By Francis Akinnodi
Economic and financial experts have attributed the surge in bank deposits to the Federal Government’s borrowings and devaluation of naira.
Other factors include: The push for financial inclusion to boost the naira equivalent of the dollars in domiciliary accounts and increased federal allocations to states following the devaluation of the naira.
Nigeria’s five biggest banks have recorded deposits growth by N15.7 trillion in the first nine months of this year to N53.34 trillion, compared to an increase of N4.47 trillion in the same period of 2022, data from the financial statements show.
Money supply in the economy hit a record high of N67.28 trillion in September, up from N52.16 trillion at the end of last year, according to the Central Bank of Nigeria (CBN).
Speaking with The Hope, President of Nigerian Economic Society, Professor Adeola Adenikinju said the recent devaluation has boosted the naira value of deposits in domiciliary accounts.
“The naira has moved from about 460 to a dollar before June, when they (CBN) tried to do a convergence, to about 800/$ at the I&E window. That in itself has almost doubled the value of the domiciliary accounts in naira terms. I think that is the major factor driving the deposit growth.”
According to him, domiciliary accounts constitute more than a third of deposits in the banking sector and a large portion is sitting idle.
Adenikinju disagreed with the suggestion in some quarters that the government should convert the money in those accounts to naira. “I think that would do a lot more damage to the economy because it would just hamper free flow of dollars.”
He, however, said the federal government’s borrowing from the central bank could also be responsible for the deposit growth because “every spending would affect both savings and consumption.”
CBN data show that in the first half of this year, the federal government borrowed N2.99 trillion from the Ways and Means Advances, a loan facility used by the apex bank to finance the government in periods of temporary budget shortfalls subject to limits imposed by law.
Also, a professor of Economics, Timothy Awe said the central bank’s loans have pushed up money supply in the country, adding that the increase in customer’s deposits has helped boost banks’ profitability.
He said a likely uptick in economic activities post-election may have also boosted bank deposits.
“If deposits are increasing, I think it’s good for the economy. It’s good for financial inclusion, that means more people are coming into the financial system. It is good for financial intermediation because the more money that goes through the system, the better.”