I was at the bank this morning to monitor one of my fixed deposit accounts and also to open another one when a news came to the bank via their mailing portal that CBN as changed the fixed deposit rate for all deposit holder.

The interest rate for deposit between 100k to 50 million is now 2.5% for 30 days and 2% for 60 days and above. For deposit from 50 million and above is 3% as against the 10% ihave been dealing with the bank.

I don't know if this is the same for other banks but i think it is bad news for Fixed Deposit holder.

Please i will want our financial analyst here on nairaland to explain the implications of this decision on the economy.

I left the bank feeling very bad.

This needs some clarificatclarificationss o. Coz I don't understand.

This is serious

If this is true, then the prevailing interest rates on risk assets should drop too. If not, the masses will be at the receiving end.

Don't they want to encourage savings anymore?

I think the whole essence is to discourage saving so that there will be more money in circulation.

Hello,

If the information is confirmed, the implications are:

For those that have already invested in fixed deposit and locked in at far higher rates, your interest will not suddenly change- you will still receive your earning at the end of maturity. So there is no cause for alarm for existing "Fixed Deposit Holders" (to capture it in @Bj5all's language).

However, going forward it means new investors in fixed deposit with the banks will earn those reduced interest as you have quoted.

CBN's key objectives include (among others) to manage THE TRINITY (Exchange rate, Inflation rate and Borrowing rate). The bank adopts different strategies and tactics to achieve it's goals and one of them is through monetary policies, trying to stimulate investment in real sector and capital projects.

Commercial Banks already offer as low as 3.0% on savings account and so the options for the public (surplus side) will then be either they Consume their funds or Invest it (since savings as it is now, erodes capital) in financial assets or non-financial assets, that could give higher returns.

At the moment, these assets include Treasury Bills or investing in Real Sector (which has higher risk) or Equities (which is classified as high risk).

Treasury Bills trade at between 9.5%-11% at the moment and is a safe investment option.

Visit www.angelstartups.com.ng/fixedincome for more information.

Cheers.

@Op, are you sure of this? I donbiliv it. somebody should please make an enquiry.

murphyrichy:
@Op, are you sure of this? I donbiliv it. somebody should please make an enquiry.

i am very sure of it, i was at the bank today when the news came. you can confirm for yourself by visiting any bank of your choice

Bj5all:

i am very sure of it, i was at the bank today when the news came. you can confirm for yourself by visiting any bank of your choice

okay I will do the needful.

hmmmmn na waooo

It's true. I saw the rate guide but I thought it was a mistake.

Treasury bills is next.

Caracta:
It's true. I saw the rate guide but I thought it was a mistake.

Treasury bills is next.

Treasury bills has already crashed na..

Bills we used to buy at 14% now going for 10.5%

I think it wont last though

feelamong:


Treasury bills has already crashed na..

Bills we used to buy at 14% now going for 10.5%

I think it wont last though

With the way CBN is going about everything, I think it will last.

I really don't understand why anyone in Nigeria will be doing fixed deposit with our inflation rates, you are only making money for the banks, who know how to use your money better than you, this doesn't not make sense.

Welcome to the stock market where you can earn interests in thousands of percents and risk losing only 99.99% of your funds. Can you handle it?

Hmm

DjAndroid:
Don't they want to encourage savings anymore?

Government want to encourage productive investment leading to more jobs. Good move!

Bj5all:
I think the whole essence is to discourage saving so that there will be more money in circulation.

FD Is not savings, its investment.

GudluckIBB:


FD Is not savings, its investment.

It is only investment if you fix it in dollars certainly not in Naira, fixed deposit is a loss eventually due to our inflation rate.

Caracta:
It's true. I saw the rate guide but I thought it was a mistake.

Treasury bills is next.

You don't mean it?

I almost replied that it was not true and dare the OP to mention the name of the bank until I read your comment.

ministeriallist:

Government want to encourage productive investment leading to more jobs. Good move!

I agree if true.

A lot of investors may be forced to liquidate their investments at maturity and "plough" same into their various businesses. Investors will need to be more creative with their funds to get the desired returns.

Risk averse investors may prefer to switch to Treasury Bills (TBs) since the return would still be higher than of Fixed Deposits (FD).

This should reduce the cost of borrowing for FG as more funds will available for investment in TBs thereby reducing interest rates on it.

To compensate for the loss of the FDs, banks should focus more on supporting the real sector.

My opinion though, if the news is actually true.

Looters will turn their rooms to banks. Expect very damp, smelly mould infested naira notes very soon.

V

Hmmm

jamace:
Looters will turn their rooms to banks. Expect very damp, smelly mould infested naira notes very soon.

But they are better off having the funds in the banks, even at the supposedly low rates.

Although this is what obtains in America. Maybe they are trying to make Nigeria a credit country like the US. We are in serious trouble if this isn't done properly.

jamace:
Looters will turn their rooms to banks. Expect very damp, smelly mould infested naira notes very soon.

My brother they have been doing that since. They hardly take most of the loot to the banks. Problem is, the common man will bear the brunt if this isn't managed properly.


I honestly hope Nigeria knows what she's doing.

all because of buhari,