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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.

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Nigeria’s manufacturing sector contracts for 5th consecutive month – CBN , To test FX market, CBN pumps $50 million, CBN issues guidelines to Finance Institutions on establishment of Subsidiaries and SPVs, CBN injects $2.63 billion to defend naira in one month, CBN’s COVID-19 N50 billion targeted credit facility, CBN’s heterodox policies buoys credit growth, These industries drove business activities in September, Credit to Nigerian economy falls to N38.67 trillion as private stagnates at N30 trillion

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

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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%.

READ: Experts laud Google’s decision to offer banking services 

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.

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Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

9 Comments

9 Comments

  1. Stanley Nwanekezie

    September 1, 2020 at 8:58 am

    Did you mean 1.25% in your concluding paragraph?

  2. 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

  3. Yusuf

    September 1, 2020 at 10:04 am

    God bless u

  4. 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.

  5. 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.

  6. M

    September 2, 2020 at 7:59 pm

    Please what was the former interest rate ?

  7. Remmy

    September 5, 2020 at 12:26 pm

    Dear Chike olisah is it a plus or minus for the poor?

  8. 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

  9. 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.

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Exclusives

CRR: Banks suffer N917.5 billion debits in latest CBN action

The central bank debited Nigerian banks N917.5 billion last week in its latest CRR action.

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CRR: Banks suffer N917.5 billion debits in latest CBN action

Nigerian banks suffered a total of N917.5 billion in new CRR debits from the Central Bank of Nigeria. Reliable sources inform Nairalytics Research that the latest debits occurred in the week ended October 23rd, 2020.

The cash reserve requirement is the minimum amount banks are expected to leave retained with the Central Bank of Nigeria from customer deposits. In January, the CRR was increased by 5% to 27.5% by the CBN Monetary Policy Committee (MPC) who explained that the decision was intended to address monetary-induced inflation whilst retaining the benefits from the CBN’s LDR policy.

READ: CBN says 17 banks to restructure over 32,000 loans

CRR Debits for Nigerian Banks.
Nairalytics Data

READ: Union Bank suffers N188 billion in CRR debits as at June 2020

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From the data, Zenith Bank topped the list with N285 billion followed by UBA with N160 billion. The rest of the FUGAZ, Access, FBN, and GTB were debited N140 billion, N95 billion, and GTB N55 billion respectively. The FUGAZ also suffered a N1.9 trillion debit in CRR sequesters in the second quarter of 2020 (April – June) alone.

READ: Nigeria’s forex devaluation timeline – 2020

Nigeria’s central bank has since 2019 debited Nigerian banks a chunk of their deposits as part of a mutually inclusive cash reserve requirement (CRR) and Loan to Deposit Ratio policy that is targeted at coercing banks to lend more to the private sector.

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READ: CBN reviews minimum interest rates on savings deposit to 1.25%

Last month, Nairametrics reported that the CBN now holds a total of N6.57 trillion in CRR debits from the nation’s top 5 banks a whopping 43% higher than the N4.58 trillion held in March and more than double the N3.5 trillion CRR debits as of December 2020. CRR debits in the third quarter of 2020 will be revealed when banks release their results in the coming days and weeks.

READ: Nigeria’s telecom sector posts double digit growth of 18.1%, manufacturing, others contract

Meffynomincs: CBN under the leadership of Godwin Emefiele has deployed several heterodox policies as it strives to stimulate the economy and manage the exchange rate crisis in the absence of strong fiscal support.

  • Interest rates on fixed deposits and money market instruments have fallen to single digits despite the galloping inflation rate.
  • Last month, the CBN monetary policy committee admitted it was no longer combating inflation but will direct its policies towards stimulating lending to the private sector hoping this will spur local production.
  • This policy has placed banks in the crosshairs with the Apex bank exposing them to CRR debits if they cannot use customer deposits to spur lending.

 

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ENDSARS

#EndSARS: Access Bank announces N50 billion interest-free facility for businesses

Access Bank Nigeria Plc has announced plans to offer N50billion interest-free credit facility to individuals and businesses. 

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Access Bank Plc, Nigeria's Creative Industry needs urgent financing from commercial banks to bridge unemployment gaps - Herbert Wigwe

Access Bank Nigeria Plc. has announced N50 billion in support of Nigerians through interest-free loans and grants to support communities, the youths, and micro, small and medium-sized businesses.

READ: Access Bank gets regulatory approval to become a Holding Company

READ: Banks lay-off 2,477 staff during lock-down

This information was disclosed by the bank through its official LinkedIn page. 

The bank’s official statement read thus,

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“Now more than ever, we remain committed to our purpose of impacting lives positively. In light of the recent occurrences, we will be supporting Nigerian businesses with 50 Billion Naira interest-free loans and grants. Watch this space for more information.”

READ: Access, GTBank, two others pay PWC & EY N1.5 billion as Audit fees in H1 2020 

Why it matters

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The impact of the pandemic, coupled with the hijacked #EndSARS protests that led to the looting of businesses and destruction of properties has thrown so many Nigerians into debts.

READ: $70 billion per annum will be needed to tackle pandemic induced poverty – World Bank

READ: WTO DG: US, EU divided over Nigeria’s Okonjo-Iweala and South Korea’s Yoo

This show of support from Access Bank will help alleviate and stimulate economic activities, as well as produce many positive multiplier effects on the economy.

READ: #EndSARS: Popular hacking group, Anonymous allegedly hacks Nigerian Govt. websites

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Financial Services

CBN reviews appointment requirements for CCOs in Banks

The CBN has reviewed the appointment criteria for CCOs in Merchant Banks and Regional Banks.

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Access Bank Plc, Herbert Wigwe, CBN, interest payment on bank deposits, CBN review appointment requirements for Chief Compliance Officers in Banks

The Central Bank of Nigeria (CBN) has reviewed the appointment criteria for Chief Compliance Officers in Merchant Banks and Regional Banks (Commercial and specialized).

This is according to a circular issued by the apex bank dated October 9, 2020, and signed by its Director of Financial Policy and Regulation Department, Kevin Amugo.

READ: CBN has rolled out new anti money laundering penalties that should get any banker worried

According to the latest notice, Merchant banks and Regional banks are hereby granted dispensation to appoint CCOs on a grade not below an Assistant General Managers. However, the CCOs will report directly to the ECO of the financial institutions who have sole responsibility for compliance matters in the bank.

READ: CBN to “reduce” savings rate to 1% declare OMO bills as “Poison”

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Backstory

This latest action by the CBN is the sequel to consultations and engagement with stakeholders emanating from its earlier circular referenced FPR/DIR/GEN/CIR/06/004 of September 28, 2016, in which the tentative requirements for Executive Compliance Officers and Chief Compliance Officers of deposit money banks were mooted.

(READ MORE:CBN moves to ring-fence Disco collections)

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Meanwhile, the requirements and responsibilities of Executive Compliance Officers remain as earlier communicated in the circular dated 28 September 2016.

A part of the recent circular signed by Mr. Kevin read thus,

READ: CBN grants approval for banks to debit accounts of loan defaulters 

“Further to the circular referenced FPR/DIR/GEN/CIR/06/004 of 28 September 2016 on the appointment of Executive Compliance Officers (ECO) and Chief Compliance Officers (CCO) of deposit money banks, the CBN has, after due considerations and presentations by stakeholders on the size, structure, operation, and dynamics of classes of operators in the sectors reviewed the requirements for the appointment of Chief Compliance Officers.”

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