The Central Bank of Nigeria (CBN) has collected N1.4 trillion ($3.9 billion) from banks with excess cash holdings as part of measures to support the currency, banking sources told Reuters.
This came as the naira began hitting new lows on the over-the-counter spot and black markets since last month after the apex bank adjusted its official rate, implying a 15 per cent devaluation, to absorb the impact of an oil price crash triggered by the coronavirus pandemic.
The naira last week touched 420 per dollar on the black market for the first time since February 2017, 14 per cent weaker than the official market rate. The currency was quoted at N386.33 on the spot market on Friday.
On the non-deliverable forward market, one-year dollar/naira forwards crossed N500 per dollar during the week.
CBN in January raised the cash reserve ratio (CRR) that banks must hold by 500 basis points to 27.5 per cent, the first rise in four years to curb excess liquidity in the banking system, which it said was contributing to inflation.
Bankers on Friday said the CRR debit was more than 27.5 per cent and that it was not related to a penalty set for lenders that failed to meet a regulatory loan-to-deposit target.
Banking credit totalled N260.17 billion at Friday’s open from 817.69 billion naira the previous session, central bank data showed. Banks have been awash with cash after the government on Wednesday released 780.9 billion naira to states under a March budget payment.
The nation’s 28 commercial and merchant banks were affected by the higher debit. Zenith Bank had the highest amount parked at the central bank at N355.95 billion, followed by First Bank with N208.1 billion and United Bank for Africa with N204.75 billion. Standard Chartered Bank was charged N120.65 billion and Stanbic IBTC N143.97 billion.
The bank uses cash reserve levies to mop up liquidity. It often re-injects the liquidity to stabilise markets. It was not immediately clear the reason for the levy, especially at a time when lenders are dealing with the fallout of the new coronavirus on Africa’s biggest economy.
The central bank has rolled out a 1 trillion naira stimulus to boost the economy and cut rates on soft loans granted to some sectors but has not said how it would fund the interventions.