Banks in search of cash deposit, Naria is redesign and cash is swap

 The fallouts of the cash crunch induced by a combination of factors such as naira redesign and cash swap is that deposit money banks are now facing cash squeeze as customers are no longer lodging their cash deposits.  Ibrahim Apekhade Yusuf also  examines the phenomenon.

 A staff of one of the new generation banks whose office is situated at Matori industrial avenue in Lagos called a close acquaintance of this reporter about a month ago desperately demanding for as little as a thousand naira to enable him get transportation back home as he couldn’t secure any cash at bank office

,The  reality of this situation is  caused by the Central Bank of Nigeria (CBN’s) due to the  naira redesign policy and other related issues has come cascading down to the populace with rippled negative effects including forcing majority of the Deposit Money Banks (DMBs) to cry out that customers have refused to deposit their cash thus further strangulating the already pauperized 

banks are worried as their fears that low deposits from their customers could limit their ability to lend and offer credit to boost production and investment .

The banker said: “It is not really desirable if cash is not deposited in the banks, either across the counter or through electronic transfers. It means money supply will be reviewed beyond what is optimal and that can affect lending.

The ability of the commercial banks to create money, lend money for production purposes, for investment purposes, even for consumption; people borrow money to buy personal goods and services; all that will be affected.”

The senior banker who would not be named attributed the weak desire to return cash to banks to the loss of confidence in the system, saying it was “as a result of a decline in confidence in the system, the fear that cash shortage will continue.”:

He also said that those who are not traditional hoarders are also keeping the cash at home, but at some point, when more money is in circulation, normalcy will return to the banking system,” he said.

The banker, who pleaded anonymity, said the lack of interest in depositing cash is part of the uncertainty arising from the scarcity of cash in banks, following the introduction of the cashless policy by the apex bank.

However, he expressed optimism that confidence was gradually being restored in the banks and commercial sector.

Offering a solution, the banker urged the CBN to “sustain its tempo of releasing more notes, both new and old, into the system, saying definitely, customers will gradually regain confidence in the banking system.”

A cash deposit is the money you pay into your bank account or savings account. The bank then has a liability to keep the money safely and pay you it back on the terms you have agreed for that account.

Although banks do many things, their primary role is to take in funds—called deposits—from those with money, pool them, and lend them to those who need funds. Banks are intermediaries between depositors (who lend money to the bank) and borrowers (to whom the bank lends money

Bank customers went through hell to make withdrawals from their deposits so it is natural for there to be resentment as regards depositing their funds back to the banks.

“This trend will be on for some months before depositors will adjust accordingly. The economy will gradually bounce back with the infusion of cash back into the system.”

 It may be recalled that the CBN in a bid to stall the planned strike action by the organised labour union released a total of N1 trillion into the system.

The apex bank has pushed nearly N1 trillion into circulation, Nigerians continue to experience scarcity. Despite that move, many bank branches complained of inadequate allocation of cash from the CBN on a daily basis.

According to what Emefiele told reporters after the end of the Monetary Policy Committee (MPC) meeting at the CBN headquarters in Abuja yesterday that the apex bank has pumped more cash into circulation.

Fielding questions on the outcome of the MPC meeting, Emefiele said on the Naira redesign policy and where things stand now, the “currency in circulation is roughly close to N1 trillion and the CBN continues to pump the newly designed currency into the market.”

Speaking on cash flow since the March 3 Supreme Court judgment, Emefiele said: “The CBN will need to re-access again to know whether the currency in circulation has attained an optimal level so as to be able to put in place measures that will ensure that we don’t go back to what we had before, where people were keeping a lot of money outside the banking system for their own benefit.

“The MPC has noted that the naira redesign and cash withdrawal limit policies have resulted in a sizable reduction in Currency-Outside-Banks, indicating an expected improvement in the potency of monetary policy tools.”

CBN need to restore customers’ confidence

Also speaking on the development,  The chief executive Officer Dr Muda Yusuf, Centre for the Promotion of Private Enterprise [CPPE] said the growing apathy by customers was understandable.

He also  said customers were merely trying to err on the side of caution because the cash squeeze at the bank has not ended though it has improved a bit.

Yusuf, the immediate past Director General of the Lagos Chamber of Commerce and Industry (LCCI), recalled that “Up until the CBN came up with its disruptive policy we have done well in terms of cashless policy because the level of financial inclusion had improved substantially. Since the advent of the POS, practically everyone now has a bank account. That trajectory was already very positive. We were not doing badly so far. Only last December the country recorded N400 trillion in cashless transactions in December 2022 alone. That is a lot.”

Of course, cashless didn’t start from Godwin Emefiele. Otherwise how was the country able to generate N400 trillion in December 2022 alone in cashless transactions.