Nigerian Banks N22 Trillion Claims With Central Bank Seen Funding Largest Intervention Funds In Nigeria’s History

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The total claims Nigerian commercial banks have against the Central Bank of Nigeria rose to N21.5 trillion as of June 2022 compared to N19.9 trillion as of the end of December 2021.

This represents an 8% increase in the last year or a N1.6 trillion increase in 6 months.

Bank deposits with the central bank have more than doubled since 2019 rising from about N9.9 trillion in December 2018 to about N21.5 trillion in June.

This follows the central bank’s policy of sequestering bank deposits as cash reserve requirement debits (CRR).

The deposit with the central bank is further divided into “currency”, “reserve deposits” and “other claims” made up of N513.4 billion, N11.8 trillion, and N9.1 trillion respectively.

CRR Debits
The Central Bank of Nigeria introduced a policy that forces banks to retain up to 30% of their deposits in cash reserve requirement, meaning that the deposits are not accessed by the banks for loans and advances.

The policy which started in 2019 has drawn veiled criticisms from most of the banks who have cited a drop in their interest income as a major consequence.

The central bank initiated the policy as part of its efforts to curb money supply, especially those channelled towards funding forex purchases and not to productive sectors of the economy.

Thus, banks that do not meet its loan to deposit ratio targets have their bank deposits debited by the central bank.

Nigerian Banks N22 Trillion Claims With Central Bank Seen Funding Largest Intervention Funds In Nigeria’s History

The apex bank does not officially reveal what it does with the money and since it does not publish its annual reports, it is often difficult to deduce.

However, some economists who spoke to newsmen suggest it could be the major source of the Central Bank’s intervention funds in the economy in various sectors of the economy including the government.

For example, provisional data from the CBN suggest Claims to the private sector and Net claims to the Federal Government are a combined N23.4 trillion.

Claims to the Federal Government are stated at about N24.2 trillion (out of which Ways and Means is about N19.9 trillion) while the CBN owes the government about N11.8 trillion thus a net N12.3 trillion in claims from the FG.

Meanwhile, credit to other sectors of the economy which includes credit to the private sector is provisionally stated as N11 trillion.

Thus, the claims owed to the CBN by sectors in the economy could easily have been partly funded by the CRR debits of N21.5 trillion as the chart above depicts.

Combined, the total loans to the public and private sector is the largest we have seen on record per CBN historical data.