CBN Reduces Interest Rates on Savings Deposit
The Central Bank of Nigeria (CBN) has reviewed downward the minimum interest payable on savings deposit accounts to further deepen credit to the real economy.
The bank said he noticed with satisfaction the decline in market rates in the banking sector after it implemented numerous policies to stimulate credit flow to the real sector of the economy.
CBN said starting from September 1, 2020 no bank must pay less than 10 percent of the 12.5 percent monetary policy rate on savings deposit. Meaning, financial institutions will now be paying around 1.25 percent on savings deposit but not the old rate of 3.75 percent or 30 percent of Monetary Policy.
The central bank instituted the policy to increase investment in the real sector and discourage savings given the high unemployment rate and falling economic growth. Also, this is in line with the Loan-Deposit-Ratio of 65 percent implemented last year to ensure deposit money banks increase credit to the private sector and the exclusion of non-bank corporates from Open Market Operations (OMO) auctions.
The central bank said it “noted with satisfaction the recent declining trend in market rates in the banking sector, following the implementation of policies aimed among others at stimulating credit flow to the real sector.”
In a statement signed by Bello Hassan, Director of Banking Supervision and released on September 01, 2020, the apex bank said the decision is in line with its Guide to Charges by Banks, Other Financial and Non-Bank Financial Institutions issued in December 2019.
It said “Consequently, all deposit money banks are hereby informed that effective September 1, 2020 interest on local currency savings deposits shall be negotiable subject to a minimum of 10 percent per annum of Monetary Policy Rate.
“This letter supersedes that of August 31, 2020 referenced BSD/DIR/GEN/LAB/13/051 on the same subject.”
Investors King’s Note: Banks’ customers, starting from today, will now earn at least 1.25 percent per annum on their savings deposit accounts. Suggesting that customers will be earning less than 10 percent of the current inflation rate of 12.82 percent and just about 10 percent of the monetary policy rate of 12.5 percent while financial institutions continue to collect over 20 percent per annum from customers borrowing the same deposits.
