Nigeria’s central bank raises interest rates on savings deposits to 4.2%

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The Central Bank of Nigeria (CBN) has ordered Nigerian banks to pay savings deposit accounts an interest rate of at least 4.2%, an increase from the 1.4% previously charged.

This was contained in a circular seen by Nairametrics, dated August 15, 2022, titled “Review of Interest Rate on Savings Deposits” and signed by Haruna B. Mustafa, Director of Banking Supervision.

According to the apex bank, the increase in savings interest rates, which has been effective since August 1, was carried out in view of the return to complete normality after taking into account current macroeconomic conditions.

What the CBN says

The circular indicates “It should be recalled that as part of efforts to mitigate the impact of the COVID 19 pandemic, the Central Bank of Nigeria has reduced the minimum interest rates payable on local currency savings deposits by 30% 10% of the monetary policy rate (MPR). This was intended to stimulate growth in the economy as a whole following the economic downturn occasioned by the pandemic.

The apex bank noted that Nigeria has returned to economic normalcy, the bank said “after the return to full normalcy and given the prevailing macro-economic conditions, it became necessary to make an upward adjustment in the interest rate. ‘interest payable on savings deposits in local currency’.

The news continues after this announcement




“As a result, from 1 August 2022, the minimum negotiable interest rate on savings deposits in local currency will be 30% of the MPR. This supersedes our letter dated BSD/DIR/GEN/LAB/13/052 on the subject. September 1, 2020,” the CBN said.

What you should know

  • The monetary policy rate (MPR) is the base interest rate of an economy. It serves as a benchmark for lending in the financial services industry.
  • The CBN recently raised the MPR from 13% to 14% in an effort to curb inflation, which hit a 17-year high of 19.64% in July 2020.
  • Savings deposit rates are the interest rates that banks charge customers to keep their money in their accounts. It is generally expected that an increase in the interest rate on a savings deposit will increase savings and serve as a form of restrictive monetary policy.
  • However, since inflation has exceeded all of these rates, any money saved loses purchasing power over time.

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