Between October (when the redesigned naira was announced) and January, Nigeria’s demand deposits increased by N1.67 trillion, reaching an all-time high of N20.18 trillion.
At the end of October, there were 18.5 trillion Nigerian Naira in demand deposits, or savings that could be withdrawn at any time. Over the course of three months, the money increased by around 9%.
December saw a decrease in the amount to N18.12 trillion, possibly as a result of adding in Christmas. The biggest amount of demand deposits ever held by Nigerian banks was over N20 trillion by January, according to financial data from the Central Bank of Nigeria, which increased demand deposits by 9.2% month over month (m/m) (CBN).
As the first date for the demonetisation of the old N500 and N1000 drew near, Nigerians turned in their physical savings in old currency at banks around the end of last month. Due to bank customers’ inability to retrieve their funds, many of these deposits have become stranded.
The savings increased by N4.37 trillion (27.5%) year over year. As of January 2022, there was 15.8 trillion in demand money held in demand deposit accounts (DDAs) by all banks in Nigeria.
Data also reveals a significant fall in the value of cash outside of banks. Money that was not in banks last month was N788.9 billion, which is 30% of the N2.71 trillion in records from three months prior.
Throughout 2011, the nation’s cash outside of banks had regularly remained above N1 trillion.
One of the justifications stated by the CBN for the naira redesign effort is the enormous amount of currency that exists outside of banks and the related economic hazards. The enormous amount of money stored outside of banks, according to the governor, Godwin Emefiele, has rendered the financial system incapable of producing new loans.
Yet, records show that the expansion of lending to the private sector has been sluggish, increasing at an average rate of 1% over the last three months. That is far less than the y/y growth speed, which is over 20%.
At the beginning of the year, The Guardian has noted an extraordinary increase in the flow of short-term loans from deposit money banks (DMBs) to the CBN.
The historical trend indicates that many banks are flush with excess cash, much of which may have resulted from the recent rise in deposits with the implementation of the naira reform strategy.
Through the standard lending facility (SLF), commercial banks had released a total of N755.05 billion from January 1 to February 10. The amount was N226.7 billion, or 43% more than the total amount the apex bank lent to banks within the same time period.
Banks had accessed the lending portion of the window for loans totaling N528.3 billion since the beginning of the year (standard lending facility). SDF accounts for 58.8% of the total standard discount facility valued at N1.28 trillion executed this year, reversing prior years’ data.
A standard lending facility (SLF) took 77.5 percent of the transaction value last year, or N11.15 trillion, leaving only N3.24 trillion for SDF. Beginning in early January, the recent SDF rise reached its pinnacle on Friday when total lending exceeded 112 billion, or 14.8% of the total SDF transacted in the preceding 40 days.
An additional study of the data set reveals that banks are lending the CBN a total of 32.83 billion each day on average this year, while they are receiving roughly N23 billion in total.
Demand deposits are on the rise, private sector credit is stagnant, and SDF is growing, all of which indicate declining economic activity and raise concerns about an increase in the unemployment rate in the near future.
