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Good news for Bank customers as CBN issues new directive

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Following the recent hike of interest rate in Nigeria to 15.5 percent by the Central Bank of Nigeria (CBN), the apex bank has issued a directive to banks to pay 4.65 percent interest on savings deposit accounts, an increase of 4.2 percent earlier.

The recent directive is due to the 150 basis point addition in monetary policy rates to 15.5 percent from 14 percent.

The CBN’s decision came from an increase in the interest rates on savings deposits, which could mop up excess liquidity in the system.

The CBN governor, Godwin Emefiele, announced the MPC changes on Tuesday, September 27, 2022, at its MPC meeting.

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The Monetary Policy Rate (MPR) is the rate at which the apex bank lends money to banks. It is a benchmark rate for lending in the financial services industry.

Savings deposit rates are rates that banks pay customers for keeping their money in the banks. Initially, the CBN kept the MPR at 14 percent, meaning a 30 percent increase to 4.2 percent.

Reports say that the CBN also increased the negotiable minimum interest rate on local currency savings deposits from 10 percent to 30 percent, effective August 1, 2022.

The increase in the interest rate on a savings deposit would boost savings and serve as a means of countermeasures to stem inflation.

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Investors lose money if the inflation rate outpaces interest generated on savings as high inflation erodes consumers’ purchasing powers over time.

Analysts have said that the CBN’s recent hike in interest rates could tame inflation, which is currently at a 17-year high of 20.52 percent.
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