Opening a Fixed deposit account in Nigeria
In Nigeria, there are a lot of banks operating and there is a lot of competition for funds. One of the most attractive products which banks offer to the public is the fixed deposit account.
A Fixed or term deposit account in Nigeria is a savings account that attracts a higher interest for money saved on an pre-agreed time period and on a pre-agreed interest rate. If you'd rather save money in your account for a long term, without touching it, you should move it to a higher yielding interest account.
Fixed deposit accounts are one of the ways Nigerian banks encourage and reward customers for saving money in their bank for a longer time period without making withdrawals. They do this by offering to pay them a higher interest on such savings that they've left the bank.
How to open a Fixed deposit account
- Ensure you also have a sufficient amount of capital. Most banks require at least N200,000(around $1250)
- Then inquire with the bank what their terms are on Fixed deposit such as interest rate, time period and other conditions.
- Apply by filling the Fixed deposit account opening form after reading the terms and conditions
- Your funds will be moved to the Fixed deposit account and held for agreed time period
Fixed deposit accounts pay you a higher interest on your savings
When you consider the fact that many banks pay at least 10% p.a. for your term deposits in Nigeria, you stand a good chance of getting a better interest on your savings since such savings pay around 1% to 3% per annum.
If you are going to save money in your bank account for quite a long time, perhaps for a future plan like a home or car savings, it's best to just move it to a fixed account where you'll get more credit for saving money.
When a bank offers you around 10% on your savings in this case, it means that they will pay you 10% of your money including your original capital at the end of the agreed period. If for instance you invest N1m in a fixed deposit account in Nigeria at 10% per annum, you will earn N100,000 at the end of that year or N50,000 at the end of 6 months depending on how long you have agreed to put your money in that account. If you ask me, that is a good form of passive investment where your money actually does the work for you.
- Not all banks pay as much as 10% so look for the ones that can pay you higher
- Invest with a higher capital to earn more. N1m will earn you more than N100,000
- Ensure you Inquire first what the interest rate is before making your investment
- Ensure to read the terms of service before filling the application form.
Can I withdraw from my account? If you choose to withdraw from your Fixed deposit account, you will lose the interest on your deposit
How much money do I need to open a Fixed deposit account? Most banks require at least N200,000
How much interest can I earn from Fixed deposits? It varies from bank to bank. You can get around 7% to 12%
How long can I hold a Fixed deposit account? The least is 30 days and the most is for 1 year. You have the option or continuing for another year after the first year. You can hold an account for 30, 60 and 90 days too.
Are there any charges or taxes for operating Fixed deposit account? In Nigeria, around 10% Withholding tax is charged on the interest earned on your deposit. This is a sort of tax deducted by the bank. So if you earn N100,000, you'll only get credited a balance of N90,000.