Banks Lose Appetite For State, LG Funds As 75% CRR Limits Lending

Banks are holding less money for state and local governments, months after the Central Bank of Nigeria (CBN) made it costlier to keep such funds.
Following the CBN’s implementation of the 75 per cent cash reserve requirement on non-TSA accounts last year as a measure to curb the liquidity surge in the country, deposits by state and local governments in commercial and merchant banks have begun to dwindle.
Data from the CBN show that deposits of state and local governments in commercial and merchant banks fell to N2.668 trillion at the end of the first quarter of 2026. That is 13.4 per cent lower than the N3.082 trillion recorded in the same period of 2025.
The drop follows the CBN’s ...