Data from the Central Bank of Nigeria (CBN), shows that demand deposits dropped from N20.12trillion in January 2023 to N19.91trillion by March.
This was as the masses continue to make huge withdrawals from deposit money banks, bringing total amount of demand deposits to drop by N210bn between January and March 202
According to the Corporate Finance Institute, a demand deposit is money deposited into a bank account with funds that can be withdrawn on-demand at any time.
Meaning the depositor would typically use demand deposit funds to pay everyday expenses.
The Corporate Finance Institute also states that many people would make large withdrawals from the bank during a financial crisis.
Going by the CBN data, “The withdrawals will lead to a decline in demand deposits and a decrease in the money supply, with banks left with less money to loan out.”
The large withdrawal was triggered by the naira redesign policy of the CBN, which led to cash crunch in the country.
The policy seemed to have led to a lack of trust in the banking system, with Nigerians making large withdrawals and hoarding cash, contrary to the withdrawal limits introduced by the CBN.
Analysing a circular the CBN issued on December 6, it had said that with effect from January 9, 2023, the maximum over-the-counter cash withdrawal limit by individuals and corporate organizations per week, would be N100,000 and N500,000 respectively,
It states that withdrawals above these limits would attract processing fees of five per cent and 10 per cent respectively.
It further adds that the maximum cash withdrawal per week via Automated Teller Machines (ATM) from January 9 would be N100,000, subject to a maximum of N20,000 cash withdrawal per day.
Writing by Julian Osamoto; Editing by Adeniyi Bakare