By Kennedy Nnamani
THE Central Bank of Nigeria, CBN, has adjusted the interest rate on Savings Deposits to 30% of the Monetary Policy Rate, MPR.
In a letter dated August 15, the apex bank noted that the review became necessary, following the return to full normalcy and considering the prevailing macroeconomic condition after the scourge of the COVID-19 pandemic.
Signed by Haruna B. Mustafa, director of Banking Supervision, the letter said that the policy became effective from August 1, 2022.
“The negotiable minimum interest rate on local currency savings deposits shall be 30% of MPR,” the letter read.
It further stated that the letter supersedes the previous letter carrying September 1, 2022 referenced BSD/DIR/GEN/LAB/13/052.
Recall that the CBN had earlier reduced the minimum interest rates payable on local currency savings deposit from 30% to 10% of the MPR as part of the efforts to ameliorate the impact of the COVID-19 pandemic.
“This was aimed at stimulating growth in the larger economy, following the economic slowdown occasioned by the pandemic,” the letter said.
The Monetary Policy Rate is a base interest rate of the economy, which serves as a benchmark for lending in the financial industries. It is a tool which the CBN uses to regulate inflation.
In the same vein, savings deposit rates refer to the interest rates that customers pay for keeping their money in their bank accounts charged by the commercial banks.
The implication of this is that an increase in the interest rate on savings deposits is expectantly to increase savings, but when inflation surpasses the rates, the purchasing power of any money saved begins to drop.