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Deposit Money Banks (DMBs), in the country are currently battling acute dollar shortage believed to have been occasioned by the activities of the political class ahead of the forthcoming 2023 elections in the country.

This is coming at a time the banks are grappling with operational hitches arising from strict enforcement of the Cash Reserve Requirement (CRR) policy by the Central Bank of Nigeria (CBN), and the hike in the price of diesel.

The dollar liquidity crisis, according to a top source in one of the new generation banks, may not be unconnected with the approaching conventions of both the ruling All Progressives Congress(APC) and the opposition Peoples Democratic Party(PDP) to pick their presidential flag bearers.

The source said the politicians have commenced a massive mop up of dollar in circulation in a bid to edge out one another, thereby triggering a situation where most of the banks cannot meet the foreign exchange need of their customers.

Findings revealed that diaspora remittance recipients appear to be the worst hit as they could not access funds sent to them by their families and friends abroad.

A customer with a leading first generation bank, Mr. Adeyemi Kolade, told a national daily that a visit to the banks branch in Ogba left him disappointed as he was told that dollar was not available for disbursement.

He noted that similar efforts to get the fund from two other branches of the bank In Ikeja also proved abortive before he returned to Ogba, where he resorted to intimidation and harassment before the teller could accede to his request. He however, said other customers were not as lucky as they were turned down.
Souring energy cost.

Also biting hard in the nations banking sector is the hike in the price of diesel. The negative effect of the situation on the fortune and operations of banks has already seen two of the leading lenders cut down their working hours to save cost.

This is happening amid incessant national grid collapse that has overtime left the country in darkness forcing organisations to heavily rely on diesel for their operations.

Last week, the pump price of diesel hit a record high of N750 per litre, a figure representing close to a 300 percent increase from the N225 per litre the product went for in January 2021.

Accordingly, First Bank of Nigeria had announced the reduction of its operating hours at most of its branches nationwide. In a statement made available on its official website, the bank announced that the new development would take effect from Monday, April 11.

We have revised our banking hours across all our locations. The revised opening and closing hours will be effective from Monday, 11 April 2022, the bank had said.

The bank further disclosed that while some of its branches would maintain the status quo, other branches would function between the hours of 8:00 am to 3:00 p.m., 8:00 am to 2:00 p.m., 8:00 am to 1:00 p.m. and 10:00 a.m. to 3:00 p.m accordingly.

Earlier, Guaranty Trust Bank informed its customers of its decision to reduce its operation closing hour from 5:00 p.m. to 4:00 p.m. over incessant increase in diesel pump prices.

Well like to inform you that our branches will now be opened from 8:00 am to 4:00 p.m., Monday to Friday effective Monday, 21 March 2022, the bank stated in a flyer announcement.

The bank advised customers to consider its digital banking options for any transactions beyond its new operating hours. GTBank had in 2013 extended its banking hours to 5:00 pm, from the regular 4:00 p.m. closing hour observed by most banks.

Industry watchers said other banks may join the trend as the cost of diesel continues to soar. According to a source, staff working in a branch of an unnamed  Tier 1 bank had noted that they had been told to switch off the generators by 4 pm prompt and that they were not allowed to remain in the banking hall past 4 pm unless there is public power supply.

CRR dilemma

Sustained sanction on banks by the CBN for failure to meet the 27.5 per cent Cash Reserve Requirement (CRR) threshold is also not helping the profitability of the lenders.
In 2021, the apex bank debited 10 banks a whooping N7.02 trillion over CRR failures.

According to audited financial statements of these banks, the banking sector regulator had debited them a sum of N6.71trillion in 2020 for not meeting the monetary requirement.

The CRR is the minimum amount banks and merchant banks are expected to retain with the CBN from customer deposits and it carries no interest and is not available for use by the banks in their day-to-day operations.

In early 2020, the apex banks Monetary Policy Committee (MPC) increased CRR by five per cent from 22.5 per cent to 27.5 per cent over its intention to address monetary-induced inflation whilst retaining its 65 per cent Loan Deposit Ratio (LDR) policy.

The CBN by regulation forces banks to retain up to 27.5 per cent of their deposits in CRR requirement, meaning that the deposits are not accessed by the banks for loans and advances. The policy, which started in 2019 has drawn criticisms from most of the banks and shareholders who have traced a drop in their profit it.

Analysts at GTCO in its report titled, Nigeria Macro-economic outlook for 2022, explained that the reason for the tight system liquidity is the CBNs discretionary CRR debits which posed a huge challenge to credit growth for most banks.

According to them, A rough estimate of the industrys effective CRR position suggests that about 50 per cent of total naira deposits are sterilised with the CBN as CRR and Special Bills.

Going into 2022, the general build-up to the 2023 Elections will very likely result in a system awash with liquidity. We believe that the apex bank will tighten the system from the second half of the year just as political campaigns start, to mop-up excess liquidity from the system.

Although it is unlikely that the CBN will slow down on its discretional CRR debits, we expect more banks to approach the apex bank for the release of a portion of their excess CRR to assist them in funding their transactions, payment of regulatory levies/fees, etc.

The Executive Vice President, Highcap Securities Limited, Mr. David Adnori said the apex bank is using CRR to control inflation, stressing that the introduction of CRR is a drastic monetary policy targeted at controlling money supply in the banking system. According to him, the only way CBN can cut CRR is when inflation drops to single digit.

Adonri said, If CBN fails to maintain its CRR policy, so much money will flow into the market and further deprecates naira. Generally, the policy has not favoured banks because the fund is not yielding any interest and of no benefit to the productive sector.

These are funds banks lend to the real sector to drive business activities, finance working capital of productive sector and boost GDP but the CBN is holding it down.

It is not a good development for the nations economy in general. However, CBN has its reasons and releasing these funds my result in hyperinflation, which can damage the nations economy. It is like a double edge situation – if you dont do it, the economy is damaged and if you do it, the economy also struggles.


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