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Banks Raise Deposit Rates To 1.3%

A month after the Central Bank of Nigeria (CBN) increased its benchmark interest rate, Nigerian banks are now raising their deposit rates to an average of 1.3 percent as demand deposits decline by 1 percent.

In May 2022, the CBN increased the Monetary Policy Rate (MPR) by 150 basis points, bringing it to 13 percent. The apex bank raised the rate last month by 100 basis points to 14 percent.

Data from the CBN indicated that between May 24, when the key interest rate was first raised, and the end of June, the amount of money held in bank demand deposits, which can be taken at any moment without notice, decreased from N17.85 trillion to N17.67 trillion.

According to CBN data, 13 out of 22 deposit money banks increased their savings rate to an average of 1.3 percent in response to the MPR raise.

According to Johnson Chukwu, managing director/CEO of Cowry Asset Management Limited, “it is primarily driven by an increase in the monetary policy rate of 250 basis points, which compel banks to raise their savings rate.”

Access Bank informed its clients that its savings rate had increased from 1.5 percent to 1.4 percent. “Savings account interest rates have changed as a result of recent MPR revisions. The increased rates are in effect right away, according to the bank.

According to the CBN’s announced applicable rates for each deposit money bank as of July 15, 2022, 11 banks offer 1.3 percent on client deposits while nine banks provide various rates ranging from 0.75 percent to 4.20 percent.

Citibank, Ecobank, Fidelity, Globus, Keystone, Polaris, Stanbic IBTC, Sterling, TitanTrust, Wema, and Zenith were the companies that offered 1.3 percent.

Other banks offering a range of interest rates include FCMB (1.15%), GTBank (1.29%), Heritage (4.20%), Providus (0.75%), Standard Chartered (2.20%), SunTrust (4.10%), UBA (1.15%), Union Bank (0.88%), and Unity Bank (1.90%).

READ MORE: Over Half Of Nigeria’s Oil Revenues May Be Used To Clean Pollution – Shell

Ayodele Akinwunmi, relationship manager, corporate banking at FSDH Merchant Bank Limited, said: “Competition can drive deposit rates higher, but I don’t see it driving the present deposit rates higher given the current environment in Nigeria.”

He contends that the challenging business environment is causing margins for all companies to contract, and as long as regulatory permissions are granted, banks will retain the lowest deposit rates possible.

The amount of money available for lending to the real sector will rise as a result of the increase in the savings rate, he claimed.

Banks are currently raising the cost of borrowing. If clients seek a higher rate, a deposit might follow suit. The focus right now is on increasing borrowing rates. The deposit rate will rise as a result of competition.

However, the CBN’s regulatory stance is now driving the market for risky assets. Banks must raise their rates as a result of the MPR hike because the CBN increased the rate at which banks can borrow money from it, a top bank official told BusinessDay.

From N28.68 trillion in May, bank lending to the private sector increased to N39.27 trillion in June.

Data from the Central Bank of Nigeria (CBN) show that PSCE climbed by 20.4 percent yearly to N39.2 billion as of the end of June 2022, maintaining the growth trend from the previous month. Despite outpacing nominal GDP growth, the PSCE growth rate has trailed behind the other money and credit metrics, according to FBNQuest analysts.

The growth trend in credit to government has been continuously rising, in contrast to the consistent PSCE growth rate of between the mid-teens and 20 percent y/y growth rate over H1 ’22.

According to the most recent data for June, credit extensions to the government increased by 55% year over year. In the six months before June of this year, it grew by an average of around 35% y/y, which is significantly faster than the growth of other money and credit aggregates.

According to a report by FBNQuest, revenue deficiencies (compared to expenditure) lead to fiscal deficits that must be covered by debt (both domestic and external), which is what is causing the government’s credit extended to climb quickly.

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A month after the Central Bank of Nigeria (CBN) increased its benchmark interest rate, Nigerian banks are now raising their deposit rates to an average of 1.3 percent as demand deposits decline by 1 percent.

In May 2022, the CBN increased the Monetary Policy Rate (MPR) by 150 basis points, bringing it to 13 percent. The apex bank raised the rate last month by 100 basis points to 14 percent.

Data from the CBN indicated that between May 24, when the key interest rate was first raised, and the end of June, the amount of money held in bank demand deposits, which can be taken at any moment without notice, decreased from N17.85 trillion to N17.67 trillion.

According to CBN data, 13 out of 22 deposit money banks increased their savings rate to an average of 1.3 percent in response to the MPR raise.

According to Johnson Chukwu, managing director/CEO of Cowry Asset Management Limited, “it is primarily driven by an increase in the monetary policy rate of 250 basis points, which compel banks to raise their savings rate.”

Access Bank informed its clients that its savings rate had increased from 1.5 percent to 1.4 percent. “Savings account interest rates have changed as a result of recent MPR revisions. The increased rates are in effect right away, according to the bank.

According to the CBN’s announced applicable rates for each deposit money bank as of July 15, 2022, 11 banks offer 1.3 percent on client deposits while nine banks provide various rates ranging from 0.75 percent to 4.20 percent.

Citibank, Ecobank, Fidelity, Globus, Keystone, Polaris, Stanbic IBTC, Sterling, TitanTrust, Wema, and Zenith were the companies that offered 1.3 percent.

Other banks offering a range of interest rates include FCMB (1.15%), GTBank (1.29%), Heritage (4.20%), Providus (0.75%), Standard Chartered (2.20%), SunTrust (4.10%), UBA (1.15%), Union Bank (0.88%), and Unity Bank (1.90%).

READ MORE: Over Half Of Nigeria’s Oil Revenues May Be Used To Clean Pollution – Shell

Ayodele Akinwunmi, relationship manager, corporate banking at FSDH Merchant Bank Limited, said: “Competition can drive deposit rates higher, but I don’t see it driving the present deposit rates higher given the current environment in Nigeria.”

He contends that the challenging business environment is causing margins for all companies to contract, and as long as regulatory permissions are granted, banks will retain the lowest deposit rates possible.

The amount of money available for lending to the real sector will rise as a result of the increase in the savings rate, he claimed.

Banks are currently raising the cost of borrowing. If clients seek a higher rate, a deposit might follow suit. The focus right now is on increasing borrowing rates. The deposit rate will rise as a result of competition.

However, the CBN’s regulatory stance is now driving the market for risky assets. Banks must raise their rates as a result of the MPR hike because the CBN increased the rate at which banks can borrow money from it, a top bank official told BusinessDay.

From N28.68 trillion in May, bank lending to the private sector increased to N39.27 trillion in June.

Data from the Central Bank of Nigeria (CBN) show that PSCE climbed by 20.4 percent yearly to N39.2 billion as of the end of June 2022, maintaining the growth trend from the previous month. Despite outpacing nominal GDP growth, the PSCE growth rate has trailed behind the other money and credit metrics, according to FBNQuest analysts.

The growth trend in credit to government has been continuously rising, in contrast to the consistent PSCE growth rate of between the mid-teens and 20 percent y/y growth rate over H1 ’22.

According to the most recent data for June, credit extensions to the government increased by 55% year over year. In the six months before June of this year, it grew by an average of around 35% y/y, which is significantly faster than the growth of other money and credit aggregates.

According to a report by FBNQuest, revenue deficiencies (compared to expenditure) lead to fiscal deficits that must be covered by debt (both domestic and external), which is what is causing the government’s credit extended to climb quickly.

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