The Central Bank of Nigeria (CBN) has instructed an upward adjustment of the minimum interest rate payable on local currency savings deposits. This review which is effective from August 1, 2022 means that savings deposits with the banks will now attract a 4.2 percent interest, up from the previous 1.4 percent.
This was disclosed in a CBN circular seen by Rate Captain and dated August 15, 2022. Extract from the circular reads as follows:
“It will be recalled that as part of the effort 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.”
“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.”
“Accordingly, effective August 1, 2022, the negotiable minimum interest rate on local currency savings deposits shall be 30% of the MPR.”
The CBN stated that this directive supersedes the later dated September 1, 2020, referenced BSD/DIR/GEN/LAD/13/052 on the subject.
What you need to know
- The monetary policy rate (MPR) is the baseline interest rate in Nigeria, every other interest rate used within the economy is built on it. It is the rate at which the CBN lends money to commercial banks.
- Savings deposit rates are the rates banks pay customers for keeping money in the bank for a particular period.
- The Monetary Policy Rate is currently 14 percent. This means when you deposit money in your savings account in the bank for a particular duration, you will earn 4.2 percent (30 percent of MPR) interest on your savings deposit.
- Considering the inflation rate in the country, this hike in the savings deposit rate is still insignificant as it cannot compensate for inflationary pressures in the country.
