Banks deposit with CBN drops 68% in 9 months


Due to the pressure placed on Deposit Money Banks by the Central Bank of Nigeria (CBN) to meet the 60% Loan-to-Deposit Ratio (LDR) deadline of September 2019, banks’ deposits with apex bank via the Standing Deposit Facility (SDF) dropped by 68%.

The Details: The specific figure dipped from N30.4 trillion recorded as at the third quarter of 2018, compared to N9.7 trillion recorded by the same period of 2019, representing a decline of 68%.

The CBN increased the LDR from the initial 60% to 65% after deducting the sum of N499.1 billion from the vault of 12 banks for failure to meet the September 30, 2019 deadline stipulated for them to maintain 60% LDR.

According to analysts, the decline in monetary policy rates made all Tier-II and weak Tier-I banks increase deposit with the CBN to boost liquidity that will help drive daily business activities. The Monetary Policy Committee voted to reduce the MPR to 13.5% from 14% on March 26, 2019.

It was also gathered that the CBN’s policy on SDF coerced weak banks to reduce deposit and concentrate on growing the LDR.

Meanwhile, several stakeholders have differed on the revision of certain CBN policies.

Reacting to this was the Head of Research, Pan African Capital Holdings Limited, Mr Moses Ojo, who noted that banks were aware of the proposed plans by the CBN to introduce the LDR policy. He also added that banks were really interested in lending to the real sector to meet the 60% LDR by September 30, 2019.

“Banks were aware of the CBN plans to introduce 60 per cent LDR policy this year. As a result of that, they needed the money to lend to the real sector and meet the benchmark.

Before now, banks were facing Cash Reserve Ratio of 22.5 per cent. If you combine the CRR and 60 per cent LDR, there is no way the SDL of the CBN will not reduce,” Ojo said.