CBN Issues Directives to Banks to Increase Interest on Savings Deposits After 15.5 Rates Hike

CBN Issues Directives to Banks to Increase Interest on Savings Deposits After 15.5 Rates Hike

  • The Central Bank of Nigeria has ordered deposit money banks (DMBs) across Nigeria to increase interest on customers' savings
  • The bank issued the directive after it hiked interest rates to 15.5 on Tuesday, September 27, 2022, during its MPC meeting
  • The recent order is to cushion the effect of inflation on customers' savings and increase their purchasing power

Following the recent hike of interest rate in Nigeria to 15.5 per cent by the Central Bank of Nigeria (CBN), the apex bank has issued a directive to banks to pay 4.65 per cent interest on savings deposit accounts, an increase of 4.2 per cent earlier.

The recent directive is due to the 150 basis point addition in monetary policy rates to 15.5 per cent from 14 per cent.

CBN, Savings accounts, Godwin Emefiele
Governor of the Central Bank of Nigeria, Godwin Emefiele Credit: Bloomberg/Contributor
Source: Depositphotos

Interest rate hikes means hike on savings

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The CBN's decision came from an increase in the interest rates on savings deposits, which could mop up excess liquidity in the system.

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The CBN governor, Godwin Emefiele, announced the MPC changes on Tuesday, September 27, 2022, at its MPC meeting.

The Monetary Policy Rate (MPR) is the rate at which the apex bank lends money to banks. It is a benchmark rate for lending in the financial services industry.

Savings deposit rates are rates that banks pay customers for keeping their money in the banks.

Initially, the CBN kept the MPR at 14 per cent, meaning a 30 per cent increase to 4.2 per cent.

Analysts optimistic CBN move will bring down inflation

Reports say that the CBN also increased the negotiable minimum interest rate on local currency savings deposits from 10 per cent to 30 per cent, effective August 1, 2022.

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The increase in the interest rate on a savings deposit would boost savings and serve as a means of countermeasures to stem inflation.

Investors lose money if the inflation rate outpaces interest generated on savings as high inflation erodes consumers’ purchasing powers over time.

Analysts have said that the CBN's recent hike in interest rates could tame inflation, which is currently at a 17-year high of 20.52 per cent.

CBN increases interest rates to 15.5 per cent, highest in 20 years reported that to mitigate the impact of inflation, the Central Bank of Nigeria (CBN) has raised the interest rates to a 20-year-high of 15.5 per cent.

The Monetary Policy Committee of the apex bank unanimously voted to raise the benchmark interest rate, also known as the monetary policy rate, to 15.5 per cent from 14 per cent, the third time this year due to rising inflation.

The CBN governor, Godwin Emefiele, on Tuesday, September 27, 2022, announced the new rate at the MPC meeting.


Pascal Oparada avatar

Pascal Oparada (Business editor) Pascal Oparada is a Mass Communications Graduate from Yaba College of Technology with over 10 years of experience in journalism. He has worked in reputable media organizations such as Daily Independent, TheNiche newspaper, and the Nigerian Xpress. He is a 2018 PwC Media Excellence Award winner.

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