CBN directs banks to review interest rate on savings deposits

The Central Bank of Nigeria (CBN) has directed banks in Nigeria to start paying savings deposit accounts at an interest rate of, at least, 4.2 percent, up from 1.4 percent.

The figure shows a percentage increase of 66. 7 percent.

The CBN made this known in a circular issued and dated August 15, 2022, titled, ‘Review Of Interest Rate On Savings Deposits’, and signed by its Director Of Banking Supervision, Haruna B. Mustafa.

According to the apex bank, the hike in the rate, which became effective from August 1, was made after taking into account the current macroeconomic conditions.

The circular read, “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 percent to 10 percent 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 percent of MPR. This supersedes our letter dated BSD/DIR/GEN/LAB/13/052 on the subject. September 1, 2020.”

Reactions have been trailing the development, as analysts knowledgeable about the economy saw the move as an effort by the apex bank to ameliorate the effects of soaring inflation on bank customers.

But an economic analyst with Arise Television, Chika Mbonu, seemed not particularly impressed by the CBN move, saying, “No matter whatever interest rate the CBN puts on savings, inflationary pressure is already eroding the savings.”

Mbonu stressed that Nigeria, being an import-dependent economy, had depended so much on foreign exchange, which he said had put the naira under constant pressure.

“We need structural reforms on the overall economy in Nigeria Ports Authority (NPA), Nigeria Customs Service (NSC), and Nigerian Maritime Administration and Safety Agency, (NIMASA) to ensure we save up more foreign exchange for the economy,” he said.

Another economist, Michael Ani, told THE ICIR that the initiative would not deter Nigerians’ appetite for “dollarisation” as the naira continued on a downward spiral.

“The appetite for savings won’t be there much because of inflation. Some may, however, look at treasury bills, government bonds, and commercial paper,” Ani said.