Compound annual growth rate and total return, with a real view.
CAGR (nominal)
—
Total return
—
Real CAGR
—
Gain
—
Your breakdown
Updates live as you type
Item
Amount
Worked example
Take an investment that started at N1,000,000 and grew to N2,500,000 over 5 years, a gain of N1,500,000. The total return is the final value over the initial value minus one, which is 150.00%. The CAGR, the steady yearly rate that would turn N1,000,000 into N2,500,000 over five years, is the fifth root of 2.5 minus one, about 20.11% a year. That is the nominal figure. With Nigerian inflation around 23%, the real CAGR is the nominal divided by inflation, so one plus 20.11% divided by one plus 23% minus one, which is about negative 2.35% a year. In other words the investment grew strongly in naira but lost a little purchasing power, because its return trailed inflation.
Measure
Value
Gain in naira
1,500,000
Total return
150.00%
CAGR (nominal)
20.11%
Real CAGR (after 23% inflation)
-2.35%
How it is calculated
The total return is simply the final value divided by the initial value, minus one. The CAGR smooths that total return into a single yearly rate: it is the final value over the initial value, raised to the power of one divided by the number of years, minus one. This is the constant annual rate that links the start and end values regardless of how bumpy the path was in between. The real CAGR strips out inflation by dividing one plus the nominal CAGR by one plus the inflation rate, then subtracting one, which is the precise way to combine two rates rather than just subtracting them. In a high-inflation economy like Nigeria the real CAGR is the honest measure of whether your wealth actually grew, since a large naira gain can still represent a loss of purchasing power if it fails to outpace inflation.
Frequently asked questions
What is CAGR and why does it matter in Nigeria?
CAGR, the compound annual growth rate, is the steady yearly rate that would grow your initial value to its final value over the holding period. It smooths out lumpy returns into one comparable number. In Nigeria, where inflation runs high, the real CAGR matters more: it strips out inflation so you can see whether your investment actually grew your purchasing power or merely kept pace with rising prices.
How is the real return calculated for a Nigerian investment?
The real CAGR is found by dividing one plus the nominal CAGR by one plus the inflation rate, then subtracting one. This is more precise than simply subtracting the inflation rate from the nominal figure. For example, a nominal CAGR of 20% with 23% inflation produces a real CAGR of about negative 2.4%, meaning the investment lost purchasing power even though it grew in naira terms.
What is the difference between total return and CAGR?
Total return is the overall percentage gain or loss across the entire holding period, calculated as the final value divided by the initial value minus one. CAGR converts that total return into an equivalent steady annual rate, making it easy to compare investments held for different lengths of time. A 150% total return over five years is the same as a CAGR of about 20.1% per year.
Does capital gains tax reduce the investment return shown?
This calculator shows the pre-tax return on the investment values you enter. Under the Nigeria Tax Act 2025, gains on many investments made by individuals fold into chargeable income and are taxed at the personal income tax bands. To see the after-tax picture, subtract the estimated capital gains tax from your final value before entering it, or use the capital gains tax calculator to model the tax on the gain separately.