The Standing Deposit Facility of Nigerian banks has experienced an alarming 18% decline, plummeting to N2.4 trillion in November from N2.94 trillion in October, a direct consequence of the prevailing cash scarcity. Conversely, the Standing Lending Facility soared by 559% to N376.64 billion in November from N57.14 billion in October, sparking concerns about liquidity in the country’s financial sector.
The revelations were unearthed from the Central Bank of Nigeria’s financial data for November 2023, painting a worrisome picture of the banking landscape. Despite the Central Bank’s assurance on December 11 regarding the resilience of Nigerian banks, the substantial decline in the Standing Deposit Facility coupled with the exponential surge in the Standing Lending Facility has set off alarm bells.
This decline in the Standing Deposit Facility can be directly attributed to the reduction in cash deposits, a direct consequence of the persistent Naira scarcity. In response, the CBN took measures to alleviate the situation by suspending processing fees on large cash deposits. This was a strategic move following the CBN’s acknowledgment of the cash crunch, attributing it to high-volume withdrawals from its branches by Deposit Money Banks and panic withdrawals by customers from the ATMs.
In an exclusive interview with Media Talk Africa, Dr. Uju Ogunbunka, the President of the Bank Customers’ Association of Nigeria, underscored the enduring Naira scarcity despite the assurances from the CBN. “The problem is that people do not have the money to buy because Naira is scarce. There is still Naira scarcity. What is paramount now is the availability of cash,” Dr. Ogunbunka emphasized.
Elegede Segun, the secretary-elect of the Association of Mobile Money and Agent Banking Industry in Nigeria, echoed Dr. Ogunbunka’s sentiments regarding the Naira scarcity, shedding light on the shifting reliance of their members from banks to alternative merchants. “Our members no longer rely on banks for cash; we’ve shifted our focus to alternative merchants. And this means we have to pay more to get cash,” Segun revealed to Media Talk Africa.
The overarching concern surrounding the decline in banks’ deposit facilities and the parallel increase in lending facilities amidst Naira scarcity underscores the urgent need for sustained solutions to stabilize the financial ecosystem. The ripple effects of this monetary conundrum extend beyond the banking sector, casting a shadow over the broader economic landscape. As Nigerian authorities grapple with this intricate issue, the global financial community remains observant, cognizant of the potential reverberations on the international stage.
