The Central Bank of Nigeria (CBN) has directed all deposit money banks that effective Tuesday, September 1, 2020 interest on local currency savings deposits shall be negotiable subject to a minimum of 10 percent per annum of Monetary Policy Rate. This takes the savings interest rate from 3.9 percent to 1.25 percent per annum and 0.104 percent per month which the bank customer gets if he or she has not withdrawn from the savings deposit more than three times a month.
In an August 31 letter to all banks signed by Bello Hassan, Director of Banking Supervision, CBN said it noted with satisfaction the recent declining trend in market rates in the banking sector, following the implementation of policies aimed among others at, stimulating credit flow to the real sector.
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“In line with the 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 2020”, CBN said in the letter.
An industry analyst told BusinessDay that “Whilst this helps banks to reduce their cost of funds, it further undermines the savings appetite of Nigerians.”
“Interestingly, the policy reinforces CBN’s position of stimulating real sector investment whilst discouraging perennial investment in financial assets, which creates limited economic value add, given the relatively weak transmission mechanism of financial investments into real sector productive activities,” he added.
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