The Central Bank of Nigeria (CBN) has instructed deposit money banks in Nigeria not to pay less than 1.25% in interest on savings deposit accounts.
This was contained in a CBN circular dated August 31, 2020. Excerpts of the circular read as follows;
“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’ consequently reviewing rates to 10% of Monetary Policy Rates.
“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 annum of Monetary Policy Rate.”
The Monetary Policy Rate (MPR) is the rate at which the CBN lends money to banks. It is a benchmark rate for lending in the financial services sector. MPR is currently 12.5%. Savings deposit rates are default rates banks pay customers for keeping their money in the banks. According to people familiar with CBN rate applications, the rate used to be 30% of MPR but has now been reduced further by the CBN. The savings deposits rate is mostly overlooked by Nigerians due to its historical low rate. CBN websites put the rate at about 3%.
This means that:
When you keep money in your savings deposit accounts you will be paid at least 1.25% per annum by banks. When you consider that inflation rate is 12.8%, then this is almost like paying banks to keep the money for you.
