BREAKING: CBN Moves To Reduce Money In Circulation, Mops Up N26.6tn From Banks

The Central Bank of Nigeria has mopped up over N26.6tn from the banking system as part of moves to limit money in circulation and control inflation.

The N26.6tn was taken from banks as the Cash Reserve Requirement (CRR) which is mandatory for Deposit Money Banks (DMBs) in the country.

The CRR is a percentage of banks’ deposits that they are required to hold in reserve with the CBN.

As of February 2024, the CRR for DMBs was 45 per cent, and for Merchant Banks, it was 14 per cent.

As of January 2024 THE WHISTLER can report that the CRR of banks held with the CBN was N13.5tn but the amount has grown by 49.2 per cent as of January 2025.

A member of the CBN Monetary Policy Committee, Mustapha Akinkunmi, said the move reflects the CBN’s efforts to manage inflation and control liquidity in the banking system.

“This implies that commercial banks will be required to hold more reserves with the central bank, which directly limits the amount of money in circulation.

“As a result, this could lead to a contraction in credit to the private sector, which will moderate inflationary pressures but may also slow down economic growth,” he said in his personal statement at the 299th MPC meeting seen by THE WHISTLER.

The CBN Governor Olayemi Cardoso has occasionally disclosed that Nigerian banks are sound despite the dissolution of the board and management of Keystone Bank, followed by a court order in February 2025.

To ensure the stability of the lender, Keystone Bank Limited is now fully owned by the Federal Government of Nigeria.

However, a document seen by THE WHISTLER shows that the Capital Adequacy Ratio of the banking system rose to 14.84 per cent at the end of January 2025, up from 10.70 per cent in January 2024.

But Akinkunmi said the CAR of banks at 14.84 per cent is still below the regulatory threshold for many banks in the advanced economies.

He called for additional action from the CBN to speed up the recapitalization process of banks.

Akinkunmi said, “The increase in CAR reflects positive movement in the capital strength of Nigerian banks, indicating that banks have either raised more capital, improved profitability, or reduced risky assets, thereby enhancing their ability to absorb shocks.

“While this improvement is positive, 14.84 per cent remains below the regulatory threshold for many banks in the advanced economies, thus leaving room for further improvement to meet international standards and cope with external financial pressures.

“I therefore call for additional action to accelerate the recapitalization process.”

However, banks’ Non-Performing Loans (NPLs) ratio declined to 4.22 per cent in January 2025 from previous months. As of November 2024, banks NPL ratio was 4.87 per cent.

“This decline is generally a good sign, indicating that more borrowers are meeting their obligations, and banks may be addressing their non-performing loans more effectively,” Akinkunmi commented.