Access, GTB, Others Wait as CBN Slashes Cash Reserve Ratio of 6 Banks to Push More Money Into Economy

• The Central Bank of Nigeria has decided to slash the cash reserve ratio of merchant banks in the country
• Merchant banks are financial institutions that provide various financial services to corporations, governments, and individuals
• The decision by CBN is expected to serve as a big boost for Nigerian companies in need of cash to finance their activities

The Central Bank of Nigeria (CBN) has announced a significant Cash Reserve Ratio (CRR) reduction for merchant banks to 10% from 32.5%.

Haruna Mustafa, director of banking supervision, disclosed this in a letter addressed to all merchant banks on July 14, 2023.

Part of the CBN circular reads:

"The Central Bank of Nigeria hereby informs all Merchant Banks that it has approved a reduction in their cash reserve requirement from 32.5 per cent to 10 per cent effective August 1, 2023.

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“The above regulatory measure is in recognition of the nuanced business model of the Merchant Banks, in particular their wholesale funding structure, regulatory restrictions from the retail market, and permissible activities vis-a-vis conventional commercial banks.

How important is CRR

A Cash Reserve Ratio is a specified minimum fraction of the total deposits of customers, which banks have to hold as reserves either in cash or as deposits with the central bank.

A higher percentage of CRR will reduce the banks’ capacity to lend to borrowers, while a reduction in CRR will make more funds available to the banks to lend to customers.

CBN hopes its decision will boost companies' access to financing needed to support the development of the Nigerian economy.

It is expected that the CBN will take a similar decision to cut the CRR of Deposit Money Banks, which is currently at 32.5%.

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List of Merchant banks in Nigeria

• Coronation Merchant Bank Limited
• FBN Quest Merchant Bank Limited
• FSDH Merchant Bank Limited
• Greenwich Merchant Bank Limited
• Nova Merchant Bank Limited
• Rand Merchant Bank Limited

List of 45 failed banks in Nigeria and dates of closure

In another report, Legit.ng revealed that in the last 28 years, approximately 46 commercial and merchant banks have closed down for various reasons.

The banks had their licenses revoked by the Central Bank of Nigeria between 1994 and 2006.

United Bank of Africa and Ecobank took control of the failed commercial banks.

Source: Legit.ng