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Home Financial Literacy

Guide to making money by investing in Nigerian Fixed Deposits

Segun Olarinmoye by Segun Olarinmoye
July 24, 2019
in Financial Literacy
Nigerian fixed deposits, mark to market
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This articles explains investing in Fixed Deposit and how much you can make from it and how it is calculated. 

A fixed deposit is an investment with a specific amount invested at an agreed interest rate and tenor. All banks in Nigeria offer this investment opportunity, however the rates you get when you invest in one bank may differ from what you get from another.

Features of a typical fixed deposit investment

  • Investment period (tenor) is a minimum of 30 days and a maximum of 360 days.
  • The Minimum opening balance for this investment is N100,000.
  • If the investment is terminated before maturity the total accrued interest not earned will be forfeited. Meaning only the portion of interest earned in the period that your money was in the bank is what will be paid to you.
  • The investment amount can be terminated at the customer’s discretion.
  • The interest paid to the depositor is subject to Withholding tax (WHT), which is usually deducted from the interest earned.

Advantages of Fixed Deposit Investment

  • Provides a higher rate compared to a Savings deposit.
  • Guaranteed returns – The returns from this investment is guaranteed.
  • Highly liquid – The money can be terminated to fund short term liquidity needs.
  • Flexible in nature – An individual can have several fixed deposit investments with different banks and at different terms.

[Read Also: Fixed Deposits or Treasury Bills, Which Is Better?]

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Documents needed to open a fixed deposit

  • Filled fixed term deposit form which will be provided by the bank.
  • Valid means of identification (National ID, Passport, Driver’s license).
  • Utility Bill of Applicant (water rate, tenement, rent receipt).
  • Two passport photographs.
  • Customer investment advice.

How much you get

  • Fixed deposit rates for most Nigerian banks can earn between 7% and 12% depending on how much you have.
  • The more money you have available to invest, the higher your return.
  • For example, to get up to 12% you might have to invest in millions of naira.

How to Calculate Interest on Fixed Deposit

Fixed deposit investments are usually calculated using simple interest, which means the key elements to take note of include; Principal, tenor and rate.

[Read Also: Difference Between Fixed Deposit and Treasury Bills]

Example 1

If Mr Bello invests N1,000,000 in fixed deposit with a Nigerian bank for a 30 day tenor and the bank offers 7%, how much will he make after 30 days?

Principal – N1,000,000

Rate – 7%

Tenor – 30 days

Step 1: Calculate interest to be earned

= 1,000,000 x 0.07 x 30/365 = 5753.425.

The interest on this investment will be N5753.425.

Step 2: Calculate interest net of withholding tax – This is because banks charge 10% WHT on interest.

WHT = 10% (0.1) x 5753.425 = 575.3425

Net interest = 5,753.425-575.3425 = 5178.082

Step 3: Calculate total amount to be earned at maturity

Total amount at maturity = N1,000,000 (Principal) + N5,178.082 (Net interest) = 1,005,178

Example 2

If Mr Bello decides to increase his investment to N1,500,000 at a higher rate of 9% for a 90 day maturity offered by the bank, what will be his total investment after 90 days?

The same principles will apply;

Step 1: Calculate interest to be earned

= 1,500,000 x 0.09 x 90/365 = 33,287.67.

The interest on this investment will be N33,287.67.

Step 2: Calculate interest net of withholding tax – This is because most banks usually charge 10% WHT on interest.

WHT = 10% (0.1) x 33,287.67 = 3,328.77

Net interest = 33,287.67-3.328.77 = 29,958.90

[Read Also: The Pain and Gain of Money Market Fund Investment]

Step 3: Calculate total amount to be earned at maturity

Total amount at maturity = N1,500,000 (Principal) + N29,958.90 (Net interest) = 1,529,958.90

If you plan to invest in a fixed deposit, it will be wise to contact between 3-5 banks and find out which bank offers the most competitive rate before placing your money. 


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Tags: ExplainersFixed DepositFixed IncomeNigerian fixed deposits
Segun Olarinmoye

Segun Olarinmoye

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Comments 13

  1. Elkanah Kalio says:
    September 25, 2019 at 7:32 am

    I believe you’ve done some research yourself… What bank in Nigeria gives the highest interest?

    Reply
  2. Chidi Vitalis says:
    February 12, 2020 at 5:10 pm

    Pls always update me

    Reply
  3. segunkokoye says:
    December 17, 2020 at 8:21 am

    Pls always need update

    Reply
  4. Itodo charles Abah says:
    January 3, 2021 at 8:20 am

    Thanks for the article as I have been looking for these kind of advice for long.

    Reply
  5. Anonymous says:
    March 17, 2021 at 10:54 am

    please which bank give the highest rate in fix deposit in Nigeria

    Reply
  6. Ubong says:
    June 2, 2021 at 12:08 pm

    Is the net profit daily paid or monthly paid

    Reply
  7. Oluchi says:
    July 14, 2021 at 4:40 pm

    Can I start the fixed deposit account with 50,000 and what will be the interest

    Reply
    • Mark says:
      April 19, 2022 at 1:22 pm

      Minimum of 100k at 7% interest rate

      Reply
      • Kassam says:
        June 25, 2023 at 9:10 am

        Which bank offer such rate?

        Reply
  8. Wetboi bray kenneth says:
    March 1, 2022 at 10:22 pm

    I would like to start with 100k for 10 years and what is going to be my interest?

    Reply
  9. Cecilia says:
    April 6, 2022 at 9:29 pm

    Is it true that CBN doesn’t entertain individual customers but corperate bodies?

    Reply
  10. Njoku chioma Rita says:
    May 2, 2022 at 2:01 pm

    What is interest of 1,800,000 for 2 year in keystone bank

    Reply
  11. Shuaibu Abdu says:
    May 25, 2022 at 12:09 am

    Ineed to help me progres my busines

    Reply

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