Going through the data, I realise that despite the new monetary policy regime the disparity between lending and deposit rates continue to widen. For example, the highest time deposit rate was 5-10 percent as at 3/6/2011. The highest lending rate on the other hand was 27 percent. Deposit rates can also fall as low as 1.75 percent whilst lending can drop as low as 12 percent.
Whichever way you look at it the margins are at the least double on the average. Whilst the banks attribute their increases to inflation and cost of funds, the depositors are left with cash in banks that continue to be eroded by inflation.
Ideally, if the MPR is 8% (as is the case presently) , lending rates should be between 16% and 18% including fees and charges. If MPR is the barometer then infaltion must be the trigger. Therefore, our main concern must be to fight off the “mythical” double digit inflation rate in Nigeria.
As for the common depositors, it probably makes no sense keeping your money in the bank on the long term as the deposit rates will always lag behind. In this case WAY behind. Use the banks for your banking transactions. If your looking to “grow” your money above inflation rate invest in ideas, small business, start ups, growth stocks, managed funds, lands etc.