CBN Chops Interest Rate on Savings Deposit to 1.25%

By Dipo Olowookere

The minimum interest rate to be paid by deposit money banks (DMBs) in Nigeria to their customers for deposits has been reviewed downward to 1.25 per cent per annum.

The chopping of the rate was announced by the Central Bank of Nigeria (CBN), the agency saddled with the responsibility of regulating the banking industry in the country.

A circular signed by the Director of Banking Supervision at the CBN, Mr Bello Hassan, dated Tuesday, September 1, 2020, disclosed that the effective date for the new interest rate is today.

The notice addressed to all banks in the country specifically said the interest rate on savings deposit will be 10 per cent of the benchmark interest, the Monetary Policy Rate (MPR), which is presently at 12.50 per cent.

The 12.50 per cent MPR was retained at the last Monetary Policy Committee (MPC) meeting of the central bank held in July 2020.

The CBN had said most members of the committee voted to leave the benchmark interest rate at 12.50 per cent because “loosening monetary policy stance would provide the succour for stimulating output growth and rapid recovery but with implications for domestic private investment and capital mobilisation to support the huge domestic financing gap.”

In the circular today, Mr Hassan said, “The Central Bank of Nigeria has noted with satisfaction the recent declining trend in market rates in the banking sector following the implementation of policies aimed amongst others, at stimulating credit flow to the real sector.

“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, other financial and non-bank financial institutions issued in December 2019.

“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 cent per annum of Monetary Policy Rate.

“This letter supersedes that of August 31, 2020, referenced BSD/DIR/GEN/LAB/13/051 on the same subject.”

To put this in reality, a customer who deposits the sum of N200,000 in any local bank will get about N208 as interest in a month from September 1, 2020.