforts to adapt to the new normal.

From the shutting down of the economy for months to the closing of borders and business offices of banks, here are the 3 major ways in which COVID-19 will affect the 2020 profits of Nigeria’s Lenders:

  • Increase in impairment and bad loans

Impairments are an additional financial cost to the lender resulting from the reduction in the creditworthiness of the borrower while bad loans are literally loans that have gone… Bad (you guessed that). Whereas bad loans are to be written off completely by the lender, impairments are deductions that should reflect in financials of the lender pending when the loans become active.

In the wake of the pandemic, the CBN took proactive measures to ensure that Banks are protected from ruinous impairments by approving the request of the Lenders to restructure loans in their books allowing more time for debtors to pay.

Notwithstanding this initiative, loans (especially in the retail space) would most likely end up being written off as unemployment rates soar and the economy slowly recovers from the effects of the pandemic. Education, aviation, and the oil and gas sector do not seem on the path of recovery yet, and their delay would most likely cost lenders with sizable exposures in their respective industries.

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  • FX scarcity and Liquidity squeeze

These two sides of the same coin are causing painful gut-wrenching groans to be heard in the Banking sector, especially amongst lower-tiered Banks.

The oil price crash coupled with border closures have worsened Nigeria’s FX deficit and caused the CBN to employ unconventional means and policies to stabilize the Naira, even after a long-awaited devaluation.

Banks who are unable to meet the FX needs of their customers rush “cap in hand” to the CBN to get FX intervention for their corporate customers for whom the exorbitant parallel market rate is not an option. Instead of getting their requests met, their positions are debited and added to their CRR forcing them to reduce their FX demands and leave their customers dissatisfied. While this may lead to loss of deposit from these customers taking their businesses elsewhere, the major issue the Banks have with this discretionary CRR, is the foregone earnings that their extra CRR would have earned in the money market or through commercial loans.

Over N2trillion has been arbitrarily debited from Nigerian lenders since April in tranches of N1.4trillion, N300billion and N459.7billion causing some banks to have CRR in excess of the 27.5% agreed upon by the CBN Monetary Policy Committee in January 0f 2020.

The depreciating Naira is also inimical to Banks with FX denominated bonds, and is expected to impact their bottom line.

  • The macro economy and unfair competition

The relationship between Banks and the economy is complex. They are the gauge through which the pulse of the economy is felt, and the channel through which its life force can be restored. At no time is this complex relationship more evident than during severe economic strain, such as this pandemic. It is at this time that the Banks experience unfair competition from their regulators who are forced to provide direct, and cheaper funding to the economy sacrificing short term profitability of the Banks for long term sustainability of the economy.


In the wake of the pandemic, the CBN has provided series of intervention funds, ranging from the N50b household support, to the Agric fund, CIFI and MSME support funds at single interest rates, lower than the commercial Banks can afford.

Although the commercial Banks are listed as PFI (Performing Financial Institutions) for most of these funds, the commissions they stand to earn are in no way comparable to what it would have been had they been the direct lenders at commercial rates. This arrangement would definitely impact their creation of new risk assets and the accompanying income that would have found its way to their annual profit.

It’s not all gloom though, Bankers who chose to speak off-record claimed that the lockdown played a key role in increasing enrolments on their online platforms and the timing of the nationwide cashless policy was a “masterstroke” in ensuring that customers bought into e-channel transactions on which the Banks would earn fees and commissions. They claim that the pandemic also offered some Banks a rare opportunity to prune their operations cost without alarming their customers, as they were able to shut down not too profitable branches in some locations and redeploy their staff accordingly.

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A top Treasury official in one of the new generations Banks who sought anonymity said that Banks who have earned income in FX prior to the pandemic would enjoy revaluation profit, but was quick to add that this little margin would not offset their loss of income from Letters of credit not done due to border closures, nor will it write off the rate decline in risk-free investments of Banks buying Government Bonds.

With increased cost for operational branches due to adaptability to COVID-19 protocols amongst other things, it remains to be seen how Nigerian Banks would fare in this remarkable year. Their H1 results should give more insight.

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