Here are banks that pay higher interest for your savings

Some Nigerian banks are paying higher interest to customers for saving their money with them, while others pay lower than regulatory approved minimum rate of 1.15 percent.

The Central Bank of Nigeria (CBN) on August 31, 2020, slashed the minimum interest payable on savings deposited in banks across the country to 10 percent per annum of the Monetary Policy Rate (MPR).

The MPR is currently at 11.5 percent. What this means is that the banks are to pay average interest rate of 1.15 percent (10 percent of 11.5 percent) to their customers for saving with them.

The CBN on September 22, 2020, cut its benchmark interest rate by 100 basis points (bps) from 12.5 percent to 11.5 percent.

Some of tier two and three banks are paying higher interest rate on savings account, a development analysts describe as a way of attracting customer deposits.

Out of 21 deposit money banks that published their rates as at March 5, 2021, Heritage Bank pays higher interest rate on savings at an average of 4.2 percent.

It is followed by Suntrust Bank 4.1 percent, Unity Bank 1.9 percent, Ecobank 1.25 percent, Citibank and Standard Chartered Bank 1.2 percent each.

The bank with the lowest interest payment on savings account is Providus Bank Limited. It pays average rate of N0.62 percent followed by Union Bank plc, which pays N1.07 percent to their customers.

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Other banks that pay N1.15 percent interest rate on savings include FCMB, Fidelity Bank, GTBank, Globus Bank, Keystone Bank, Polaris Bank, Stanbic IBTC, Sterling Bank, Titan Trust Bank, UBA, Wema Bank, and Zenith Bank.

Customers’ reaction

Christian Ezegolo, a Nigerian businessman, does not operate a savings account because he needs money to invest in his business and could not accept what he described as peanut that banks pay as interest on deposit.

“To me as an entrepreneur, I don’t save because I need that money to run my business. It does not make economic sense to me that I will go and give bank money and it is paying me 1.1 percent and I will still go to another bank and borrow at 25 percent, it does not make sense,” he says on phone.

What analysts say

Ayodeji Ebo, head, retail investment, Chapel Hill Denham, says banks are not supposed to pay lower than the regulatory prescribed interest rate, noting customers have the option of going to a bank that can compensate them better on their savings.

CBN’s letter to all banks

The CBN’s August 31, 2020 letter signed by Bello Hassan, director of banking supervision, noted with satisfaction the recent declining trend in market rates in the banking sector following the implementation of policies aimed at stimulating credit flow to the real sector.

The letter read, “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 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 percent per annum of monetary policy rate.”

The CBN’s economic report for fourth quarter 2020, showed that key interest rates, prime and maximum lending rates, declined at the end of December 2020, following ample liquidity levels in banks. Daily interbank call and OBB rate ranged from 1.00 percent to 1.75 percent and 0.37 percent to 8.42 percent, respectively.

There was no transaction recorded for interbank call in October 2020, while the average for November and December were 1.75 percent and 1.25 percent, respectively. Average Open Buy-Back (OBB) rates for October, November and December were 1.88 percent, 1.12 percent and 1.09 percent, respectively, while 30-day Nigeria Inter-Bank Offered Rate (NIBOR) traded at averages of 1.83 percent, 0.64 percent and 0.57 percent in October, November, and December, respectively.

From their levels in the preceding quarter, average prime and maximum lending rates fell by 0.99 percentage point and 0.88 percentage point to 11.78 percent and 28.48 percent, respectively, in the fourth quarter of 2020. Average term deposit rate also fell by 0.72 percentage point to 3.70 percent.

The spread between the average term-deposit and average maximum lending rates narrowed by 0.16 percentage point to 24.77 percentage point in the quarter under review.

With inflation at 15.75 percent at the end-December 2020, this signified negative real rates for deposits and prime lending rates, but a positive real rate for maximum lending rate.