CBN INTEREST RATE CUT : HOW IT WOULD AFFECT YOU – By Chuzy Ezike
In Nigeria, interest rate decisions are taken by the Central Bank of Nigeria. Interest rate in Nigeria averaged 11.19% from 2007 until 2020, reaching an all time high of 14% in July 2016 and a record low of 6% in July of 2009.
The Central Bank of Nigeria slashed its monetary policy rate ( Interest Rate) by 100 bps ( 1%) during it May 2020 meeting, from 13.5% to 12.5%. It was the first rate cut since March of 2019.
When the Central Bank of Nigeria cuts interest rate, Commercial bank customers usually earn less interest on their savings. Banks will typically lower rates paid on cash held in money market accounts and regular savings accounts. ( SEE Recent Notice from Access Bank ; Attached )
Borrowing becomes cheaper, making purchases on credit more affordable such as home mortgages, Credit card loans and Car loans.
The decision to slash the rate is aimed at reviving the economy battered by the Covid-19 pandemic and collapsing oil price despite persistent inflationary pressures.
A lower rate would stimulate credit expansion to critically important sectors and thus support employment.
CBN uses its target interest rate as a monetary policy tool, and the impact of a change to the rate depends on whether you are a borrower or saver.