Some shareholders have called for the reduction of banks’ mandatory Cash Reserve Ratio (CRR).
One of them and the founder of the Independent Shareholders Association of Nigeria (ISAN), Sunny Nwosu, urged the apex bank to reduce the CRR to 15% from 27.5% or pay interest on the restricted deposits to the banks, noting that the banks had over N12 trillion restricted deposits with the Central Bank of Nigeria (CBN).
Nwosu, according to NAN, explained that the decision by the apex bank to review most bank charges and fees downward, coupled with the hike in the CRR, amid expectations of increasing regulatory headwinds, was currently causing a setback in the sector.
CRR is a monetary policy tool used by the Central Bank of Nigeria (CBN) to control money supply in the economy.
The CRR empowers the central bank to sequester up 27.5% of customer deposits held by commercial banks, effectively restricting the banks from accessing the money.
The apex bank debited a chunk of deposits of banks since 2019 as part of a mutually inclusive CRR and Loan to Deposit Ratio policy that targeted at driving lending more to private sector.
He said, “It is noteworthy that Nigeria has the highest reserve requirement in sub-Saharan Africa. South Africa, Kenya and Ghana all have CRR’s of below 10 per cent.
“We believe the elevated CRR level moderated the industry’s performance and liquidity position during the year under review.
According to Nwosu, the tight monetary policy of the CBN has continued to pummet the banking sector with multiplier effect on the equities market and loss of value addition to shareholder.
He said: “After serious evaluation of the CRR and current AMCON scam, ISAN insist that CBN should pay interest to banks on restricted deposits to enhance banks obligation to the real sector.
“In the alternative the apex bank should reduce the CRR to 15 per cent to enable banks declare meaningful dividends that would encourage domestic investments.
“We urge CBN to have a rethink on CRR and among other things to enhance the performance of the financial sector of the economy.”
The National Coordinator, ISAN, Mr Anthony Omojola, said banks’ interim reports in 2021 showed poor revenues following higher borrowing costs as CRR hike further complicated banks’ currency flow already hit by fallout from the COVID-19 pandemic and the oil price shocks.
Omojola said the CBN warehousing of about N1.2 trillion from the banking system since it raised the CRR by five per cent to 27.5 per cent coupled with the AMCON sinking funds called for serious concerns by all stakeholders.
“That the cumulative restricted deposits of banks so far as at 2020, if invested in treasury securities at five per cent, would have N482 billion added to the industry’s profit before taxation.
“The industry’s return on average equity (ROE) would have increased by between 11percent and 31.6 percent as at December 2020,” he said.