The Central bank of Nigeria has issued a new guideline to banks on how to manage their Cash Reserve Requirement.
CRR otherwise known as cash reserve ratio is the percentage of a bank’s total deposit
CRR otherwise known as cash reserve ratio is the percentage of a bank’s total deposit that is required to be maintained with the central bank in the form of liquid cash.
The apex bank in a letter dated February 2, 2024 and sent to all banks said it will no longer use the daily CRR debt mechanism but will henceforth adopt a method that allows for the CBN to monitor the banks capacity for planning.
The letter signed by CBN’s Acting Director, Banking Supervision Department, Adetona S. Adedeji said the new plan will be implemented in two stages.
The circular titled, “Cash Reserve Requirement Framework Implementation Guideline,” reads:
“The Central Bank of Nigeria (CBN) is ceasing daily CRR debts and will be adopting an updated Cash Reserve Requirement (CRR) mechanism that is intended to facilitate your capacity for planning, monitoring and aligning your records with the CBN.
“The determination of the segment of the deposit subject to sterilization with the CBN as CRR will follow the processes outlined below.
“Phase 1 – Utilization of the Incremental Approach: The extant ratio (32.5%) will be applied to increase in the bank’s weekly average adjusted deposits.
“Phase 2 – CRR levy of 50% of the lending shortfall will be enforced for banks that do not meet the minimum Loan to Deposit Ratio (LDR) as per our correspondence to all banks referenced BSD/DIR/GEN/LAB/12/049 dated September 30, 2019.
“The CBN will provide your bank with details of the applied charges and their underlying computation rationale.”
