It has been reported that the Central Bank of Nigeria, CBN, has slit interest rate on transactions (deposits) on savings accounts from the previous benchmark.
According to the circular reportedly issued to all banks on August 31st, the per annum interests paid on all savings account has been reduced to 1.25% against the former rate of 3.75%.
The new policy is said to stimulate the economy and will be effective from today September 1, 2020. For more clarification, the new development means when you save money to your savings account, you will at the end of the year receive at least 1.25% as interest, Naija News understands.
Nairametrics reports that the move will allow smaller banks to grow faster and also make it easier for banks to cut lending rates to borrowers.
Parts of the circular read as follows; “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’ consequently reviewing rates to 10% of Monetary Policy Rates.”
“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.”
“Context: The Monetary Policy Rate (MPR) is the rate at which the CBN lends money to banks. It is a benchmark rate for lending in the financial services sector. MPR is currently 12.5%. Savings deposit rates are default rates banks pay customers for keeping their money in the banks. According to people familiar with CBN rate applications, the rate used to be 30% of MPR but has now been reduced further by the CBN. The savings deposits rate is mostly overlooked by Nigerians due to its historical low rate. CBN websites put the rate at about 3%.”
Meanwhile, Nigeria’s foreign reserve recorded a progressive growth within the last 7 days as it increased $70m from $35.59bn as of August 20 to $35.66bn on August 27, the latest figures from the Central Bank of Nigeria have shown.