Photo caption: Nigerian banks
Seven Nigerian banks reported a total of N18.82tn in restricted deposits with the Central Bank of Nigeria as of March 31, 2025, up from the N17.54tn recorded in December 2024. Access Holdings led the pack with N8.64tn locked in, an increase of N1.58tn or 22.4 per cent, from N7.06tn in December 2024.
The funds, classified under various components such as mandatory reserve deposits, special cash reserve requirements, and differentiated cash reserve schemes, are not available for banks’ day-to-day operations. These reserves are held with the apex bank in line with regulatory obligations and monetary policy controls.
These deposits form part of the regulatory tools used by the CBN to manage the money supply, control inflation, and maintain monetary stability. CRR, which stands for Cash Reserve Ratio, is the percentage of a bank’s total deposits that must be kept with the CBN as a reserve and cannot be used for lending or investment.
Access Holdings reported the highest restricted deposit among the banks, with N8.64tn as of March 2025. The amount changed compared to its December 2024 figure, also recorded at N7.06tn. This figure includes restricted deposits and other assets as listed in its financial notes.
The bank also mentioned that the restricted deposit with Afrexim comprises a $5m minimum balance expected to be maintained at all times for the duration of the $300m Afrexim term loan facility granted to the company.
In the period under review, United Bank for Africa recorded N3.46tn in restricted deposits in March 2025, marking a decline of N470bn or 12 per cent from N3.93tn in December 2024.
Guaranty Trust Holding Company saw an increase of N208bn, or 10.6 per cent, to N2.17tn in March from N1.96tn in December 2024. The bank clarified that these funds represent the CBN-mandated cash reserve requirement and are not accessible for daily operations.
Fidelity Bank’s restricted deposits rose by 4.4 per cent to N1.66tn in March 2025 from N1.59tn in December 2024. The balance includes N1.36tn in mandatory reserves and N221bn under the special cash reserve.
Stanbic IBTC’s cash reserve grew by 5.7 per cent to N758bn in March 2025 from N717bn in December 2024. The funds are held with the CBN and are unavailable for daily use.
FCMB Group reported a decline in restricted deposits to N1.24tn in March 2025 from N1.44tn in December 2024, a drop of N198bn or 13.7 per cent.
Wema Bank’s restricted deposits increased by 6.3 per cent to N892bn in March 2025 from N839bn in December 2024. The balance includes N26bn under the DCRR scheme aimed at stimulating real-sector financing.
Meanwhile, the Monetary Policy Committee of the Central Bank of Nigeria has maintained the Monetary Policy Rate at 27.50 per cent, marking the second straight time it has kept the rate unchanged in 2025.
CBN Governor Olayemi Cardoso stated recently that “the committee was unanimous in its decision to hold policy and thus decided as follows: retain the MPR at 27.50 per cent,” explaining that the decision allows members to assess short-term economic trends more effectively.
In addition to the MPR, the CBN also kept the asymmetric corridor at +500/-100 basis points, the Cash Reserve Ratio for Deposit Money Banks at 50.00 per cent, and for Merchant Banks at 16.00 per cent, while maintaining the Liquidity Ratio at 30.00 per cent.
Data from the National Bureau of Statistics show that headline inflation eased to 23.71 per cent in April 2025, down from 24.23 per cent in March.
Commenting, an economist and chief executive officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, described how this affects banks’ core function of financial intermediation.
He said, “The cash reserve ratio is affecting the banks in a negative way. The role of the bank is what we call financial intermediation; in other words, the primary function of the bank is to mobilise financial resources to the deficit end of the economy. The 50 per cent CRR affects their cost of lending and hinders them from performing the primary role of financial lending.”
He added that the combined effect of the CRR and liquidity ratio constrains banks’ lending capacity.
He explained, “The CRR is 50 per cent, and the liquidity ratio is 30 per cent, and if you add them together, it’s 80 per cent, and it is a major issue. Most of the funds are about 30 per cent, and the MPR is 27.5 per cent. This situation is creating very tight conditions for investors. It is not a particularly good thing for the economy. It is very detrimental to investment and growth.”
Yusuf acknowledged differing opinions on the approach to monetary policy but emphasised the need for a shift in focus.
He said, “There are arguments for and against. Some people believe that the use of a tightening monetary policy will ensure stability in the foreign exchange market and control inflation, but some of us believe it is better to concentrate more on the supply side of the economy to tackle inflation.
“I don’t think the use of these monetary instruments is so effective — they are, but not considerably effective. They are not sufficient to tackle inflation. What we need now is fiscal intervention to address the supply side of the economy.”
Also, the Chief Executive Officer of Financial Derivatives Company Limited, Bismarck Rewane, provided a different perspective, highlighting the CBN’s rationale behind the high CRR.
He stated, “The Central Bank of Nigeria has done its calculation. Excess liquidity has a strong correlation with the rate of inflation in the country. Therefore, they have taken it as a major step, and since liquidity is constrained and inflation begins to ease up, I believe the CBN will reduce the Cash Reserve Ratio.”
Rewane acknowledged the high CRR but defended its necessity in the current inflationary environment.
“Yes, the CRR is high, but because the inflation rates are stubborn, we need this kind of measure. In the next few quarters, we will see the MPR and the CRR reduce. Inflation is a result of lower output and increased demand,” he said.
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