Interest and maturity value on a principal over a period.
Maturity value
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Interest earned
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Principal
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Flat interest, and why it stays flat
Simple interest is the most honest piece of arithmetic in finance. You take a principal, apply one annual rate, and let it run for a fixed number of years. Nothing rolls over. The interest in year three is the same naira figure as the interest in year one, because the rate always bites on the original sum and never on the interest you have already piled up. That single property is what separates it from compound interest, where each year's growth becomes part of next year's base.
The formula this calculator uses is principal times annual rate times time in years. Maturity value is just the principal added back to the total interest. There is no tax logic here and no FIRS rule to apply. This is a pure money tool, useful for a friendly loan between two people, a promissory note, a short fixed-rate placement, or any agreement where the parties have explicitly said interest will not compound.
Where the 27.5 percent default comes from
The rate box opens at 27.5 percent, which is the Central Bank of Nigeria Monetary Policy Rate that this calculator carries as an indicative anchor. That number is a policy benchmark, not the rate your bank actually pays a depositor or charges a borrower. Deposit rates usually sit well below it and lending rates usually sit above it, sometimes far above. Treat 27.5 percent as a sensible placeholder, then overwrite it with the real figure from your loan agreement, your fixed-deposit certificate, or a current quote from your bank. The CBN publishes the policy rate after each meeting of its Monetary Policy Committee, so confirm the live number there if you want the anchor to be current.
A NGN 1 million placement over three years
Take the defaults loaded in the form: a principal of NGN 1,000,000, a rate of 27.5 percent, and a term of three years, using the rate this calculator applies. Each year earns the same NGN 275,000, because 27.5 percent of the original million never changes. Three identical slices give NGN 825,000 of total interest, and the maturity value lands at NGN 1,825,000.
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The chart below shows the balance climbing in three equal steps. Equal steps are the signature of simple interest. If those steps were getting taller each year, you would be looking at compounding.
A practical word of warning on loans
Borrowers sometimes prefer a simple-interest quote because the total looks smaller than a compounded one, and over a single year the two are identical. The gap only opens with time. The honest comparison is the effective annual cost, not the headline. A common mistake is to compare a simple-interest personal loan against a compounded bank product purely on the stated percentage, when the compounding frequency is doing the heavy lifting. If you are weighing the two, run the same principal and term through both this tool and the compound interest calculator and compare maturity values directly.
Does simple interest attract any Nigerian tax?
The interest itself can be taxable in the recipient's hands. Interest income earned by an individual generally folds into chargeable income, and interest paid by Nigerian companies typically suffers withholding tax at the rate of 10 percent that the wider system applies. This tool does not deduct any of that. It shows the gross interest only, so if you need the after-tax figure, subtract the relevant withholding and confirm the current treatment with the FIRS, reconstituted as the Nigeria Revenue Service under the 2025 reform.
Can I use a part-year term like 18 months?
Yes. The time field accepts fractions of a year, so 18 months is entered as 1.5 and six months as 0.5. The maths scales smoothly, because interest is rate times time. Entering 1.5 years at 27.5 percent on NGN 1,000,000 gives NGN 412,500 of interest. Just make sure your rate is an annual rate before you do this, since mixing a monthly rate with a years figure is the most frequent slip people make.