Calculate simple and compound interest on savings or investments. See the difference between both methods and choose compounding frequency.
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Nigerian Bank Rates (2026)
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Simple vs Compound Interest
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus all previously earned interest — interest on interest. Over long periods, this difference becomes enormous. Albert Einstein reportedly called compound interest the eighth wonder of the world: those who understand it earn it, those who do not pay it.
Nigerian Bank Rates 2026
The CBN Monetary Policy Rate (MPR) set the benchmark at 27.25% in 2025, with savings account rates typically ranging from 10-22% and fixed deposit rates up to 28-30% depending on the bank and tenure. Loan interest rates from banks average 25-32% per annum for personal loans.
Frequently Asked Questions
Simple interest: I = P × R × T (interest = principal × rate × time). It is calculated only on the original principal each period. Compound interest adds previously earned interest to the principal before calculating next period's interest. Over 10 years, ₦100,000 at 15% simple interest grows to ₦250,000. At 15% compounded monthly, it grows to about ₦444,000.
Most Nigerian bank fixed deposits compound quarterly or annually. Savings accounts typically compound monthly or quarterly. The more frequently interest compounds, the more you earn. Compare accounts using the Effective Annual Rate (EAR) which accounts for compounding frequency.
Divide 72 by the annual interest rate to approximate how many years it takes to double your money. At 18% interest: 72/18 = 4 years to double. At 9%: 72/9 = 8 years. It is a quick mental shortcut that works surprisingly well for rates between 6% and 20%.
For savings and investments, yes — compound interest earns you more. For loans and debt, compound interest means you pay more. Credit cards and many consumer loans compound interest, which is why carrying a balance is so costly. Understanding which type applies to your financial product is important.
EAR is the real annual return accounting for compounding frequency. A 12% nominal rate compounded monthly has an EAR of (1 + 0.12/12)^12 - 1 = 12.68%. The EAR is always higher than the nominal rate when compounding occurs more than once per year. Use EAR to compare different savings products accurately.