CEM REPORT | The Central Bank of Nigeria (CBN) has ordered banks in Nigeria to pay an interest of at least 4.2%, to savings deposit accounts.
The new rate which takes effect from August 1st, CBN says is a result of the return to complete normalcy after taking into account the current macroeconomic conditions.
The new rate was communicated to banks in the country via a circular titled “Review Of Interest Rate On Savings Deposits”, dated August 15, 2022, and signed by CBN Director Of Banking Supervision, Haruna B. Mustafa.
The new rate will see banks revert from the present 1.4% to the new rate.
“It will be recalled that as part of the efforts to ameliorate the impact of the COVID 19 pandemic, the Central Bank of Nigeria reduced the minimum interest rates payable on local currency savings deposits from 30% to 10% of the Monetary Policy Rate (MPR). This was aimed at stimulating growth in the larger economy following the economic slowdown occasioned by the Pandemic.”
“Following the return to full normalcy and considering the prevailing macroeconomic conditions, it has become necessary to effect an upward adjustment of the interest rate payable on local currency savings deposits.”
“Accordingly, effective August 1, 2022, the negotiable minimum interest rate on local currency savings deposits shall be 30% of MPR. This supersedes our letter dated BSD/DIR/GEN/LAB/13/052 on the subject. September 1, 2020,”
Recall that the CBN recently increased the MPR from 13% to 14% in an effort to combat inflation, which reached a 17-year high of 19.64% in July 2020.
An increase in the interest rate on a savings deposit is typically expected to increase savings and serve as a form of contractionary monetary policy.