– The CBN has once again announced its intention to mop up excess liquidity in the banking sector
– The apex bank’s plans to reduce money supply in the economy to tackle inflationary pressures
– The CBN occasionally mops up or injects cash into the banking system through Treasury Bills and CRR debits.
The Central Bank of Nigeria is determined to curb the rising inflation and will move to remove about N5 trillion excess cash from the banking industry. The first apparent step to achieve this is the recent increase in the Cash Reserve Ratio (CRR) to 45% at the last Monetary Policy Meeting. Cash Reserve Ratio is the percentage of a bank’s total deposits that it needs to maintain as liquid cash. This money kept with the CBN is unavailable to Nigerian banks for investing and lending purposes.
CBN to clear up excess cash
Mohammad Abdullahi, the CBN deputy governor of economic policy, confirmed the plan at a recent virtual meeting, tagged Foreign Portfolio Investors Call, organised in collaboration with NGX Group. He noted that the banking system has a shortfall of N5 trillion to meet the new 45% CRR. Abdullahi, however, said that the apex bank will not debit the banks N5 trillion at once, adding that the apex bank will implement the new CRR in a way that will not be disruptive to the industry, Vanguard reports.
He also revealed that some banks have already surpassed the 45% CRR and would be refunded the excess, while banks with shortfalls will have to build up their cash reserves.
CBN sets deadline for BVN enrollment
In a recent development, the Central Bank of Nigeria (CBN) has instructed Nigerian banks to shut down accounts that do not have a Bank Verification Number (BVN) within 30 days. This directive aims to enhance the safety, reliability, and efficiency of banking and payment systems. As per data from the NIBSS, as of April 8, only 57.39 million out of over 190 million bank accounts in Nigeria had been linked to BVNs.
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