Convert a nominal return into a real, inflation-adjusted return.
Real return
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Nominal return
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Inflation
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Why the headline rate on your savings lies to you
When a Nigerian bank advertises a fixed deposit at 20 percent, or a Treasury bill clears at a similar yield, that number is the nominal return. It tells you how many more naira you will hold at the end of the year. It does not tell you whether those naira buy more bread, fuel, or school fees than they did when you started. With headline inflation running around the 23 percent the calculator uses as its default, prices can climb faster than your balance, and the purchasing power of your money quietly shrinks even as the figure on your statement goes up. This tool exists to expose that gap.
The real return is the growth in what your money can actually buy. The calculator uses the Fisher relationship, which is more precise than simply subtracting inflation from the nominal rate. You take one plus the nominal return, divide by one plus the inflation rate, and subtract one. The division matters at the high inflation levels Nigeria has seen, because a crude subtraction overstates how well you are really doing once prices rise into the twenties.
A 20 percent deposit against 23 percent inflation
Take the figures the calculator loads by default. You earn a nominal 20 percent on your money over a year, and headline inflation sits at 23 percent. Plenty of savers would glance at a 20 percent rate and feel they are winning. The Fisher maths says otherwise. One plus 0.20 is 1.20. One plus 0.23 is 1.23. Divide 1.20 by 1.23 and you get roughly 0.9756, so subtracting one leaves about negative 0.0244. The real return is a loss of about 2.44 percent. Your naira pile grew, but it lost ground against the shop shelf.
| Step | Value |
|---|---|
| Nominal return on the deposit | 20.00% |
| Headline inflation (calculator default) | 23.00% |
| 1 plus nominal, divided by 1 plus inflation | 1.20 / 1.23 = 0.9756 |
| Subtract one | 0.9756 minus 1 |
| Real return | (2.44%) |
The bracketed figure is the convention for a negative result: the deposit delivered a real return of about negative 2.44 percent. These are the rates this calculator applies in the worked example, drawn from the inputs you can change at any time.
Reading the result, and the break-even point
The break-even nominal rate is whatever matches inflation. At 23 percent inflation you would need a nominal return above 23 percent just to stand still, and meaningfully above it to grow your wealth. That framing changes how you shop for yield. A money market fund quoting 19 percent and a fixed deposit quoting 21 percent are both losing to a 23 percent price rise, so the choice between them is really a choice between two different sizes of loss. Dollar assets, equities, or real estate enter the conversation precisely because naira cash struggles to clear the inflation hurdle in years like these.
A practical tip: when you compare offers, run each nominal rate through this tool with the same inflation figure before you decide. The ranking by real return sometimes differs from the ranking by headline rate once a product has fees or a lower advertised yield, and the real number is the one that pays your bills.
A common mistake: subtracting inflation instead of dividing
Many savers reach for the quick version, 20 percent minus 23 percent equals negative 3 percent. The Fisher result is a smaller loss, about negative 2.44 percent, because the division accounts for the interaction between the two rates. At low inflation the two methods barely differ. At Nigerian inflation levels the gap is wide enough to matter, which is why the calculator uses the precise relationship rather than the shortcut.
Does this calculator account for tax on my interest?
No. It compares a pre-tax nominal return against inflation. Bank interest can attract withholding tax, which would lower your true return further, so the real figure here is best read as a ceiling. Confirm the current treatment of savings and investment income with the Federal Inland Revenue Service (reconstituted as the Nigeria Revenue Service under the 2025 reform) before you finalise any plan, since the tax rules are still settling after the new Act.
Where does the 23 percent inflation default come from, and can I change it?
It reflects the headline consumer price index Nigeria has reported recently, published by the National Bureau of Statistics, and it is only a starting point. Inflation moves month to month, so type in the latest figure when you run a serious comparison. The calculator recomputes the real return the moment you edit either box.