Bank Clients Will Earn More As The CBN Raises The Interest Rate on Savings Accounts To 4.65%.
The Central Bank of Nigeria (CBN) has mandated that banks pay at least 4.65% interest on savings deposit accounts, an increase from 4.2% previously.
This is because monetary policy rates were raised by 150 basis points to 15.5% from 14%. The central bank’s hawkish move led in an increase in the interest rate on savings deposits, which has the potential to crowd out the money in circulation.
At Tuesday’s monetary policy committee meeting, Mr. Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), announced the MPR change.
The Monetary Policy Rate (MPR) is the interest rate at which the Central Bank of Nigeria lends money to banks. It serves as a benchmark for lending in the financial services industry. Savings deposit rates are the interest rates that banks charge consumers for holding their money in their accounts. The CBN previously set the MPR at 14%, and 30% of that is 4.2%. The MPR is currently at 15.5%, and 30% of that is presently 4.65%.
What you should be aware of
- The Central Bank of Nigeria recently raised the negotiable minimum interest rate on local currency savings accounts from 10% to 30%, effective August 1, 2022.
- A rise in the interest rate on a savings deposit is often intended to promote savings while also acting as a type of contractionary monetary policy. However, because inflation has surpassed all of these rates, any money saved over time loses purchasing value.
- Nigeria’s inflation rate increased to 20.52% in August 2022, up from 19.64% the previous month, becoming the highest rate since September 2005.
- If the rate of inflation exceeds the rate of return on savings, the investor loses money. Over time, inflation is likely to decrease a consumer’s purchasing power. Fortunately, there are ways to preserve your purchasing power from your savings. This suggests that you should invest while keeping your risk level low.