By John Ikani
The Central Bank of Nigeria (CBN) has ordered banks in Nigeria to pay savings deposit accounts an interest rate of at least 4.2%, an increase from the 1.4% previously received.
This was disclosed in a letter to all banks titled “review of interest rate on savings deposits”, dated August 15, 2022, and signed by Haruna Mustafa, director of banking supervision.
According to the apex bank, the hike in savings interest rates, which is effective from August 1, was made in light of the return to complete normalcy after taking into account the current macroeconomic conditions.
Why the increase became necessary
Nigeria’s headline inflation surged to 19.64 percent in July 2022 on a year-on-year basis, the highest in 16 years and 10 months, according to data from the National Bureau of Statistics (NBS).
In September 2020, the CBN reduced the minimum interest rate payable on local currency savings deposits from 30 percent to 10 percent of MPR, as part of efforts to ameliorate the impact of Covid-19 pandemic.
This, according to the banking sector regulator, was aimed at stimulating growth in the larger economy showing 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, the CBN said in the letter.
“Accordingly, effective August 1, 2022, the negotiable minimum interest rate on local currency savings deposits shall be 30% of MPR. This supersedes our letter dated BSD/DIR/GEN/LAB/13/052 on the subject. September 1, 2020,” the CBN said.
