What is a good interest rate for savings in Nigeria?

As of 2026, 364-day T-bills yield around 22.5%, while fixed deposits at commercial banks offer 20–25% per annum. High-yield savings accounts from digital banks (Kuda, PiggyVest) typically range 10–15% per annum. Always verify rates directly with your bank.

How does the CBN MPR affect my savings rate?

The CBN Monetary Policy Rate (MPR) currently stands at 26.5%. Banks generally set deposit rates below the MPR and lending rates above it. A rising MPR environment is good for savers as it pushes deposit rates up.

What is compound interest and why does it matter?

Compound interest means you earn returns not just on your initial deposit but also on previously earned interest. Over time this creates exponential growth — the longer you invest, the more powerful the compounding effect becomes.

How often does compounding happen in Nigeria?

Most Nigerian banks compound interest monthly or quarterly. T-bills pay at maturity (not compounded during the period). Investment funds typically compound daily. Always check your product's compounding frequency as it significantly affects returns.

Compound Interest Calculator

See how your savings grow with compound interest — using realistic Nigerian rates and Naira amounts.

Investment Details

Initial Deposit

₦

Monthly Contribution

₦

Annual Interest Rate

Investment Period (Years)

yrs

Compounds Per Year

Future Value

₦5,482,316

Total Deposited

₦3,500,000

Interest Earned

₦1,982,316

Return on Investment

56.6%

How to Use This Calculator

Investment Growth Tab

Enter your initial deposit (the lump sum you start with), your monthly contribution (what you add each month), an annual interest rate, and the number of years. Use the "More options" toggle to change how often interest is compounded. Results update instantly as you type.

Savings Goal Tab

Set a target amount you want to reach — say ₦5,000,000 for a car or house deposit — enter your starting balance, rate, and time horizon. The calculator tells you exactly how much to save every month.

Compare Tab

Enter two different rates (for example, 15% for a fixed deposit vs 22.5% for a T-bill) side by side. The winning option highlights automatically and shows how much more you earn over your chosen period.

The Formula

FV = P × (1 + r/n)^(n×t) + PMT × [(1 + r/n)^(n×t) − 1] / (r/n) Where: FV = Future value (end balance) P = Principal (initial deposit) r = Annual interest rate (decimal, e.g. 0.15 for 15%) n = Compounding periods per year (12 = monthly) t = Time in years PMT = Monthly contribution

The first term calculates how your lump sum grows. The second term adds the future value of your regular contributions. Together they give your total portfolio value at maturity.

Note: when compounding is monthly (n=12), the effective monthly rate is (1 + r/12), which means interest earned in month 1 itself earns interest in month 2 and so on — this is the power of compounding.

Example

Scenario: Fixed Deposit + Monthly Top-up

Tolu places ₦500,000 in a fixed deposit paying 20% per annum compounded monthly, and transfers ₦50,000 to it every month. After 5 years:

Initial deposit₦500,000

Monthly top-up₦50,000

Rate20% p.a. (monthly)

Years5

Total deposited₦3,500,000

Future value≈ ₦5,600,000

Interest earned≈ ₦2,100,000

At current T-bill rates (22.5%), the same scenario yields roughly ₦5,900,000 — about ₦300,000 more purely from a higher rate.

Nigerian Investment Context

Understanding where your rate fits in Nigeria's market helps you make informed decisions:

CBN MPR (2026): 26.5% — The benchmark rate. Deposit rates generally sit below this.
364-day T-bills: ~22.5% — Government-backed, very low risk, excellent for large savings.
Fixed deposits (banks): 20–25% — Rate varies by bank and tenor. Always negotiate for larger amounts.
Digital bank savings: 10–15% — PiggyVest, Kuda, Cowrywise. More accessible, lower rates.
Eurobond/FGN Bonds: 16–20% — Longer-term, semi-annual coupon payments.
Stock market (NGX): 8–35% depending on year — Higher potential returns with higher risk.

Inflation was running at ~15% in 2025. Any investment below inflation means your purchasing power is shrinking in real terms — aim for rates above 15% to preserve wealth.

FAQ

As of early 2026, 364-day Treasury Bills offer around 22.5% per annum — among the highest risk-free rates available. Commercial bank fixed deposits range from 20–25%. Compare your options and lock in longer tenors when rates are high.

The CBN Monetary Policy Rate is the anchor for Nigeria's interest rate environment. When the MPR rises, T-bill yields and bank deposit rates tend to rise with it. The MPR currently stands at 26.5% — the highest in many years — which is great news for savers.

Yes, especially over long periods. Monthly compounding on a 20% annual rate gives an effective annual rate (EAR) of about 21.94%, versus 20% for annual compounding. On ₦1,000,000 over 10 years that difference adds up to hundreds of thousands of naira.

Under Nigerian tax law, interest on savings accounts and fixed deposits from licensed banks is generally exempt from withholding tax for individuals. However, T-bill income may attract 10% withholding tax depending on the investor type. Consult a tax advisor for your specific situation.

The nominal rate is the advertised rate (e.g. 20% p.a.). The effective rate accounts for compounding frequency. For 20% compounded monthly, the effective annual rate is (1 + 0.20/12)^12 − 1 ≈ 21.94%. Always ask banks for the effective annual rate (EAR) for a true comparison.