A fixed deposit (FD) is an investment opportunity provided by banks that offer investors a higher interest rate than regular savings account upon maturity. FD runs for a pre-defined tenor, so you can know what will be received when your money matures. Fixed Deposit account is also known to have no risk involved in investments. All Nigerian Banks offer the fixed deposit investment opportunity, although the interest rate could differ from one another. Fixed deposit interest rate is usually between 4% and 7.5% without tax.
Features of a Fixed Deposit Account
A fixed deposit investment tenor in Nigeria is usually less than a year. It is from a minimum of 30 days to a maximum of 360 days To have a fixed deposit account, you must invest a minimum of N100,000. If your investment is canceled before the agreed date of maturity, all interest acquired will be forfeited. In other words, you can withdraw your money before the maturity date, but you would have no profit paid to you. The interest you would receive upon maturity is also subject to Withholding tax (WHT). You would have to pay a percentage of tax from the interest received from your fixed deposit in Nigeria.
Requirement for a Fixed Deposit Account
To open a fixed deposit account and invest, you’ll need to meed the following requirements
- Be a minimum of 18 years of age.
- Valid means of identification such as an original Passport, Driver’s Licence, National ID card or Voters Cards (Originals for sighting and photocopies)
- Two passport photograph of each authorized signatory
- Copy of Utility bill (water rate, tenement, rent receipt).
- Residence or Work permit (for foreign account holders)
- Filled fixed-term deposit form provided by the bank.
Advantages of Fixed Deposit Investment
Why invest in Fixed Deposit? Fixed Deposit Investment has a couple of advantages.
- They have a higher interest rate compared to a savings account
- There is no risk involved in investment
- Returns from investments are safe and guaranteed
- Investment is highly liquid and can be terminated at anytime
- Investment is Flexible- Several fixed deposit accounts can be opened with different banks on different terms.
Disadvantages of Fixed Deposit Investment
Fixed Deposit (FD) has various disadvantages. One major disadvantage is the relatively low-interest rate compared to other investment opportunities in Nigeria.
Fixed Deposits also taxed at normal taxation rates and hence one does not enjoy no-tax benefits like other investments. The interest rate of every investment is largely determined by the rate of inflation in the country. If the rate of return after tax is above the rate of inflation during the investment period, there will be real profit. Otherwise, the money invested would not be worth the investment. Another disadvantage of FD is that when money is withdrawn before the agreed maturity date, all interest rate will be forfeited.
Before opening a fixed deposit account, it is advisable to check the interest rate of different banks in Nigeria first. It would help you in determining the most competitive rate before investing.
Other safe investment platforms in Nigeria offer a higher interest rate on better terms and conditions than FD. Sycamore is a peer to peer investment platform that offers investors a high-interest rate and guaranteed returns with no risk involved. Visit www.sycamore.ng for more.