CBN INCREASES INTEREST RATE ON SAVINGS DEPOSIT TO 4.2%

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The minimum interest rate on savings deposits has been increased by the Central Bank of Nigeria (CBN) to 4.2 percent from 0.15 percent, which is equal to 30 percent of the Monetary Policy Rate (MPR).

This information was provided in a letter from the director of banking supervision, Haruna Mustafa, dated August 15, 2022, addressed to all banks and captioned “review of interest rates on savings accounts.”

The letter therefore recommended that the negotiable minimum interest rate on local currency savings accounts be set at 30% of the Monetary Policy Rate as of August 1, 2022.

The MPR, CBN’s benchmark interest rate, was raised by 250 basis points to 14 percent in less than two months of this year.

The Monetary Policy Committee (MPC) decided to make the change in order to stop the nation’s increasing inflation rate from outpacing global trends.

According to figures from the National Bureau of Statistics, Nigeria’s headline inflation soared to 19.64 percent in July 2022 on a year-over-year basis, the most in 16 years and 10 months (NBS).

As part of its efforts to lessen the effects of the COVID-19 pandemic, the CBN cut the minimum interest rate payable on local currency savings accounts in September 2020 from 30% to 10% of MPR.

The banking sector regulator claims that this was done to stimulate growth in the overall economy and counteract the pandemic-related downturn.