The amount of foreign currency in the domiciliary accounts of Nigeria’s commercial and merchant banks increased by over 20 percent in June, a data from the Central Bank of Nigeria (CBN) revealed.
Most of these deposits are in dollars and they rose from N10.72 trillion in May to N17.65 trillion in June, the CBN data revealed. In dollar terms, they went up by 21 percent from $23.20 billion to 28.92billion,usingtheaverageexchangerateofN610.17/ in June.
The naira was devalued by the central bank in mid-June and it averaged 462.01/$ before that.
The data also showed that the rise was due to more deposits and devaluation, which increased the naira value of the foreign currencies in the domiciliary accounts.
The naira has fallen to historic lows in different markets since the central bank allowed it to depreciate by up to 40 percent against the dollar in June.
The president of the Nigerian Economic Society and a professor of economics, Adeola Adenikinju, said that the increase in the naira value of deposits in domiciliary accounts was the main factor behind the growth of bank deposits.
He said that domiciliary accounts make up more than a third of the deposits in the banking sector and a lot of it is not being used.
“There is a lot of money there. If we create dollar-denominated assets, some people can buy them and move that money from savings to some value that will be available to the economy that the government can then use to help build accretion [to external reserves] and the value of the naira,” he said.
The CBN reported that the external reserves of the country were $33.41 billion as of November 7, down from $37.08 billion at the end of last year.
Adenikinju opposed the idea that some people have that the government should convert the money in domiciliary accounts to naira. “I think that will do a lot more damage to the economy because it will just hamper the free flow of dollars.”
On June 18, the central bank lifted the restrictions on domiciliary accounts after a special Bankers’ Committee meeting as part of measures to promote transparency, liquidity, and price discovery in the FX market in order to improve supply, discourage speculation, enhance customer confidence, and ensure overall stability.
“Ordinary domiciliary account holders shall have unfettered and unrestricted access to funds in their accounts,” it said.
“Domiciliary account holders are permitted to utilise cash deposits not exceeding $10,000 per day or its equivalent via telegraphic transfer. Deposit money banks shall provide returns to the CBN, including the ‘purpose’ for such transactions.”
The apex bank said in May 2021 that only a maximum of $5,000 monthly would be allowed for transfers if the source of funds was a cash deposit into a domiciliary account.
“Cash deposits of foreign currencies other than USD may be paid into domiciliary accounts (subject to an equivalent $5,000 monthly limit) but will not be allowed for transfer purposes,” it said at the time.
The top five banks in Nigeria have witnessed a faster growth in their customer deposits this year, even as the money supply in the country has increased by more than 25 percent.
The banks are Zenith Bank Plc, United Bank for Africa Plc, Access Holdings Plc, FBN Holdings Plc, and Guaranty Trust Holding Company Plc.
According to data from their financial statements compiled by BusinessDay, their combined deposits increased by N15.7 trillion in the first nine months of this year to N53.34 trillion, compared to a rise of N4.47 trillion in the same period of 2022.