Following a 250 basis points increase in interest rate to 14%, the Central Bank of Nigeria (CBN) has now increased the minimum interest rate payable on savings deposits from 0.15% to 4.2%.

The apex bank stated this in a letter titled ‘Review of interest rate on savings deposits’ and signed by Haruna Mustafa, director of banking supervision.

According to the letter, effective August 1, 2022 minimum interest rate on local currency savings deposits should be reviewed upward to 30% of the Monetary Policy Rate.

The CBN lowered the interest rate on savings deposits from 30% to 10% in September 2020 to help financial services providers manage the impact of COVID-19 better. However, the persistent increase in the inflation rate to 19.64% in the month of July has compelled the apex bank to start making adjustments to its monetary policy.

In the last two months, CBN has raised interest rate by 250 basis points to 14% in an effort to curtail the inflation rate, increased interest on intervention loans from 5% to 9% and now revised upward interest on savings deposits.

The central bank attributed the adjustments in interest rate to economic recovery post-Covid. However, all fingers point to consumer prices struggle.

“However, 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,” the CBN said in the letter.

Uche Uwaleke, professor of Capital Market at the Nasarawa State University Keffi, said: “It is a good thing the CBN has done so because the gap between savings and lending rates is so wide and discourages savings.”

He was concerned that each time the MPC increases the MPR, commercial banks tend to increase their lending rates without a corresponding increase in savings rate.

“With a savings rate floor of 4.2 percent, I expect to see increased volume of savings and, by extension, credit to the economy,” he said.

The Central Bank of Nigeria (CBN) has increased interest rates on all its intervention loans by 4% from 5% to 9% per annum to ease the nation’s record high inflation rate.

Chibuzo Efobi, director of financial policy and regulations department of the CBN, disclosed in a circular to all banks and Other Financial Institutions (OFIs) dated August 17, 2022.

CBN had reduced interest rates on intervention loans from 9% to 5% per annum in the first quarter of 2020 to help curtail the impact of COVID-19 on businesses and the Nigerian economy at large.

However, the nation’s almost 20% inflation rate despite efforts to halt price increase has forced CBN to start mopping currency in circulation. One of the initiatives introduced in the last two months was to return interest on intervention loans.

This was announced just two days after the apex bank reviewed upward the minimum interest rate payable on savings deposits from 0.15% to 4.2%, 30% of the Monetary Policy Rate (MPR).

In the last two months, the CBN has risen the interest rate by 250 basis points to 14%, increase interest on intervention loans and raised minimum interest rate on savings deposits to contain inflationary pressure.

Nigeria’s inflation rose to 19.6% in the month of July as the value of the Nigerian Naira took a hit against global currency amid rising demand for the United States Dollar in an economy that depends on imports for most of its consumption.

This pushed prices of imported goods or locally made goods with imported items to a record-high as businesses were forced pass to increase in cost to final consumers.

The Central Bank of Nigeria (CBN) has announced plans to launch the Unstructured Supplementary Service Data (USSD) code for eNaira transactions next week.

Godwin Emefiele, the governor of CBN, disclosed this at the Grand Finale of the 2022 eNaira Hackathon held in Abuja on Thursday.

The eNaira is the Central Bank of Nigeria’s virtual currency, basically a digital form of the Nigerian Naira.

According to Emefiele, Nigerians can also open an eNaira wallet on any mobile phone via a designated USSD code. Explaining the process, the CBN governor said Nigerians only need to dial *997# on their mobile phones to perform transactions.

He said “Nigerians, both banked and unbanked, will be able to open an eNaira wallet and conduct transactions by simply dialling *997 from their phones.

“Shortly after this, both merchants and consumers with bank accounts can use the NIBSS Instant Payment (NIP) to transfer and receive eNaira to any bank account.

“This will further deepen the integration of the eNaira with the existing national payment infrastructure”.

“The CBN will increase the level of Financial Inclusion in the Country because just like the Naira, the eNaira is expected to be accessible to all Nigerians. And would provide more possibilities to bring in the unbanked into the digital economy.”

In May 2022, Emefiele said central banks from various African nations and across the world are now studying Nigeria’s eNaira project.

Emefiele said, “We feel delighted with what we are doing in the area of the Central Bank Digital Currency, CBDC. What we are doing in the area of eNaira is attracting the interest of different countries in the world,” Emefiele said during an experience-sharing tour of the CBN’s CBDC (eNaira) by officials of the Bank of Uganda in Abuja.