Nigeria savers gave banks N9trn to keep as deposits by end of Q1

By Moses Obajemu

Nigerian savers gave their banks a total of N8.6 trillion to keep in various demand deposit accounts across the country by end of March, information released by the banking industry regulator, Central Bank of Nigeria, has shown.

Industry sources told Business A.M. that at the end of the first quarter when Nigerian banks were closing their books, they found that their customers had deposited N500 billion more in their demand deposit accounts than they did in February, creating for banks a positive liquidity position than they had expected.

But the surplus cash left in the vaults of the banks is being linked to a quiet month in which activities and spending were tempered by a ravaging coronavirus (COVID-19) pandemic that had created fear and panic and consequently led to a lockdown of the economy whereby access to banking halls and facilities was strained.

The 25 banks therefore had a combined demand deposit portfolio of N8.6 trillion at the end of March 2020, up from the N8.1 trillion recorded in February.

Demand deposits are the cheap retail funds in the vaults of banks in the form of savings and current accounts as against fixed deposits.

The figure could have been higher but for the upward review of the cash reserve ratio by the Central Bank of Nigeria from 22.5 percent to 27.5 percent in January 2020. The cash reserve ratio is the share of a bank’s total deposit that is mandated by the CBN to be maintained with it in the form of liquid cash.

The CRR is used by the CBN to ensure that a part of deposit money banks’ cash is with the Central Bank and is hence, secure.

The move was part of measures aimed at driving down inflation which had in the last seven months remained high.

Figures from NBS showed that inflation rate had risen to about 12.34 per cent in April, the highest in recent times

Godwin Emefiele, the governor of the CBN, had said then that the decision was taken as a way of mopping up excess liquidity from the banking system which had become a threat to inflation.

Similarly, total credit granted by the 25 banks in the country stood at N37.9 trillion as at the end of March 2020, representing an increase of over N1 trillion over the N36.6 trillion recorded at the end of February.

According to data on the website of the Central Bank of Nigeria, credit to the private sector during the review period was N28.2 trillion, up from N26.6 trillion in February. Similarly, credit to the government was N9.7 trillion, down from 9.8 trillion in February.

In the same vein, the nation’s net domestic assets also grew from N28.3 trillion in February 2020 to N29.2 trillion at the end of March. The growth trajectory also reflected in the net foreign assets which rose marginally from N6.3 trillion to N6.6 trillion.

In recent times, however, the outbreak of the coronavirus pandemic, necessitating global shutdown and the attendant fall in oil prices, have combined to distort Nigeria’s fiscal projections and affected its budget for the year.