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Nigerians hoarding cash as CBN plot N10k withdrawal limit

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Nigerians hoarding cash as CBN plot N10k withdrawal limit

A proposal to limit the over the counter cash withdrawal by bank customers to N10,000 has been tabled before the Central Bank of Nigeria (CBN).

The Sub-committee on Payments Systems and Infrastructure of the Bankers Committee last week sent the proposal to the CBN.

The proposal was presented at the committee’s meeting but it is not clear whether it was considered.

The CBN is expected to “give feedback on the request”.

Deposits taken by banks declined by N1.029 trillion between April 2015 and April 2016, a Central Bank of Nigeria (CBN) report has said.

Besides, more customers are finding their loans difficult to service, the report said.

A report presented by CBN Deputy Governor (Economic Policy) Dr. Sarah Alade to last week’s Bankers’ Committee meeting in Abuja attributed the reduction in deposits to the Treasury Single Account (TSA).

She said the poor loan servicing resulted in the increase of non- performing loans (NPLs) to a ratio of 10.1 per cent over and above the CBN prudential limit of five per cent as at end April.

The CBN Deputy Governor also told members of the Committee that total deposits in the banks declined by N1.029 trillion from April 2015 to April 2016. 

According to her, ”the decrease in deposits were largely due to the introduction of the Treasury Single Account in the system.”

According to Dr. Alade, “the sudden rise in NPLs was attributed to the outcome of the risk assets examination of Deposit Money Banks (DMBs) conducted in December 2015 and the sustained low price of crude oil, supply constraints at the FOREX market as well as other macroeconomic conditions impacted negatively on the quality of bank loans.”

Her report to the Committee noted that the development had led to a decline in banks’ total assets; the volume of credits granted by them and even the degree of deposits generated by them, which in turn ultimately led to a decline in banks earnings as well as income from interest and non-interest investments.

The TSA policy, which directed all Ministries Department and Agencies to move government funds to the CBN began in September, last year.

Dr Alade had reported that “audited profit before tax for the period ended April 2016 decreased by 10.8 per cent or N24 billion from N222 billion for the period ended April 2015 to N198 billion in the period ended April 2016”.  

“Also, the ROA and ROE were 2.17 per cent and 16.17 per cent in February 2016 compared with 2.42 per cent and 19.39 per cent in the corresponding period of 2015.”

She added: “The decline was driven by a decrease in both interest and non-interest income, which declined by 6 per cent or N50 billion and N54 per cent or N259 billion respectively. 

“Industry total assets (April 15) – N27.588 trillion, (April ’16) – N27.434 trillion, showing a decrease of N158 billion or 0.6 per cent. 

“Gross Credit (April 0.3 percent  ’15) – N13.403 trillion; ( April ’16) – N13.362 trillion, showing a decrease of N41 billion or 0.3 per cent; Total deposits ( April ’15) – N18. 544 trillion, ( April’ 16)- N17.516 trillion  showing a decrease of N1.029 trillion or 5.5 per cent , decreases were due largely to TSA”

Alade also reported that the economic downturn has impacted negatively on the foreign reserves management. 

According to The Authority, the foreign reserve declined by more than $5 billion from $31.20 billion in July 2015 to $26.05 billion on May 19.

On a bright note, however, the CBN Deputy Governor reported that the banks’ Capital Adequacy and Liquidity Ratios remained strong and far above prudential limits.

According to her, “the Capital Adequacy Ratio (CAR) of the banking industry, which was still above the prudential minimum of 10 per cent and 15 per cent for banks with national and international authorisation respectively as at April 2016 stood at 16.5 per cent compared with 17.0 per cent as at April 2015. 

“The CAR deteriorated between April 2015 and April 2016 due to decline in the total qualifying capital (caused by regulatory deductions, retirement of Tier 2 Capital, impairment etc) and increase in the total risk weighted assets.

Dr. Alade added that “the trend of industry liquidity ratio shows that the industry operated far above the minimum requirement of 30 per cent”.  

“As at April 2016, the industry liquidity ratio stood at 46.3 per cent compared with 39.78 per cent as at April 2015.” The report reassured of the soundness of the banks.

The Sub-committee of the Bankers’ Committee on Payments Systems and Infrastructure has also recommended to the Central Bank of Nigeria (CBN) for approval to limit across the counter withdrawals to N10,000. 

The CBN is expected to “give feedback on the request”.

Also at the meeting, the CBN reported to the Committee “on the outcome of its meeting with the Nigerian Communications Commission (NCC) to address issues around reallocation of dormant phone numbers to other users”.

CBN TOLD TO HALT N10,000 CASH WITHDRAWALS LIMIT

Meanwhile, CBN has been told to limit across-the-counter withdrawals to N10,000, following a major drop in customers’ deposit.

This call was made by Bankers Committee following the industry recording a decline of about N1.03tn in total deposit.

Sources said the measure being contemplated would drastically reduce the number of customers that would need to physically visit banking halls for transactions.

The DMBs, sources said, wanted to achieve two objectives through this strategy, if approved by the CBN.

The objectives include greater use of electronic banking and smaller workforce – as a means of cutting cost of operations.

A ‘State of the Economy’ document of the apex bank presented to the Bankers’ Committee in Abuja, last Thursday, showed that unaudited Profit Before Tax of banks for the period ended April 2016 indicated a decrease from N222 billion in April last year to N198 billion, representing a 10.8 per cent or N24 billion decrease.

“The decline was driven largely by a decrease in both interest and non-interests income which decline by 6 per cent or N50 billion and 54 per cent of N259 billion, respectively,” the document read.

Also, a top bank official quoted in the report said the drop in deposits was due to the withdrawal of government funds through the implementation of the TSA.

“The competition for deposit mobilisation is very high now in the banking sector because since the government withdrew its funds through the TSA last year, a lot of banks were seriously affected.

“So, it has been challenging now for bank workers to mobilise deposits from customers as we used to do because of the economic situation.

“A lot of people are struggling to survive and even many of those that we meet when we go out to canvass for deposits will tell you that they are in need of money.”

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