of Nigeria (CBN) that saw the mandatory 50 percent Cash Reserve Requirement for public sector deposits, indications have emerged that the law has resulted in severe cash squeeze for commercial banks.

The Monetary Policy Committee (MPC) convergence in July resolved to place a 50 percent reserve on funds in commercial banks deposited by all tiers of government, ministries, and agencies.

The reserve, which would have hitherto been available for loans, has reportedly led to a hitch for financial institutions, with interbank lending rates alone climbing to 44 percent, an apparent hike from its previous 28 percent, as the lenders start to battle liquidity problems and low excess cash, according to local newspaper, ThisDay.

The cash reserve which sets the minimum amount banks must always maintain – rather than lend out – are normally in the form of cash stored physically in a bank vault or in CBN care.

In a related development, reports have emerged that the Asset Management Corporation of Nigeria (AMCON) would soon start collecting its annual levies for commercial banks.

“In addition, we hear AMCON may be looking to collect its annual levies from banks, these would place more pressure on already ill-liquidity banks” an analyst from Renaissance Capital stated.

He however noted that cash solid banks like GTBank, Zenith Bank, UBA and Fidelity would adapt easily as a result of their good balance sheets.