Bank customers to earn more as CBN increases interest on savings deposits to 4.2%

The Central Bank of Nigeria (CBN) has directed banks to increase the minimum interest rate payable on savings deposits from 10 percent to 30 percent of the monetary policy rate (MPR).

By implication, bank customers operating local currency savings in the country would enjoy more interest.

The apex bank said this in a circular dated August 15, 2022, and signed by Haruna B. Mustafa, director of the banking supervision department.

The MPR — the baseline interest rate in an economy, every other interest rate used within an economy is built on it — is currently 14 percent.

Last month, the apex bank raised the MPR from 13 percent to 14 percent to curtail rising inflation. The inflation rate currently stood at a 17-year high of 19.64 percent in July.

With the new circular, bank customers can now make up to 4.2 percent interest on their savings deposit — up from 1.4 percent.

Mustafa explained that the apex bank made the decision owing to the current macroeconomic conditions.

He said the new interest rate on savings deposits became effective on August 1, 2022.

“It will be recalled that as part of the efforts to ameliorate the impact of the COVID 19 pandemic, the Central Bank of Nigeria reduced the minimum interest rates payable on local currency savings deposits from 30% to 10% of the monetary policy rate (MPR),” the circular reads.

“This was aimed at stimulating growth in the larger economy following 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.

“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.”