How To Earn Up To 15% Per Annum On Your Savings in Nigeria
Hey there!
You’re probably familiar with the historically low interest rates paid by Nigerian banks on saving accounts, which average around 3.7% per annum.
However, following the recent decision by the Monetary Policy Committee of the Central Bank of Nigeria to slash the Monetary Policy Rate (MPR) from 30% to 12.5%, the CBN has instructed banks in Nigeria not to pay less than 10% of the MPR as interest on a savings account.
As a result, Nigerian banks have collectively reduced their already low interest rates on savings accounts to hover around the minimum 1.25% stipulated by CBN, with some banks ― like Access Bank ― even paying lower than that.
In a recent email sent by Access Bank to its customers, they were notified that following the recent changes in MPR, the bank has revised its interest rates on savings accounts down to 1.15% per annum.
That’s pretty low, don’t you agree?
Well, that’s not all.
Did you know that to qualify for the payment of interest on your savings account, banks require you not to make up to four withdrawals in a month? According to Okafor Endurance, an editor for Business Day, when you make four or more withdrawals from your savings account in a month, you automatically forfeit any interest you might have earned.
Ouch.
I’m sorry, but that’s still not all.
When you calculate all the charges being deducted from your savings account ― such as account maintenance charges, text message alert charges, ATM card maintenance fee, and transfer fees amongst other charges ― you realize that at the end of each year, you are left with lesser money than you deposited into your account. And even when you get paid interest on your savings account, they hardly cover a quarter of all these charges!
Also, when you take into consideration Nigeria’s inflation rate of 12.82%, it means you’re basically paying your bank to keep your money for you, and this is a reverse of what should happen. Banks should be the ones paying you to keep your cash because when you save with them, they lend your money out to borrowers, who then pay interest on their loans.
For example, let’s assume you deposit ₦100,000 into a savings account that pays you 1.25% (this is the minimum interest rate stipulated by the CBN on savings deposits). Your interest payment for the year will be ₦1,250. The bank loans out your ₦100,000 to a business at a 14% interest rate and will earn ₦14,000. The difference of ₦12,750 is for the bank. Now, assuming the bank has ₦2,750 worth of expenses to pay for employees, property, insurance, and other expenditures, the bank profit from your money is ₦10,000.
To put it simply, the bank earns more money than you from your own money.
Dismaying, right?
Once again, I’m sorry, but then that’s not all.
If you think that’s the only way banks profit off you, you’re sorely mistaken.
Earlier in the article, I mentioned that when you calculate all the nefarious charges banks deduct from your account at the end of the year, they usually surpass whatsoever interest you might get paid for the whole year. These deductions ― such as account maintenance fee ― are a massive way banks profit off you.
For example, in the 1st quarter of 2020 ― that is, the first three months of 2020 ― Nigeria’s tier-1 banks, First Bank, UBA, GTBank, Access Bank, and Zenith Bank, generated a total of ₦18.4 billion from bank maintenance charges which is a 17.12% increase from what they made within the same period in 2019!
I know this is pretty gloomy, and believe me when I say I’m sorry to lay it down on you like this.
That is why I’m writing this article to inform you that there are ways you can earn up to 15% per annum on your savings and ditch paying traditional banks to keep your money for you.
So, let’s get down to it.
How to Earn Higher Interests On Your Savings
So, how do you earn a higher interest rate than what is offered by traditional banks?
By saving digitally.
What do I mean by this?
Kindly read on.
In recent years, the FinTech sector has been positively disrupting the financial scene in Nigeria as they are looking to make an array of financial services more available to both the banked and unbanked population in the country.
In case you don’t know, FinTech, a.k.a. Financial Technology, refers to the ecosystem where technology companies, as well as financial institutions, use innovations in technology to facilitate financial services and increase access to finance.
And in this article, I’ll be discussing one of this ecosystem’s product – Digital Savings Platforms (DSPs).
What are DSPs?
DSPs are online savings platforms whose raison d’état is to make savings more rewarding to you and I.
They offer better interest rates on your savings than all Nigerian banks, and on some of these platforms, you can save your money with a guaranteed 12% interest paid into your account per annum.
Plus, unlike Nigerian banks, they don’t deduct your money criminally ― you know what I mean. 🙃
These DSPs can afford to pay you these higher interest rates because they have low operational costs than traditional banks as their operations are lean and mostly cloud-based.
Are They Safe?
These platforms are safe to save your money on for several reasons.
For starters, these DSPs are legal entities that are licensed to operate by the Federal Government of Nigeria.
Some of them are insured and guaranteed by Meristem Trustees ― a Private Limited Liability Company licensed by the Securities & Exchange Commission (SEC) ― while some insure your saved funds with AIICO ― the leading asset management company in Nigeria.
In addition to being regulated by the Central Bank of Nigeria, a DSP must fork out at least $275,000 before they can be allowed to operate. The fund is required by the CBN to help secure funds and credibility of these operators.
So, be rest assured, saving your money on these platforms is as safe as saving your money in a bank.
Let’s take a look at 3 DSPs that offer the highest interest rate on savings in Nigeria.
Kuda Bank
Kuda Bank is arguably Nigeria’s first digital-only bank and it is licensed by the Central bank of Nigeria.
Kuda Bank provides full banking services through its apps, allowing everyday Nigerians with internet access to run a current account, save money automatically and earn up to 15% per annum on their savings without the burden of bank charges.
By running a digital savings platform that excludes card maintenance fees, transfer fees, and even account maintenance fees, Kuda Bank has beautifully set a precedent that set it apart from other banks in the country!
When you create an account with Kuda Bank, a free debit card is delivered to you wherever you are in the country at no cost whatsoever. Also, unlike traditional banks, when you misplace your card, you can easily freeze it from your Kuda app and request another one for free! In the event you later find your card, you can easily unfreeze it and keep using it.
Isn’t that pretty sweet?
In addition to being licensed by the CBN, Kuda Bank provides additional security to your funds by insuring all funds with the National Deposit Insurance Commission (NDIC). Therefore, the safety of your funds is fully guaranteed on Kuda Bank and since inception, Kuda Bank has processed over ₦10 billion and has saved its customers tens of millions in banking fees.
Benefits Of Saving With Kuda Bank
· Earn 15% per annum on your savings.
· No card maintenance fee.
· No account maintenance fee.
· No debit card fee.
· Operate a zero-account balance.
· 25 free transfers per month.
· Free credit and debit alerts.
· Free ATM withdrawals from over 3,000 Access Bank and Access Diamond Bank ATMs across Nigeria.
To start enjoying 15% per annum on your savings on Kuda Bank, all you need to do is follow these 3 simple steps;
· Download the Kuda app on Google Play Store or App Store.
· Create an account on the app.
· Save some money on the platform and start earning some sweet interest!
For more information about Kuda, visit www.kudabank.com/Faq
PiggyVest
PiggyVest ― formerly known as PiggyBank ― is the first online “Savings & Investment” platform in West Africa, although when it first launched on the 7th of January, 2016, it launched as a savings-only platform.
It is also one of the largest online savings and investment platforms in Nigeria with over 350,000 users.
Although PiggyVest is a Digital Savings and Investment Platform, I’ll be focusing on the saving aspect of PiggyVest in this article.
PiggyVest takes away the stress associated with saving in most traditional banks by combining simplicity, discipline, convenience, and flexibility to enable you to manage your finances and achieve financial freedom.
With PiggyVest, you can choose to save little amounts of money periodically ― i.e. daily, weekly, or monthly ― towards a specific target or decide to lock away funds for a specified amount of time. Additionally, there are no charges when you transfer money from your bank to your PiggyVest account.
In terms of fee charges on the platform, PiggyVest is completely free when you withdraw on the free withdrawal dates. However, withdrawals outside these free withdrawal dates attract a 2.5% fee on the amount withdrew. There are four free withdrawal days in a year, 31st of March, 30th of June, 30th of September, and 31st of December; however, you can decide to set your own preferred free withdrawal dates.
In addition to being licensed as a microfinance bank, PiggyVest also warehouses all saved funds with AIICO ― the leading asset management company in Nigeria. As a result, your funds are completely safe on the platform.
For over four years, PiggyVest has been providing excellent services to over 350,000 users, and you can join them today to start enjoying such services.
Benefits Of Saving With PiggyVest
· Earn 10% per annum on your normal Piggybank savings.
· Earn up to 12.5% per annum when you SafeLock™ your savings. SafeLock is like Fixed-Deposits that traditional banks offer, although their interest rates are way lower than PiggyVest’s. The best part is that the SafeLock™ interest is paid to your account upfront and you can immediately access it.
· You can convert your Naira to Dollars and earn 5% per annum when you save in their Flex Dollar™ plan.
· You are rewarded for saving by earning Piggy Points whenever you save on the platform and these Piggy Points can be converted to cash. 1 Piggy Point = ₦10.
· No account maintenance fee.
· You can save a minimum amount of ₦100.
To start enjoying up to 12.5% per annum on your savings on PiggyVest, all you need to do is follow these 3 simple steps;
· Download the PiggyVest app on Google Play Store or App Store.
· Create an account on the app.
· Save some money on the platform and start earning some sweet interest!
For more information about PiggyVest, visit www.piggyvest.com/faq
SmartSaver
SmartSaver is a digital savings platform developed to enable Nigerian users to automate their savings on a recurring basis, thereby providing them with an opportunity to smartly achieve their savings targets. Savings target can be set on a daily, weekly, or monthly basis thereby making your saving process smarter, faster, and more convenient.
You earn 8% per annum on their SuperSaver normal savings account. However, when you save your money under their SmartSaver Investment Savings, you earn a whopping 30%. The only catch is that under the SmartSaver Investment Savings, your funds will be locked up for a minimum of three months.
Interestingly, as a SmartSaver you are automatically qualified to enjoy loan services without collateral.
In terms of fee charges, SmartSaver is completely free when you withdraw your money on the free withdrawal dates which are 31st of March, 30th of June, 30th of September, and 31st of December. Any withdrawal that falls outside these free withdrawal period attracts a 5% fee of whatever amount you withdraw.
To secure your saved funds, SmartSaver keeps your money in NDIC-insured banks for your benefit. Also, all saved funds are NDIC insured on an individual basis, that is, each user’s balance is protected by NDIC insurance up to the limits established by NDIC, which is up to ₦200,000.
Currently, you can only access SmartSaver on the web as they are still developing their mobile apps for both Android and IOS phones. To use SmartSaver, you need to connect your bank account to the platform through your debit card, then you have to set the frequency, amount, and duration of your saving, then simply relax as SmartSaver automatically saves your money into your wallet on the platform.
Benefits Of Saving With SmartSaver
· Earn 8% on your normal SuperSaver savings account.
· Earn 30% on your SmartSaver Investment Savings.
· Automated savings.
· No fees when you withdraw on the free withdrawal days.
To start enjoying up to 30% interest payment on your savings from SmartSaver, all you need to do is follow these 3 simple steps;
· Visit their website ― www.smartsaver.ng
· Create an account on the website.
· Save some money in your wallet on the platform and start earning some sweet interest!
For more information about SmartSaver, visit www.smartsaver.ng/faqs.php
Other DSPs you can check out include; Cowrywise ― Visit www.cowrywise.com, KoloPay ― Visit www.kolopay.com, amongst others.
The Bottom Line
For ultra-conservative investors, savings accounts can be a good way to invest, provided such savings account pays a reasonable amount of interest. Sadly, Nigerian bank accounts are lacking in this regard.
But as you can see from this article, gone are the days when you had no choice but to stick with these traditional banks and their nefarious bank charges.
With the advent of DSPs in Nigeria, you can easily get access to better saving plans and get paid some actual interest for saving money with them.
So, are you interested in earning some actual interest on your savings? Check out the DSPs discussed in this article, choose whichever one suits your preference, save some money on the chosen platform and start earning some sweet interest on your savings!
P.S.: Wanna discuss Investments or Forex trading or 8-Ball Pool? :)
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