Severe cash squeeze hits Banks as CBN mops excess liquidity

What can be described as a severe cash crunch situation has started hitting Nigerian banks and may worsen unless the Central Bank of Nigeria(CBN) puts urgent measures to stem the tide.

At some banks visited on Monday, many of their customers were seen complaining of inability to withdraw money across the counter, or through the Automated Teller Machine (ATM).

For customers who intended to make transfers, bank personnel resorted to guiding them on how to use the online fund transfer apps on their phones to achieve that, all aimed at de-congesting the banking halls.

In some banks, including First Bank, Diamond Bank and United Bank for Africa, long queues of customers were seen waiting to be attended to by the teller officers.

Most of the banks were also directing customers withdrawing less than N100,000, to use the ATM, but in most cases, only one out of five points were dispensing cash.

None of the banks agreed to give reasons for the development which was first noticed on Friday when more than 60 per cent of the banks were unable to honour interbank cheques on the excuse that their system was down.

However, unofficial comments by a branch manager of UBA, who pleaded for anonymity, said the CBN policy of mopping up excess liquidity in the system has seen most banks run short of cash.

“One of the measures put in place to check huge demand of dollars by banks is for CBN to be on the trail of the banks through frequent sale of Treasury Bills, almost on weekly basis,” the branch manager disclosed.

It would be recalled that the internal borrowing arrangement by both CBN and DMO between March and July 2017, had seen CBN and DMO sell Treasury Bills and Bonds, put at more than N2.46 trillion so far.

This does not include the permission granted some commercial banks to go for dollar-dominated external borrowing, at $500 million maximum.

These measures were put in place to enable government raise money with which to back up the $2.3 billion deficit in the 2017 Budget, said DMO official, Rufus Ogunsayo.

It was further learnt that the cash crunch situation may not ease off since the first week of August will see CBN have an auction sale of N35 billion in Treasury Bills, as a two-year paper life , while DMO is expected to go to the interbank market to sell N20 billion and N25 billion short-term investment bonds, though mostly targeting foreign investors.

When contacted, the CBN spokesman, Isaac Okorafor, speaking through an aide, dismissed the allegation that banks were forced to suffer cash scarcity because of their participation in Treasury Bill transactions.

“In the banking system, it is not strange to once in a while have a branch run short of cash which may lead it to alert its headquarters.

” Usually cash demands on Mondays ,being the beginning of weekday , tend to cause some distortions, but solution is always found,” he said.

However, the situation is expected to cause interbank lending rate to soar, which will likely be borne, through various charges, by the customers, said a banker.

Leave a Reply

Your email address will not be published. Required fields are marked *