How Does Fixed Deposit Work in Nigeria?

Fixed deposits are an investment scheme that most Nigerians have never heard about or don’t just know how it works. However, it is one of the safest investments available from banks. Fixed deposits typically pay higher interest rates than saving accounts and even the acclaimed money market accounts.

Unfortunately, there is one big hiccup with this type of investment. To use a fixed deposit account, your money will be locked away in an account for a period of time meaning you won’t be able to make withdraws whether for emergency or personal use before the stipulated time.

How Does Fixed Deposit Work in Nigeria?

Fixed deposits could be described as time deposits that are made into an account for a specified amount of time (which could be months or years) in return for higher interest rates.

This follows the same structure as a savings account only with several limitations and more benefits. The bank will offer you a higher annual yield on the funds deposited into the fixed deposit account.

When you choose to open a fixed deposit account, you get to choose how long you want your funds to remain in the account. This is known as the terms which could be from 6, 12, 18, to 60 months.

As you would expect, going for the long-term option offers better rewards as you will get higher rates and earn more. However, it won’t be the best way to go for starters. If you don’t have so much money to spare, leaving a huge chunk of it locked up in a bank account that will only allow you to withdraw at a certain time might not be the best idea.

You might to want to withdraw early which is actually possible, however in some cases, you might be denied such a request. If the bank allows you to pull out your funds early, you will have to pay an early withdrawal penalty.

This penalty might cost you any interest you have earned on your deposit and eat into your deposit as well. For starters, it is best to save as little as you can afford to store away and for only a short period of time. As your interest and financial freedom builds, you can deposit more and earn higher interest rates.

When the term expires (known as the maturity date), you won’t have to actually withdraw your deposit. When the term draws to a close, your bank will notify you that the fixed deposit is about to mature and they will offer you several options. You can then decide how to go from there. You could choose to reinvest the fixed deposit using the same term as the one that just matured or go for a new term.

The interest awarded for re-investing might be higher or lower depending on the bank’s policies.

How To Start Using Fixed Deposits

To invest in a fixed deposit account you will have to contact your bank. There are different ways to go about the process but most banks will demand that you meet certain requirements.

You might want to check different banks for the requirements of a fixed deposit account and get more information on the terms and policies. When searching for the best banks keep the following things in mind

  • Global Currencies: Some banks will allow you to make a deposit in not just the national currency but also foreign currencies such as Pounds, Euros, and the United States Dollar
  • Flexibility: The best fixed deposit policies should allow for terms ranging from months to years giving you all the options you need.
  • High-Interest Rates: The main purpose of creating a fixed deposit account is to generate profit. You should only go for the ones that match their policies with the best rates.

How to Make Money by Investing In Fixed Deposits in Nigeria

First, you should know that Fixed Deposits isn’t a get-rich-quick scheme. It is more like a long-term investment that will keep your pockets full, the more you throw into it.

To make money from fixed deposits, you need to make calculated investment decisions. Watch out for high-interest rates and only invest the money you can do without for the specified period of time.

You can make the best gains with short-term investments of not more than five years. While longer-term fixed deposits deliver more returns, you might need the money for some unforeseen emergency in the future which could lead to an early withdrawal and several penalties.


Unlike many other types of investments, fixed deposits are not a gamble. You’re sure of your money and what to expect when it finally matures. The right steps to take would be avoiding low-interest rates, start small and go for shorter terms till you build the right strategies that will help you hit big gains with your investment.

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