The Central Bank of Nigeria (CBN) is discontinuing the daily debits for Cash Reserve Requirement (CRR) and adopting an updated mechanism, marking a significant move amid the ongoing regulatory efforts to address currency challenges in the country.
In a letter dated February 2, 2024, addressed to deposit money banks (DMBs), the apex bank outlined the decision’s intention to enhance its capacity for planning, monitoring, and aligning records with the CBN.
The letter details the revised approach to determining the segment of deposits subject to sterilisation with the CBN as the CRR. The new process involves two phases. In the first phase, known as the Incremental Approach, the existing ratios (32.5% for commercial banks and 10% for merchant banks) will be applied to increases in the banks’ weekly average adjusted deposits.
Moving to the second phase, a CRR levy of 50% of the lending shortfall will be imposed on banks that fail to meet the minimum Loan to Deposit Ratio (LDR), as outlined in a previous correspondence to all banks dated September 30, 2019 (reference: BSD/DIR/GEN/LAB/12/049).
Adetona Adedeji, Acting Director of the Banking Supervision Department, assured that the CBN would furnish banks with details of the applied charges and the underlying rationale for their computation.