On the heels of meeting the Central Bank of Nigeria (CBN) 65 per cent Loan-to-Deposit (LDR) ratio policy, banks and merchant banks deposit with the apex bank dropped by 58.14 per cent in 2021.
Banks 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 11.5 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.
THISDAY gathered from the central bank’s financial data that banks and merchant banks deposit dropped to N3.03trillion in 2021 from N7.25trillion in 2020.
The CBN had in July 2019 directed that banks’ daily deposits placement through its SDF should not exceed N2 billion, stressing that any daily deposits above the stipulated amount will not attract interest payments.
According to THISDAY investigation, as banks’ and merchant banks deposit dropped in the year under review, borrowing significantly appreciated.
As gathered by THISDAY, Banks’ and merchant banks borrowings from the CBN grew by 79.3per cent to N13trillion in 2021 from N7.25trillion in 2020.
The reflection is increased dependency by banks and merchant banks on the CBN to cope with the intense scarcity of funds, which prevailed in the interbank money market for most part of 2021.
The CBN had noted in its 2019 guidelines that the N2billion deposit represents 73 per cent reduction from the previous limit of N7.5 billion introduced way back in 2014.
In November 2014, the CBN said it observed that banks and discount houses preferred to keep their idle balances in the SDF with the CBN.
Unfortunately, this preference contributed to the restraining of the financial intermediation process, the reason the CBN opted to review the guidelines for the operation of the standing deposit facility.
The review recommended that daily placements by discount houses and banks at the SDF should not exceed N7.5 billion.
Commenting, Head Financial Institutions’ Ratings Agusto & Co, Mr. Ayokunle Olubunmi, said: “Because CBN is implementing the discretionary CRR, banks where being careful in terms of sourcing for deposits because it doesn’t make sense for you as your bank to get deposits and then CBN is actually holding them sternal. So, banks are being careful with deposits.
“2022 is going to be much more drastic if the CBN does not change their stance. Because what we have seen last year is that banks are getting a bit more reluctant to lend. If not well managed, it could cause a dysfunction in the economy.”
A Banker who pleaded anonymity said some banks query their staff if customers bring in huge deposits and would however advice their customers with huge funds to channel it to Treasury Bills or other instruments.