All deposit banks in Nigeria have been asked to transfer N6.9 trillion in customer deposits into the Central Bank of Nigeria’s vault as the apex bank increases the Cash Reserve Ratio (CRR) from 22.5 to 32.5 per cent.

The portion of a bank’s total cash deposit that must be kept as reserves with the CBN is known as the CRR.

As a result of the increased CRR percentage, deposit banks will now remit N6.9 trillion from the total deposits of N21.43 trillion, as opposed to N4.8 trillion under the previous CRR of 22.5 per cent.

The CBN Monetary Policy Committee took the decision at its Tuesday meeting announcing that the new development will be effective today (Wednesday). 

The increased CRR will limit banks’ lending capacity, as the implementation of this measure will restrict the amount of money available to banks for lending to the economy.

Godwin Emefiele, governor of the central bank, gave all banks until Thursday to comply with the new CRR by adequately funding their accounts.

“Any bank that fails to fund their CRR to 32. 5 percent by Thursday may be stopped from participating in the FX market, We  must  mop up liquidity out of the  vaults  of the banks,” Mr Emefiele said.

He detailed that the decision to increase the CRR was taken after “10 members voted to increase CRR (Cash Reserve Ratio) by 500 basis points, while two members voted to increase it by 750 basis points.”