The central bank of Nigeria increased its cash reserve requirement (CRR) to 27.5% from 22.5% at the monetary policy committee meeting held in January 23rd to 24th. The CRR is the amount the CBN debits from banks accounts in compliance with its monetary policy objective of mandatorily keeping cash on behalf of banks. The amount is not available for banks to use.

According to Union Bank, the CBN “had restricted balances” of N484.5 billion (December 2019: N296.043billion) with the Central Bank of Nigeria (CBN) as at 30 June 2020, representing the CRR debited in the period under review.

The bank reported a CRR of N365.8 billion suggesting an additional N118.7 billion was debited between April and June 2020 compared to N70 billion in the prior quarter.

Nairametrics reported in April that the central bank debited N1.4 trillion in CRR from banks with Union Bank debited by about N49 billion. The CBN also debited banks in May and in June.

The move shocked bankers who had expected the CBN to taper down on its tight monetary policies considering the economic headwinds. This was very well before the COVID-19 virus exploded worldwide. The CBN had attributed the reason for the CRR debits to recent inflationary pressure in the economy.