CBN fixes interest rate payable on deposits at 10%
By Oludare Mayowa
The Central Bank of Nigeria (CBN) on Tuesday fixed the minimum interest rate payable on savings deposit with banks at 10 percent per annum of its benchmark interest rate from September 1, according to a circular signed by the regulator’s Director of banking supervision, Bello Hassan.
The CBN said the interest rate payable on savings deposits, however, “shall be negotiable subject to a minimum of 10% per annum of Monetary Policy Rate.”
“The Central Bank of Nigeria (CBN) has noted with satisfaction the recent declining trend in market rate in the banking sector following the implementation of policies aimed amongst others, at stimulating credit flow to the real sector.
“In line with recent market developments, the Bank has reviewed the minimum interest payable on savings deposits as provided in its Guide to Charges by Banks, Other Financial and Non-Bank Financial Institution issued in December 2019.
“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% per annum of Monetary Policy Rate.
“The Letter supersedes that of August 31, 2020 referenced BSD/DIR/GEN/LAB/13/051 on the subject,” Hassan wrote in the circular.
Commercial lenders have crashed interest payable on customers’ deposits at below 1 percent in recent times after yields on fixed-income assets, such as Treasury bills and bonds fell to single digits.
However, many depositors have decried the actions of banks over the low yields on deposits as the disparity between deposits rate and the rate banks lend money to customers has grown wider.
The CBN move to peg the interest rate payable on savings deposits is considered as the right step in the right direction by depositors who are losing value on their money due to the rising inflation rate.
Nigeria’s inflation rate rose to 12.82 percent in July from 12.56 percent while the CBN held its Monetary Policy Rate (MPR), which is the benchmark interest rate in the economy at 12.5 percent at the last Monetary Policy Committee (MPC) meeting.