Nigerians reduce bank deposits by N210bn after CBN Naira redesign policy

The deposits in commercial banks operating in Nigeria dropped in the first quarter of 2023, data from the financial regulator, the Central Bank of Nigeria (CBN), has revealed.

In the first quarter, which covers between January and March, deposits fell by N210 billion or 1.04 per cent during the period of review.

Ripples Nigeria gathered that the deposits depreciated to N19.91 trillion at the end of March, from the N20.12 trillion the deposit money banks had in their vault in January.

Note that deposits are funds readily available for customer withdrawals. A decline in deposits reduces liquidity available for commercial banks to lend to their retail or corporate customers.

This affects a deposit money bank’s revenue generated from loan advancement or credits, which is another source of income for financial institutions.

The drop in deposits occurred during the period the central bank reduced cash in circulation through the Naira redesign policy which was implemented on February 10, 2023.

CBN had compelled Nigerians to deposit their old N200, N500 and N1,000 cash in banks in exchange for the redesigned Naira notes by phasing out the old banknotes on February 10, 2023.

However, following the compliance, Nigerians were unable to lay their hands on the new currency, leading to a distrust in commercial banks and CBN.

Read also:WHERE ARE THE NEW NAIRA NOTES? CBN silent, as scarcity persists four months after

The inability to withdraw their money led to protests against banks, with some bank buildings set on fire and some destroyed – this forced bank employees to disguise themselves when entering the banks or exiting the premises.

There have been long queues at banks as customers seek to withdraw their cash after the Supreme Court lifted the restriction placed on the old cash and said it was still legal till December 31, 2023.

Amid decline in deposits, cash in circulation has also increased in March, with the CBN disclosing currency in circulation hit N1.6 trillion, from N982.09 billion at the end of February.

Prior to the implementation of the Naira redesign policy, the cash in circulation was N3.29 trillio at the end of October 2022. But after the implementation, it fell to N982.09 billion.

The currency in circulation is now back up since the Supreme Court voided the implementation, stating it breached the rights of Nigerians.

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