Central Bank of Nigeria deduct N484.5 billion for CRR from Union Bank

In the six months interim result reported by Union bank, the bank revealed that the central bank has increased its total cash reserves requirement from N296 billion to N484.5 billion from the month of July to December. This shows that the CRR charges increased by N188 billion in just six months. 

Also, the bank reported that its customers' deposit from January to June is only a little more than $1 trillion. This implies that the bank would forfeit almost 50% of the customers' deposit as CRR charges. 

Union Bank CRR Debit

On the 23rd and 24th of January this year, the Central Bank of Nigeria had its monetary policy committee meeting where the decision was made to increase the CRR charges on banks from 22.5% to 27.5%. The CRR is the money paid by banks to CBN for keeping cash on behalf of the banks. CRR charges are in compliance with the monetary policy objectives. 

According to Union Banks, as of June 30, CBN had charged the bank N484.5 billion for CRR and has refused to release the money. 

Furthermore, in the report submitted, Union bank reported a CRR charge of N365.8 billion which revealed that an additional N118.7 was debited from the period of April to June compared to the period before this time where the charges were only N70 billion. 

Aside from this, Nairametric reported that in the month of April alone, the CBN debited a CRR charge of N1.4 trillion from banks, with Union Bank debited by about N49 billion. Banks were also debited in the following months. 

The move by CBN was quite a shocking one, especially because the huge CRR payment came in a period where the banks are still grappling with the ravaging effect of the pandemic on their economy. Charging and deducting such an almost from banks in a period like this is quite harsh. The banks had expected a form of consideration from CBN but as it is, Central Bank has refused to show any mercy in its operation. The reason for this, according to CBN is because of the recent inflation pressure in the country's economy. Notwithstanding, the current financial pressure caused by the pandemic is suffered by both sectors. Banks are also a victim of the pandemic.

2020 Q2 Report

In the quarter report submitted by Union Banks in June, the bank reported a pre-tax profit of N5.1 billion compared to the same period in 2019 when it made N6.1 billion. Some of the details in the report include:

• N680 loan impairment. This shows that most of the borrowers from the bank honored their payment as at when due. 

• As of June 27, the bank earning per share is 37kobo. This is the same as last year's earning per share.

According to Emeka Emuwa, the Bank’s CEO, “The impact of COVID-19 and associated movement restrictions on the Bank and the wider economy has been broad. The total lockdown of major commercial centers Lagos, Abuja, and Ogun and partial lockdowns across the country, slowed business operations in Q2 2020. The slowdown limited growth in key income lines including fees and commissions and cash recoveries.”