How bank deposits dropped by N210bn in three months – CBN

The Central Bank of Nigeria (CBN) showed that the total amount of demand deposits dropped by N210 billion between January and March 2023.

According to the reports of the Corporate Finance Institute, “A demand deposit is money deposited into a bank account with funds that can be withdrawn on-demand at any time.”

It noted that the depositor would typically use demand deposit funds to pay everyday expenses.

However, the Corporate Finance Institute further noted that many people would make large withdrawals from the bank during a financial crisis.

It added, “The withdrawals will lead to a decline in demand deposits and a decrease in the money supply, with banks left with less money to loan out.”

The large withdrawal was triggered by the naira redesign policy of the CBN, which led to cash scarcity, in the country.

The policy seemed to have led to a lack of trust in the banking system, with Nigerians making large withdrawals and hoarding cash.

According to a circular the CBN issued on December 6, it had said that with effect from January 9, 2023, the maximum over-the-counter cash withdrawal limit by individuals and corporate organisations per week, would be N100,000 and N500,000 respectively, adding that withdrawals above these limits would attract processing fees of  five per cent and 10 per cent respectively.

It further stated that the maximum cash withdrawal per week via Automated Teller Machines from January 9 would be N100,000, subject to a maximum of N20,000 cash withdrawal per day.

The apex bank also directed banks to load only N200 and lower denominations into their ATMs.

Many stakeholders kicked against the directives, arguing that it will adversely impact the economy.

The CBN eventually bowed to pressure and revised the cash withdrawal limit policy.