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Financial Services
CBN reviews minimum interest rates on savings deposit to 1.25%
With inflation rate at 12.8%, this is almost like paying banks to keep the money for you.
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 circular seen by Nairametrics and 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, Other Financial and Non-Bank Financial Institutions issued in December 2019.
“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.”
READ: CBN’s Emefiele explains why banks restructured N7.8 trillion loans to customers
Context: 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%.
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What this means: 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.
Get relevant financial data from Nairalytics
Debt Securities
Interest rates will remain low until the end of H1 2021 – Meristem Securities
Meristem Securities has argued that interest rates will remain low until, at least, the end of H1 2021.
Meristem Securities has asserted that interest rates will remain low until, at least, the end of H1 2021.
This statement was made at the recently held webinar on Global Economy and Outlook, which the company themed: Bracing for a Different Future.
Although the company acknowledged that there is mounting pressure for upward movement in yields from several stakeholders, it appears the company concurs nothing concrete is in sight.
This line of reasoning seems to have influenced their decision to advise investors to move away from Treasury instruments.
What they are saying
Meristem advises that:
- “Buy and hold strategy investors seeking to generate above average returns should move away from risk free Treasury instruments and focus on investment grade commercial papers and bonds which satisfy investment objectives.”
- “Active traders with higher risk appetite are advised to focus on high-yield short duration instruments, which would be re-invested into a higher yield environment should rate reversals occur.”
The advice regarding shunning Treasury instruments appears to be in order, considering that treasury bill rate has been declining, with the latest figure — November 2020 — 0.03% as per the CBN monthly interest rate data.
Further checks from the Debt Management Office website, indicates that the latest figures for Eurobonds and Diaspora bond fall short of the fixed yield at issue for all the different categories of bonds in issue.
What you should know
Latest figures from the CBN’s monthly interest rate indicate that:
- Treasury bill rate has been on a steady decline for six months, down to 0.03% since the last rise (2.47%) in May 2020.
- Fixed deposit rates (one, three, six and twelve months) have also been declining – the latest figures for these indicate that in November 2020, one-month deposit rate was 1.92%, 2.9% for three months, 2.84% for six months, and 4.89% for 12 months.
- Compared with the corresponding period in 2019, the figures indicate that these rates fell by 75%, 66%, 71% and 49% respectively.
Financial Services
CBN issues framework for QR payments
CBN has issued a framework that would guide Quick response (QR) code payments in Nigeria.
The Central Bank of Nigeria has issued the framework that would guide Quick Response (QR) Code Payments in Nigeria.
This is a proactive move by the Apex bank towards ensuring the safety and stability of the Nigerian Financial System, as well as promoting the use and adoption of electronic payments and foster innovation in the payments system.
READ: Over 1 million people took loans from banks below 20% interest rate in 1 year- CBN
Quick Response (QR) Codes are matrix barcodes representing information presented as square grids, made up of black squares against a contrasting background that can be scanned by an imaging device, processed and transmitted by appropriate technology.
The codes are used to present, capture and transmit payments information across payments infrastructure and further enable the mobile channel to facilitate payments and present another avenue for promoting electronic payments for micro and small enterprises.
READ: Binance offers DeFi coders $100,000; DeFi market value hits $8 billion
What you should know
- Quick Response (QR) codes are two-dimensional bar codes. QR code payments allow merchants to receive payments from customers simply by scanning generated QR codes using a smartphone camera. The QR code payments carry the purchase transaction information to the mobile device of the buyer/customer.
- Making payments via QR codes is very secure. It is because the QR code is nothing but just a tool that is used to exchange information. Any data which is transferred via QR codes is encrypted, thus making the payment secure.
- The Participants in QR Code Payment in Nigeria include Merchants, Customers, Issuers (Banks, MMOs and Other Financial Institutions), Acquirers (Banks, MMOs and Other Financial Institutions) and Payments Service Providers.
- QR payments are increasingly becoming a popular means of payments in Nigeria, and some industry players would see the framework as a perfect way of regulating the sector.
- QR codes are capable of storing lots of data. But no matter how much they contain, when scanned, the QR code should allow the user to access information instantly. It can be used for payments, sharing contacts and Wi-Fi passwords and lots more.
- The popular and common argument is that since POS machines are expensive, cheaper options such as QR scanners should be pushed forward to local traders.
READ: Telecoms, FSI to hugely boost Nigerian Economy in 2021 – CWG’s Business Director
Financial Services
CBN unveils framework for regulatory sandbox operations
CBN has issued a regulatory Sandbox framework towards engaging with the operators in the Fintech space.
Stanley Nwanekezie
September 1, 2020 at 8:58 am
Did you mean 1.25% in your concluding paragraph?
Anonymous
September 1, 2020 at 9:00 am
The what this mean is not correct. You will be paid a minimum of 10% of 12.5% which is 1.25% per annum. Please update
Yusuf
September 1, 2020 at 10:04 am
God bless u
CHUKWUDI EZE
September 1, 2020 at 10:19 am
But truly the average Nigerian have been indifferent to interest rate on savings account: historically its been low. But i think there is nothing special about this. The body language of the CBN has always been against financial investment, and pro-real sector investment. The funny thing about this pro-real investment is that it sounds like putting square peg in round whole. What CBN should have first done is liaise with the Fiscal authorities to set budget planning that will facilitate a suitable business environment. The cost of doing business in Nigeria is crazy. If the environment for doing business is fine, the monetary policies around that bit is just an icing on the cake.
Olu
September 1, 2020 at 4:31 pm
Who are the owners of the banks? The politicians, Nigerian leaders in and outside of government. After stealing from our commonwealth they still went to wait for us where our money is. I cannot see how the poor can get out of their clutches if God do not show up foe the poor.
M
September 2, 2020 at 7:59 pm
Please what was the former interest rate ?
Remmy
September 5, 2020 at 12:26 pm
Dear Chike olisah is it a plus or minus for the poor?
Olasoji Vincent
October 15, 2020 at 1:56 pm
Wow! Just 1.25% per annum on saving account? So, what is interest rate on loan? 16 to 17%? Is that sensible? No , This has no logic to me
Vincent J.
October 19, 2020 at 4:43 pm
Actually, I never knew much about MPR and interest rates but as an ordinary Nigerian who does only savings as far as banking is concerned, I really came to see a significant effect of the recent development stemming from the CBN directive such that the interest capitalised for the month of September in my savings account was slashed to one-third of what it used to be (a miserable N600 plus) compared to the previous month where I was given N2000 plus. 2K in a month can at least help me do a TV or data subscription but now it becomes practically impossible with a miserable N600. Such a pity.
Mike
October 26, 2020 at 3:49 pm
I don’t even receive any atall in from Fcmb rather they take from mine which bank is the best when it comes to interest rate on savings account for now?
Davince
November 4, 2020 at 1:46 pm
Nigerian system of financial institution is a complete fraud based on yahoo-yahoo capitalism system borrowing money form the DMBs you will be charged 16 percent until full refund while you saving the amount in that same bank you will now get less than 2 percent that is a complete scam