The total amount of deposit money banks’ (DMBs’) reserves with the Central Bank of Nigeria (CBN) further increased significantly to N3.176 trillion in September 2013.
The latest CBN money and credit statistics for September showed that the amount represented an increase by N392 billion or 14 per cent, over the N2.784 trillion recorded in August.
Bank reserves are deposits in accounts with the central bank that are not to be lent out. It is held as part of risk management measures.
The increase in banks’ reserves was as a result of the imposition of a 50 per cent cash reserve requirement (CRR) for public sector deposits in August, which saw the withdrawal of N1.2 trillion from the banking system.
The CRR is the minimum cash, as a percentage of customer deposits and notes that each commercial bank must set aside in reserve. This cash cannot be used for other purposes or lent out. The central bank uses this monetary policy tool to protect depositors, and ensure banks have sufficient cash at all times to meet their day-to-day demands and cash withdrawals of their depositors.
Meanwhile, the CBN data showed that the currency-in-circulation improved marginally year-on-year to N1.474 trillion at the end of September, from N1.443 trillion it stood in August.
Furthermore, credit to the private sector increased slightly year-on-year N16.292 trillion in September, as against the N16.101 trillion it was in August.
But just like the previous month, the net domestic assets (NDA) reduced year-on-year to N5.445 trillion in September, from N5.627 trillion in August, just as the net foreign assets (NFA) slipped marginally to N8.927 trillion in the month under review, from N8.992 trillion the previous month.
However, broad money (M2), which generally is made up of demand deposits at commercial banks and monies held in easily accessible accounts declined to N14.371 trillion in the month under review, from N14.619 trillion in August. Also, the central bank’s money and credit statistics showed that narrow money (M1), which includes all physical monies such as coins and currency along with demand deposits and other assets held by the central bank also improved slightly to N6.296 trillion, from N6.271 trillion in the month under review.
The CBN economic report for August released last week had shown that banks’ deposit and lending rates generally trended upwards during the review month. It also revealed that all deposit rates of various maturities, including the average savings rate rose from a range of 2.45 – 7.41 per cent to a range of 2.63 – 7.47 per cent.
“At 6.61 per cent, staff estimate showed that the average term deposit rate rose by 0.45 percentage point above the level at the end of the preceding month. Similarly, the average prime and maximum lending rates rose by 0.41 and 0.84 percentage points to 16.94 and 23.89 per cent in the review month, respectively.
“Similarly, the margin between the average savings deposit and maximum lending rates widened by 0.66 percentage points to 21.26 per cent at the end of August 2013,” the report added.
Also, it showed that at the interbank call segment, the weighted average rate which stood at 10.61 per cent at end-July 2013, increased by 4.52 percentage points to 15.13 per cent at end-August 2013. Similarly, the weighted average rate, at the open-buy-back (OBB) segment, rose by 3.9 percentage points to 14.31 per cent from the level in July 2013.