Kayode Tokede 

Following the increase in Cash Reserve Ratio (CRR) to 50 per cent by the Central Bank of Nigeria (CBN), deposit money banks’ mandatory deposits with the CBN has continue to rise with shareholders demanding interest payments on the deposits.

For instance, just seven banks reported N18.16 trillion mandatory deposits with Central Banks as of half year ended June 30, 2025, representing an increase of 6.9 per cent when compared to N16.99 trillion reported in 2024 financial year. 

Last year, the CBN hiked Cash Reserve Ratio (CRR) to 50 per cent, and so far in H1 2025, Zenith Bank Plc, and First Holdco have recorded double-digit growth in mandatory reserve deposits.

However, there are some exceptions as analysis of banks’ audited/unaudited accounts for H1 2025 revealed that Sterling Financial Holdings Company Plc, Wema bank Plc and FCMB Group Plc recorded decline in mandatory deposits with the CBN.

Extracts from the H1 results revealed that Zenith Bank, followed by First Holdco and five other financial institutions reported the highest mandatory deposits with CBN.

As of H1 2025, Zenith Bank declared N6.23 trillion mandatory reserve deposits with the CBN, nearly 17 per cent increase over N5.33 trillion reported in 2024FY, while First Holdco reported N4.2 trillion mandatory reserve deposits with CBN as of June 30, 2025, representing an increase of nearly 13 per cent when compared to N3.74trillion reported in 2024FY. 

Furthermore, United Bank for Africa Plc (UBA) announced N3.97 trillion mandatory reserve deposits with central banks as of June 30, 2025, representing an increase of 0.99 per cent from N3.93 trillion in 2024.

On its part, Ecobank Transnational Incorporated (ETI) announced N2.04 trillion mandatory deposits with CBN as of June 30, 2025, a growth of 4.3 per cent from N1.95 trillion in 2024FY.

However, FCMB Group as of June 30, 2025 declared N1.02 trillion mandatory deposits with CBN, down by nearly 18 per cent from N1.24 trillion in 2024, while Sterling Financial Holdings Company posted N666.7 billion mandatory deposits with central banks as of June 30, 2025, a drop of nearly 15 per cent when compared to N777.09 billion in 2024.

In addition, Wema bank said its mandatory deposits with central banks stood at N23.69 billion as of June 30, 2025, a drop of 14.4 per cent from N27.67 trillion in 2024.

The seven financial institutions as of June 30, 2025 declared a sum of N47.5 trillion loans & advances to customers, a growth of 4.01 per cent from N45.7 trillion reported in 2024. 

The CRR is the minimum amount banks and merchant banks are expected to retain with the CBN from customer deposits and it carries no interest and is not available for use by the banks in their day-to-day operations.

It is one of the ways CBN regulates the country’s money supply, inflation level and liquidity in the country. The higher the rate, the lower the liquidity with the banks.

In early 2020, the apex bank’s Monetary Policy Committee (MPC) increased CRR by five per cent from 22.5 per cent to 27.5 per cent and in September 2022, it moved it to 32.5 per cent in a move to tame inflationary pressure.

The MPC at the first meeting in 2024 increased CRR to 45.00 per cent from 32.5 per cent amid double-digit inflation rate. However, the committee at the second meeting in 2024, adjusted the CRR for Merchant Banks from 10.0 per cent to 14.0 per cent.

Currently, the CBN by regulation forces banks to retain up to 50 per cent of their deposits in CRR requirement, meaning that the deposits are not accessed by the banks for loans and advances.

The governor of CBN after the meeting in September 2024 said the members voted to raise the Cash Reserve Ratio of Deposit Money Banks by 500 basis points to 50.00 per cent from 45.00 per cent and Merchant Banks by 200 basis points to 16 per cent from 14 per cent.

He said, “The Committee was, however, unanimous in recognising that a lot more is required to actualize the Bank’s price stability mandate. The MPC noted that even though headline inflation trended downwards due to a moderation in food inflation, core inflation has remained elevated, driven primarily by rising energy prices. The uptrend poses severe concerns to Members, as it clearly indicates the persistence of inflationary pressures.

“Members thus reiterated the need to work in close collaboration with the fiscal authority to address the current upward pressure on energy prices. The MPC noted the continued growth in money supply, recognising the need to curtail excess liquidity in the system as well as address foreign exchange demand pressures. Members were also concerned about the growing level of fiscal deficit but acknowledged the commitment of the fiscal authority not to resort to monetary financing through Ways & Means.

“Furthermore, members observed a strong correlation between FAAC releases and liquidity levels in the banking system as well as its impact on the exchange rate. The Committee, therefore, agreed to increase monitoring of future releases with a view to addressing its effects on price developments.”

The policy, which started in 2019 has drawn criticisms from most of the banks and shareholders who have cited a drop in their profit as a major consequence.

When the policy was introduced, Banks were, however, complaining bitterly that the CRR policy especially as it has affected their Net Interest Income.

Shareholders of these banks over the years have expressed displeasure about restricted deposits with the apex bank not making it available for banking operations.

Speaking, the Chairman, Progressive Shareholders Association of Nigeria (PSAN), Boniface Okezie,  said shareholders have been advocating to CBN to pay interest to these banks.

He said, “The funds deposited by banks to CBN are not used. If these funds are with banks, certainly it will enhance their earnings and returns to shareholders.

“It will create more banking expansion. The deposit fund is meant for bank customers and banks cannot make use of them. If CBN can pay at least three per cent of the mandatory funds collected from banks, it will go a long way to help banks to have more money and drive the real sector of the nation’s economy and pay robust dividends to shareholders.”

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