MARKET NEWS

Nineteen deposit money banks are now offering an 8.18 percent interest rate to customers for their savings, aligning with the Central Bank of Nigeria’s (CBN) recent monetary policy adjustment.

Commercial banks are mandated to provide a minimum interest rate of 30 percent of the Monetary Policy Rate (MPR) on customer deposits.

In September 2024, the CBN raised the MPR, commonly referred to as the benchmark interest rate, by 50 basis points to 27.25 percent to combat rising inflation. Accordingly, 30 percent of this new MPR translates to the 8.18 percent interest rate.

In a move to enhance transparency and foster informed financial decision-making, the CBN’s Monetary Policy Committee (MPC) mandated the public disclosure of lending rates across all Deposit Money Banks (DMBs). The latest data, effective November 1, 2024, revealed that 19 banks have adjusted their deposit interest rates to the mandated 8.18 percent.

The banks adhering to this rate include: Access Bank, Citi Bank, Ecobank, Fidelity, First Bank of Nigeria, Keystone Bank, Optimus, Polaris, Premium Trust, Providus, and Signature Bank. Others are: Standard Chartered Bank, Sterling Bank, TitanTrust, United Bank for Africa (UBA), Union Bank, Unity Bank, Wema Bank, and Zenith Bank.

However, five banks are offering rates below the standard. According to CBN data, Globus Bank provides a savings rate of 1.40 percent, FCMB offers 1.15 percent, GTBank and SunTrust Bank pay 8 percent, while Stanbic IBTC offers 2.73 percent.

The savings deposit rate is typically pegged at a minimum of 30 percent of the MPR but becomes inapplicable if customers make more than four withdrawals from their savings account within a month, Ayodele Akinwunmi, a relationship manager in corporate banking at FSDH Merchant Bank, emphasised this condition.

Higher deposit rates provide savers with increased earnings, which can help their funds grow more significantly over time. An analyst highlighted that in an inflationary environment where the purchasing power of money declines, higher interest rates help to offset the effects of inflation, allowing savings to retain more of their value.

Since June 2006 when the MPR stood at 0.00, the CBN has steadily increased its MPR, reaching 27.25 percent by September 2024. This trend was underscored during the 297th MPC meeting held on September 23–24, 2024.

At the meeting, Olayemi Cardoso, CBN governor, voted to raise the MPR by 50 basis points, from 26.75 percent to 27.25 percent. He also supported retaining the asymmetric corridor around the MPR at -100/+500 basis points, increasing the cash reserve requirement (CRR) for DMBs by 500 basis points to 50 percent, raising the CRR for merchant banks by 200 basis points to 16 percent, and maintaining the liquidity ratio at 30 percent.

Governor Cardoso argued that holding or reducing the policy rate would be premature despite the recent deceleration in headline inflation and concerns about tight monetary policies affecting economic recovery. “In my judgment, while previous hikes have effectively altered the inflation trajectory, maintaining a tight stance is necessary to safeguard these gains against potential reversals,” he stated.

Aloysius Uche Ordu, an MPC member, provided a global perspective on interest rate trends during the meeting. In the European Union, where economic recovery lags behind the United States, the European Central Bank cut rates in September 2024 for the second time that year.

Similarly, the Bank of England reduced rates in August and hinted at further cuts as inflation fell to 2.5 percent. Meanwhile, the Central Bank of Canada has shifted focus to the labour market, suggesting additional rate cuts following a summer reduction from 5.00 percent to 4.25 percent.

Elsewhere, the Bank of Japan raised its rate to 0.25 percent in July, holding it steady in September to strengthen the yen and mitigate inflation from rising import prices. Brazil maintained its rate at 10.50 percent to ensure price stability, while the Bank Indonesia kept its policy rate at 6.25 percent to stabilise the Rupiah exchange rate.

In Turkey, real interest rates turned positive for the first time since 2021, with inflation at 49 percent against a central bank policy rate of 50 percent.

This trend of monetary adjustments reflects the delicate balance central banks worldwide aim to strike between controlling inflation and fostering economic stability, analysts say.