The interest on deposits with banks increased to 4.08 per cent in September 2022, following the increase in monetary Policy Rate(MPR) to 15.5 per cent, becoming one of the highest since January 1, 2017; as revealed by the Central Bank of Nigeria (CBN) money market indicators. The interest on savings deposit was at 2.93 per cent in August 2022 when the MPR was at 14 per cent; it went up 4.08 per cent in September, boosting the fortune of savings account holders with Deposit Money Banks(DMBs).

The Money Market indicators of the CBN noted that the interest on saving deposits commenced January 2022 at 1.25 per cent and has witnessed a steady increase amid the increase in MPR.
It is believed that the increase in saving deposit was meant to encourage banks’depositors to save more and generate more money amid hike in inflation rate.
Speaking with the Vice President, Highcap Securities Limited, Mr David Adnori; he said the move to increase the average interest on savings deposits by CBN was meant to wipe out excess liquidity in the system; another means of tackling inflation.

The President of the Association of the Capital Market Academics in Nigeria (ACMAN), professor Uche Uwaleke on his part, attributed the drop in maximum lending rate to excess liquidity in the banking sector, stating that the interventions by CBN also forced banks to cut interest rate on loans to customers.

Aisha Ahmed, the Deputy Governor, Financial system stability, CBN in her personal statement at the end of the last Monetary Policy Committee (MPC) Meeting stated: “Sustaining banking sector lending to critical sectors of the economy will be paramount as monetary policy tighten to contain inflation, given the positive correlation of market lending rates to the MPR, it is expected that borrowing costs will rise, possibly restricting loan growth.”

Haruna B.Mustafa, the director of Banking supervision, CBN, in a circular titled, ‘Review of interest Rate on Savings Deposits’, stated that the hike in savings interest rates, effective from August 1, was made in light of the return to complete normalcy, after taking into account the current macroeconomic conditions.
“Accordingly, effective August 1, 2022, the negotiable minimum interest rate on local currency savings deposits shall be 30 per cent of MPR, this supersedes our letter dated BSD/DIR/GEN/LAB/13/052 on the subject, September 1,2020,” the CBN said.
The Money Market indicators statistics also revealed that the maximum lending rate dropped to 28.06 per cent in September from 28.3per cent reported in August, while prime lending rate remained flat at 12.23 per cent for the second consecutive year.
CBN had mandated banks operating in the country to submit their lending and saving rates for publishing and the CBN Governor, Mr.Godwin Emefiele had admitted that the hike in MPR will increase cost of borrowing, especially in non-priority sectors of the economy.

Emefiele also pointed out that the decision to raise interest rate was the last resort and a difficult one for the MPC, which had been crafting policies to stimulate economic growth as well as achieve financial stability.

Share post:




More like this

Innoson Motors Set to Export Made-in-Nigeria Vehicles to Sierra Leone

Nigerian indigenous car manufacturing company, Innoson Vehicle Manufacturing Ltd,...

Adeleke Assumes Office as Sixth Elected Governor of Osun State

As he took the baton of governorship of Osun...

FG Set to Boost Local Production For Forex Earnings

In order to drive foreign exchange earnings and boost...

Six Firms Pre-qualified by BPE to Concession Calabar, Kano FTZs

Six firms have been pre-qualified and issued with the...