By Samuel Bankole
Nigerian banks are now wooing customers with high-interest rates on their savings deposits in a bid to attract more deposits, boost liquidity, and increase their customer base as a way of expanding their lending portfolio.
The move by commercial lenders was in tandem with the recent hike in the Monetary Policy Rate (MPR) to 18.75 percent from 18.50 percent previously at the last meeting of the Monetary Policy Committee (MPC).
With the increase in MPR, which is the benchmark interest on which banks, other commercial lenders, and other operators in the financial sector are also expected to anchor their own rates, both lending and interest yields will increase.
Despite the hike in the MPR, the interest rate in Nigeria’s financial sector remains negative relative to the inflation rate, which stood at 22.79 percent in June compared with the 18.75 percent anchor rate.
However, banks are moving to lure more depositors to put more of their surplus money in their savings accounts and not on other investment assets.
Analysts said the decision to increase savings depot interest rates by banks is also in tandem with the Central Bank of Nigeria (CBN) circular last year, which directed banks to anchor their savings interest rates at 30 percent of their benchmark rate.
This means that banks should benchmark their savings interest rate at 30 percent of the 18.75 percent MPR.
Banks such as Ecobank, Stanbic IBTC, Standard Chartered, GTCO, and other lenders are already wooing their customers with higher interest rates on their deposits in a bid to attract more deposits from customers.
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They are also placing a limit on the number of times customers could withdraw from such an account in a month to be able to qualify for the higher interest yields.
A circular issued by the regulatory bank in August last year and signed by its director of banking supervision, Haruna Mustafa, stated that “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”, the CBN said in a circular dated August 15, 2022, titled “Review of Interest Rate on Savings Deposits.”
In various emails to their customers, banks notify them of the decision to increase the savings interest rate to align with the recent hike in the CBN benchmark rate.
For instance, Standard Chartered Bank wrote in an email to customers that “We are pleased to confirm that the interest rates on our Savings accounts have been revised upwards.
“Please note that credit interest is computed on daily account balances, and withdrawals are limited to 4 per month to qualify for interest payment.”
Another email from Stanbic IBTC Bank stated that “Dear Esteemed Client, following the recent upward review of the Monetary Policy Rate by the Central Bank of Nigeria (from 18.50% per annum to 18.75% per annum), please be informed that all product offerings linked to the Monetary Policy Rate will be adjusted accordingly. This is effective from July 25, 2023.”
Though the borrowing rate on the interbank market has gradually receded in the past few weeks due to liquidity shortages in the money market, banks are not relenting in their drive for more deposits to bring liquidity to the system.
The interest rate on the interbank market closed marginally higher on Thursday but still far below the benchmark interest rate of 18.75 percent pegged at the last MPC meeting.
The Overnight (O/N) rate increased by 0.21 percent to close at 1.57 percent as against the previous close of 1.36 percent, while the Open Repo (OPR) rate increased by 0.14 percent to close at 1.07 percent compared to 0.93 percent on the previous day.
(Edited by Oludare Mayowa; omayowa@globalfinancialdigest.com; Newsroom: +234 8033 964 138)
