Experts blame high interest, others on customers’ deposit decline

Financial experts have linked the recent decline in deposits of some Deposit Money Banks (DMBs) operating in the country, due to a combination of high interest rate, drop in bank customers’ income and increase awareness among their customers, among many others as factors responsible for the significant drop in the first half of the year.

There are indications that depositors were pressurizing for higher deposit rate against the backdrop of the high interest rate regime created by the monetary policy of the Central Bank of Nigeria (CBN) in its quest to curb inflation and reduce demand for foreign exchange.

Speaking on this development, President, Bank Customers Association of Nigeria (BCAN), Dr. Uju Ogubunka, noted that lack of awareness on how to leverage on government securities to get maximum returns on their savings is one of many reasons responsible for the drop in the depositors rate in the period under review.

He explained further that treasury bills rate is one of them because people now move their money to TBs and other high yield instruments because they are also low risk investment.

But this is also because there is no alternative investment option especially due to the economic situation hence the only way to maximise investments with low risk is TBs“Another factor is that customers are getting more enlightened,” he said.

Ogubunka, however, said that some of the enlightenment and educative programmes we are doing at BCAN are now yielding results. Before now some people don’t even know they can move their funds to TBs. But now they know and they are acting on this knowledge.

Also the decline in economic activities has reduced the income of consumers. People are not making income as they used to do. And you know that savings is a function of income.

As a result, people are not leaving money in current account or savings account as they used to do. This is compounded by the fact that the high prices of goods and services make people to spend more money on same quantity of goods.

Consequently, half year result of f TIER 2 lenders showed that they suffered N233 billion decline in deposit in the first half of the year (H1 2017) owing to demand for higher deposit rate by customers.