80% of First HoldCo’s Cash Locked in CRR as Lending Slows

First HoldCo Plc had about 80 per cent of its cash and central bank balances locked up as mandatory reserves as of September 30, 2026, limiting funds available for lending and daily operations even as the group expanded its deposits and raised fresh capital.

The group’s Q3 2026 financial statements show that it held ₦5.65 trillion in cash and central bank balances, of which ₦4.52 trillion was held as mandatory Cash Reserve Requirement (CRR) deposits, leaving ₦1.13 trillion outside those restricted balances.

The CBN requires banks to keep a prescribed portion of eligible deposits as CRR with it, and because these funds are restricted, banks cannot freely deploy them for customer lending or routine payments.

First HoldCo’s restricted reserves increased from ₦4.14 trillion at the end of 2025 to ₦4.52 trillion in September 2026.

The additional ₦372.32 billion absorbed its operating cash flow during the nine months, adding to the pressure on available liquidity.

The development raises questions about how effectively the bank is converting its expanded funding base into credit for businesses, particularly manufacturers and other real-sector operators that need financing to expand production and invest in equipment.

Customer deposits grew by ₦4.03 trillion to ₦22.91 trillion during the period; however, net cash absorbed by customer lending fell to ₦306.41 billion in the review period, from ₦774.99 billion in the corresponding period of 2025.

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Although net loans and advances increased by 4.76 per cent, or ₦427.38 billion, to ₦9.39 trillion from ₦8.97 trillion at the end of 2025, the cash flow figures indicate a slower pace of cash deployment into lending than a year earlier.

Fresh capital, more securities

The slower lending pace comes after First HoldCo raised ₦44.51 billion through a private placement in March 2026.

The group’s total equity increased to ₦3.86 trillion from ₦3.30 trillion at the end of 2025, while its deposit base also expanded.

However, stronger capital does not automatically translate into an equivalent amount of loanable funds.

While capital helps banks absorb losses and support their capacity to take risks, liquidity determines how readily they can access funds to meet obligations and finance activities.

The First HoldCo’s results show that investment securities expanded substantially during the period.

Securities held at fair value through other comprehensive income and at amortised cost rose by 47.9 per cent, or ₦3.34 trillion, from ₦6.97 trillion at the end of 2025 to ₦10.31 trillion in September 2026.

Financial assets measured at fair value through profit or loss, consisting mostly of debt securities, also increased from ₦1.14 trillion to ₦2.22 trillion.

The pattern echoes an earlier Pinnacle Daily analysis, which compared the group’s growing securities portfolio with its lending activity.

The Q3 figures show a similar tension between investment growth and customer credit expansion, without establishing, however, that CRR alone caused the shift towards securities, as banks also consider credit risks, funding costs and the returns available from alternative assets.

Recapitalisation’s real-sector test

The question of whether stronger banks will finance more productive businesses was also raised in Pinnacle Daily’s report, “Recapitalisation Alone Won’t Grow Economy Without Real Sector Credit — Expert”.

In the report, PR consultant Ummie Kabir argued that recapitalisation should be assessed by the extent to which banks support agriculture, manufacturing and small businesses, rather than by the size of their balance sheets alone.

“The dominant view among the SMEs, manufacturers and genuine farmers is that banks prefer low-risk lending to the government and oil and gas sector,” she said.

Kabir attributed the preference partly to attractive returns on government securities and economic uncertainty that raises the risks of lending to businesses.

She also warned that stronger capital would not automatically solve the real sector’s financing problems.

Her comments provide context for First HoldCo’s expanding securities portfolio, although the group’s financial statements alone cannot establish the reasons behind its investment decisions.

The concern is also reflected in the Centre for the Promotion of Private Enterprise’s assessment, reported in “Banks’ Recapitalisation Wins Mean Little Without Business Lending, CPPE Warns”.

CPPE chief executive Muda Yusuf said the ultimate success of recapitalisation would depend on whether stronger banks support businesses and productive investment.

“The ultimate success of this reform will be determined not just by stronger balance sheets but by the extent to which the banking system supports investment, enterprise, job creation and economic transformation,” Yusuf said.

Manufacturers need longer-term credit

First, HoldCo’s loan composition adds another dimension to the concern. Its term loans declined slightly from ₦8.24 trillion at the end of 2025 to ₦8.20 trillion in September 2026. Project finance loans fell from ₦1.08 billion to ₦673 million, while overdrafts increased from ₦983.83 billion to ₦1.32 trillion.

Overdrafts typically support short-term working-capital needs, such as paying suppliers and meeting operating expenses. Term loans are more suited to investments that require time to generate returns, including factory expansion and equipment purchases.

The figures therefore suggest that growth in customer credit was concentrated more in overdrafts than in term lending, without showing how much that went to individual industries, but the decline in term loans raises questions about the availability of longer-term financing for productive investment.

Other earlier analysis, “5 Years of FUGAZ Lending: Banks Gave Manufacturers ₦4tn, Oil & Gas Got 3 Times More”, provides further context.

It found that First HoldCo’s manufacturing loans increased from ₦251.5 billion in 2021 to ₦867.4 billion in 2025, but manufacturing’s share of its total lending declined to 9.9 per cent in 2025.

The report also cited manufacturers’ calls for cheaper, longer-term financing to support production. This matters because rising total lending does not necessarily mean that businesses requiring substantial capital investment are receiving a larger share of credit.

From stronger banks to stronger businesses

First HoldCo’s Q3 results, therefore, highlight the challenge of translating recapitalisation and deposit growth into stronger lending.

While about ₦4.52 trillion of its ₦5.65 trillion in cash and central bank balances was held as mandatory reserves, investment securities expanded, and cash deployment into customer lending slowed compared with the previous year.

The broader test is whether stronger capital positions can support more accessible and appropriate financing for businesses, as the expert views suggest recapitalisation strengthens banks, but its wider economic value depends on how effectively their resources support productive investment.

For First HoldCo, the central question is whether its expanded balance sheet can translate into stronger lending to businesses while meeting regulatory requirements and managing risk.