Domiciliary Account Balance Hits $29bn as Naira Falls to Lowest in History at Official Market
Deposits in domiciliary accounts in commercial and merchant banks have increased the devaluation of the Naira.
Five commercial banks in Nigeria have given about $29 billion since the beginning of June this year.
Analysts have called on the Nigerian government to create a window to tackle the funds in the accounts.
The total balance in domiciliary accounts in commercial and merchant banks in Nigeria increased by more than a fifth in June 2023, according to data obtained from the Central Bank of Nigeria (CBN).
The CBN data was disclosed, it shows that the foreign currency lodgment, primarily in dollars, was at N17. 65 trillion in June, up from N10. 72 trillion in May.
Naira Crash Boosts Value of Deposits in Domiciliary Accounts
When converted to the dollar, the amount increased by 21% to $28. 92 billion at the exchange rate of N610. 17 to a dollar as of June 2023 from $23.20 billion.
Before the devaluation of the naira as of June 2023, the naira exchanged at about N462. 01. The analysis of the days showed that the rise was spurred by more deposits and devaluation, which boosted the value of Fore in domiciliary accounts.
Since the CBN began the FX reform, which floated the domestic currency, the naira has crashed to its lowest across markets.
Naira Crashes in all Markets Despite Federal Government’s Interventions
The Naira dived to its lowest against the US, exchanging for N996. 75 per dollar as of November 9, 2023.
The Naira crashed to N1,170 a dollar in the parallel market where it made a marginal recovery after crashing to N1,180 per dollar the previous day.
Experts said that the increase in the naira value of domiciliary account deposits was the primary factor leading bank’s deposit growth.
They stated that domiciliary accounts make up more than deposits in the banking sector and are mostly staying idle.
Experts Advocate Dollar-Denominated 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.
His statement is as follows:
“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”.
A report that CBN says, Nigeria’s external reserves were at $33.41 billion as of November 7, 2023, down from $37.08 billion at the end of 2022.
The apex bank declared the lifting of restrictions on domiciliary accounts on June 8, 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 highest five lenders have seen their customers’ domiciliary deposits increase faster in 2023 as the money supply in Nigeria rises by more than a quarter.
The top banks that have 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.
Earlier reported that bank customers were not able to withdraw dollars from their domiciliary accounts due to scarcity of currency in the financial services sector.