- Deposits in domiciliary accounts in commercial and merchant banks have risen since the devaluation of the naira
- Five commercial banks in Nigeria house about $29 billion since the beginning of June this year
- Analysts have called on the Nigerian government to create a window to harness the funds in the accounts
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The total balance in domiciliary accounts in commercial and merchant banks in Nigeria rose by more than a fifth in June 2023, according to data obtained from the Central Bank of Nigeria (CBN).
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The foreign currency lodgments, primarily in dollars, stood at N17.65 trillion in June, up from N10.72 trillion in May, CBN data revealed.
Naira crash boosts value of deposits in domiciliary accounts
When converted to the dollar, the amount rose by 21% to $28.92 billion at the exchange rate of N610.17 to a dollar as of June 2023 from $23.20 billion.
The naira exchanged at about N462.01 per dollar before the devaluation as of June 2023.
An analysis of the data showed that the increase was spurred by more deposits and devaluation, which boosted the value of Forex in domiciliary accounts.
The naira has crashed to its lowest across markets since the CBN began the FX reform, which floated the local currency.
Naira crashes in all markets despite FG;s interventions
As of November 9, 2023, the naira plunged to its lowest against the US dollar, exchanging for N996.75 per dollar.
The naira crash to N1,170 to a dollar in the parallel market, where it made a marginal recovery after crashing to N1,180 per dollar the previous day.
Experts have said the rise in the naira value of domiciliary account deposits was the primary factor driving banks’ deposit growth.
They say domiciliary accounts make up more than a third of deposits in the banking sector and are mostly sitting idle.
Experts advocate dollar-denominate assets
Daniel Kanu, a banker with one of the new-generation banks, asked the Nigerian authorities to create dollar-denominated savings that will be used to mop the FX in these accounts.
“It is not to convert them to naira but so that the government could access them to boost liquidity in the system.
“Nigeria needs all the foreign exchange it can get following the abysmal performance of the naira against the dollar.”
“These monies are in the banks either sitting idle or being used by the banks to transact businesses and declare mouthwatering profits instead of being converted so the economy can benefit.
“If we want to change the fortune of the naira, we need a creative approach. Why not create a dollar bond in Nigeria solely for domiciliary account holders so you could mop up these monies,” Kanu said.
BusinessDay reports that Nigeria’s external reserves stood at $33.41 billion as of November 7, 2023, down from $37.08 billion at the end of 2022, CBN says.
The apex bank announced the lifting of restrictions on domiciliary accounts on June 18, 2023, after its Bankers’ Committee meeting as measures to promote transparency, liquidity, and price discovery in the foreign exchange market to improve supply.
Top banks with highest domiciliary deposits
Nigeria’s five biggest lenders have seen their customers’ domiciliary deposits rise faster in 2023 as the money supply in Nigeria increases by more than a quarter.
The top banks with the highest domiciliary accounts are Zenith Bank, UBA, Access Bank, First Bank, and GTBank.
Nigerians’ dollar funds are trapped in domiciliary accounts as bank managers tell customers to go home
Legit.ng earlier reported that bank customers were unable to withdraw dollars from their domiciliary accounts amid scarcity of the currency in the financial services sector.
Managers in 10 commercial bank branches visited in Ikeja, Ejigbo, Ago Palace, and Airport Road all confirmed the unavailability of dollars for withdrawal over the counter.
With the situation, many Nigerians who work for foreign companies full-time or as freelancers have been left to take loans to survive.
Source: Legit.ng
