Saving acct. holders rejoice, as CBN orders banks to raise interest rate

By Ezurike Ugochukwu

A step that may spur the public to channel their monies into the banking system may have emerged as the Central Bank of Nigeria (CBN) has directed Deposit money banks to effect 10 per cent increase in interest rate on local currency savings deposits.

The CBN directed that with effect from September 1, 2020, savings deposit with Deposit money banks will attract a minimum of 10 percent interest rate.

The new development experts say may encourage greater population to build more confidence and interest to channel their monies into the banking system to make for more liquidity to lend, at the same time, make savings more attractive so that banks can have more to lend.

Before now, most savings accounts had a five percent interest rate. The CBN in a letter dated August 31, 2020 to all banks has directed banks to effect the increase in interest rate.

The CBN letter signed by Bello Hassan, Director of Banking Supervision, titled “Interest Rate on Savings Deposit”, the apex bank said it had 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 sectors of the economy.

“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,” the CBN directed.

Some analysts however are of strong suspicion also that the move was meant to curb inflation, which had only recently risen to 12.82 percent, according to the National Bureau of Statistics.