Because bank fixed deposit interest rates in Nigeria vary, the issue of “which bank is best for fixed deposit in Nigeria” arises.
A Tenured Deposit, also known as a Fixed Deposit, is a tenured investment account in which a certain sum is deposited for a set period of time at a set interest rate.
The money can either be re-invested or returned to you with the interest amount gained at the end of the specified period (tenure), and the tenure is normally between 30 days minimum to 180 days maximum, depending on your instructions.
You should also be aware that the minimum initial balance for this investment is $100,000, however this may vary depending on the bank. If you’re not sure, ask your banker.
In addition, you have the option of terminating your investment at any time.
However, if you withdraw from the investment before it matures, you will be responsible for the whole amount of unpaid interest. What this implies is that you will be paid the percentage of interest gained during the time your money remained in the bank.
Keep in mind that the interest you receive is subject to Withholding Tax (WHT), which is typically taken from the amount of interest you earn.
Nigerian bank fixed deposit interest rate
What credentials are required to start a fixed deposit account?
- The bank will supply you with a filled-out fixed-term deposit form.
- National ID, passport, or driver’s license are all acceptable forms of identification.
- Applicant’s Utility Bill (water rate, tenement, rent receipt)
- Photographs for two passports
- Investment advice for customers
In Nigeria, there are several advantages to having a fixed deposit account.
1. Returns are guaranteed
A fixed deposit is a type of investment that has a set rate of return. The rate of interest you’re provided when you start an FD stays the same throughout your time with it. Even if interest rates fall in the broader market, your FD will not be affected, so you won’t be harmed by market fluctuations.
2. Investing without the hassle
If you already have a savings account, you may open an FD with a few clicks or by going to your local bank. You don’t have to bother about it after you open it until it grows. You can have your maturity instructions automatically renew or credit your account with the maturity funds.
3. Compounding’s magic
You will profit from compound interest if you pick an FD with a reinvestment option; this implies that you will receive interest not just on the principal amount but also on the amount you reinvest.
4. A steady source of revenue
You can choose to receive interest payments monthly or quarterly if you want a consistent income.
Furthermore, because FD interest rates are highly negotiable, investing in a fixed deposit account offers you a better interest rate than leaving your money in a savings account.
It’s simple to get a loan against your FD. You can borrow up to 90% of the amount of the FD.
In Nigeria, how do you compute the interest rate on a fixed deposit?
Knowing how to calculate fixed deposit interest rates in Nigeria is always beneficial since it may help you get most out of your investment.
But if you believe it’s too difficult, I’ll break it down for you.
5. Compound Interest
Simple Interest and Compound Interest are the two ways for calculating interest on a fixed deposit. Nigerian banks may employ both, depending on the deposit’s duration and size.
How can you tell the difference between simple and compound interest?
Simple interest is calculated just on the principal, whereas compound interest is calculated on both the principal and the interest.
Interest (Simple)
The principal, rate of interest, and time period are multiplied to compute this approach.
Simple Interest (SI) is calculated using the formula “principal x rate of interest x time period divided by 100” (P x Rx T/100).
Where,
P= Principal amount; R = Rate of interest per annum; T= No. of periods (in years)
Example
Now if you invest ₦1,000,000 at 8% p.a. for 5 years, you can calculate the interest like this.
Step 1: 1,000,000 x 8 x 5 = ₦40,000,000
Step 2: Now divide that by 100. You get ₦400,000.
Therefore, the interest you earn for 5 years is ₦400,000.
As a result, if you invest $1,000,000 in a fixed deposit with an annual interest rate of 8%, you will receive $400,000 at the end of five years.
Compound Interest is a term that refers to the interest
For example, if a bank provides 8% p.a. for a 5-year deposit with interest compounded annually and you invest $1,000,000, we may compute the interest using this approach as follows:
Year 1: For the first year, we apply the straightforward interest technique.
1,000,000x8x1/100 = ₦80,000
So the interest earned for the first year is ₦80,000.
This amount is added back to the principal. So the principal for the second year becomes ₦1,080,000.
Year 2
Now, in the second year, you will earn 8% on ₦1,080,000.
1,080,000 x8x1/100 = ₦86,400
You earn a total of 86,400 in interest. This is added to the main once again. As a result, your deposit has increased to $1,166,400.
That’s how you figure out compound interest over the following three years or longer.
Some banks, on the other hand, compound interest on a monthly, quarterly, or half-yearly basis. Rather than doing it this way, use a simple formula that multiplies the principal amount by the interest rate multiplied by the number of periods in years.
Remember that the interest rate on bank fixed deposits in Nigeria is not the same for all tenures. Choosing the longest term offered does not necessarily imply that you will receive the best interest rate.
Let’s examine which bank in Nigeria pays the greatest interest rate on fixed deposits.
Nigerian bank fixed deposit interest rate
Fixed deposit interest rate at Zenith Bank in Nigeria
Please be advised that a fixed deposit is a service offered by the bank to clients that gives interest rates between 2.00 percent and 2.00 percent, depending on the amount fixed (please note that the minimum amount that may be set is $100,000).
It has a 30-day, 60-day, or 90-day flexible length and can be rolled over upon request. To start a fixed deposit account, you must write a fully signed letter requesting that a sufficient sum be taken from your savings or current account.
Source: Nyscinfo