Project savings growth with contributions and compound interest.
Future value
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Total contributed
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Interest earned
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Real value (today)
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Worked example
Start with a principal of N500,000, add N50,000 every month, and earn 18% a year compounded monthly for 10 years. The monthly rate is 18% divided by 12, which is 1.5%, applied over 120 months. The principal grows to about N3,007,000 on its own, and the stream of N50,000 contributions grows to about N16,542,000, for a future value of roughly N19,549,071. You will have put in N6,500,000 of your own money, so the interest earned is about N13,049,071. The real value matters in Nigeria though. Deflating that future amount by 23% inflation a year leaves about N2,466,465 in today's purchasing power, which is less than the cash you contributed, because 23% inflation outpaces an 18% return.
Item
Amount (NGN)
Starting principal
500,000
Total contributed over 10 years
6,500,000
Interest earned
13,049,071
Future value (nominal)
19,549,071
Real value in today's money
2,466,465
How it is calculated
Compound interest earns returns on both the original principal and the interest already credited, so the balance grows faster over time. The principal grows by one plus the periodic rate, raised to the number of periods, where the periodic rate is the annual rate divided by the compounding frequency you select. Regular contributions are treated as a future value annuity, each deposit compounding from the date it is paid until the end. Adding the grown principal to the grown contributions gives the nominal future value, and interest earned is that total less everything you paid in. The real value divides the nominal amount by one plus the inflation rate raised to the number of years, which strips out the loss of purchasing power. With Nigerian inflation around 23%, a nominal return can still leave you worse off in real terms unless the return clears inflation.
Frequently asked questions
How does compound interest grow my savings in Nigeria?
Compound interest earns returns on both your principal and previously earned interest, so growth accelerates over time. This calculator adds your monthly contributions and compounds at the frequency you choose. Because Nigerian inflation is high, it also shows the real value, which deflates the future amount by the inflation rate so you can see purchasing power, not just the naira total.
Why does my real value sometimes fall below what I paid in?
When the annual inflation rate exceeds the interest rate you earn, the purchasing power of your future balance is less than what you contributed at today's prices. Nigeria's inflation has been above 20% in recent years, so a savings rate below that threshold means your money loses real value even as the naira balance grows. The calculator flags this by showing the real value alongside the nominal figure so you can compare both.
Which Nigerian savings products benefit most from compounding?
Fixed-deposit accounts, treasury bills, and money market funds all allow interest to be reinvested at rollover, which is equivalent to compounding. The more frequently interest is credited and reinvested, the faster the balance grows. Treasury bills issued by the Central Bank of Nigeria typically offer rates above commercial savings accounts, making them a common choice when looking for a compound-friendly vehicle.
Does this calculator account for Nigerian tax on interest income?
No, this calculator shows gross interest earned before any deductions. Under Nigerian tax law, interest income is subject to withholding tax at 10%, deducted at source by the financial institution. To estimate your net return, multiply the interest earned figure by 0.90. The withholding tax credit can be offset against your final income tax liability when you file your annual return with FIRS.