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Saving money in Nigeria – for beginners.

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Imagine you had ₦50,000 with you. You know you have expenses that would be due in a matter of months. What do you do? Most people in this situation would save in a bank. What if you save this money in an account and you come back three months later and instead of 50,000 you see 49,630 as your account balance? How would you feel?

I bet you would be a little bit angry. I have seen this situation in banking halls and customers often have arguments with tellers not knowing that was part of the terms of agreement with their bank. This article would take a basic look at savings accounts in Nigeria.

How do you decide which bank to save your money in? Do you rely on friends or employers? Or do you make calculated decisions by comparing the interest rates, charges, locations? This article would explain what you need to know in order to select the right type of savings account.

WHAT ARE SAVINGS ACCOUNT?

A savings account is the simplest type of bank account available to customers in Nigeria. Typically, it allows customers store their excess cash at the bank while earning interest on it. In the past, this cash was not very accessible. However, ATM cards are now the vogue and one can easily withdraw cash from any ATM location. To open a savings account in Nigeria, you need:

  • Personal form of identification e.g. Driver’s license, National id or international passport
  • Utility Bill: PHCN bill, water bill or other utility bill. This could help to prove your identity as well as your residence.
  • Cash. Don’t forget the cash. You need funds to open your account. The opening balance differs depending on the bank in question. You can get started with anything between 1000 (First bank, GT Bank) to20000(Zenith, First Bank). Some banks such as Standard Chartered even require as much as 50000 opening balance.

IMPORTANT TERMS ASSOCIATED WITH SAVINGS ACCOUNT IN NIGERIA

When you open your account at any Nigerian bank, there are certain terms the bank would use from time to time when they communicate with you through SMS or email. It is important to understand those terms so you don’t have to go to the banking hall and have quarrels with the tellers and bank staff.

CREDIT, CREDITED
For the non-accountants among us, the phrase credit may sound to us that we owe
money. No. When you get a SMS from the bank that your account has been credited, it
means that money has been paid into your account.

DEBIT, DEBITED

When you withdraw money, you get an alert from most Nigerian banks that your account has been debited. In other words, this is the opposite of a credit transaction.

BALANCE
This is the current amount of money left in your account.

MINIMUM BALANCE
The amount of money you must leave in your account. Minimum balance differs per bank.

INTEREST
This is the amount of money added to your balance when you save for a certain time. The interest may be calculated monthly, quarterly or yearly depending on the bank.

CHARGES

There are charges incurred when you use a savings account, paid out of your bank balance. These charges are for bank services such as account reconciliation, transaction alerts, ATM maintenance and replacement, Withdrawal charges etc. A prospective customer of any bank must consider these charges before opening an account.


Questions you must ask before signing the dotted line

How much is the bank’s minimum balance?

How much is the opening balance?

How much interest is paid and what are the necessary conditions to receive interest?

What are the charges applied on my account?

The answers to this question would determine if the savings account meets your need. For example, if you are a student with regular need for cash, a minimum balance of 10000 naira may be too high for you. It might be best to go to another bank with a minimum balance of 500 naira-1000 naira.

Also, the charges would determine whether you can bank with a certain bank. You have to ask the bank official if charges are applied per transaction or per period. Some banks charge for every SMS alert, others charge monthly for the same SMS alerts. We have included a basic table to help you compare.

TABLE OF COMPARISON FOR FIVE MAJOR BANKS IN NIGERIA

BANK GT BANK FIRST BANK ZENITH BANK DIAMOND BANK UBA
OPENING BALANCE 1000-5000 naira * 2000 naira 10000-50000 naira* 5000 naira 1000-5000 naira *
MINIMUM BALANCE 0 1000 naira 5000 naira 1000 naira 1000 naira
INTEREST 2.5% 1%* 2.5% 1.5% 2%
SMS/ EMAIL ALERT CHARGES 10 naira per transaction*** 160 naira per month*** 10 naira per transaction 120 naira per month 15 naira per transaction
COMMENTS From analysis of the banking industry as seen by customers, this bank is considered the most innovative. If you are comfortable with the charges and interest, then this is a recommended bank. This bank enjoys patronage as a result of its age. However, it has remained competitive over the years. To enjoy a better interest rate from First bank, you should consider a Term-deposit. The bank has carved out a niche for itself: serving the middle class and high net worth individuals. If you fall into this category, you would enjoy Zenith bank’s services. A bit similar to GT Bank but without the high praise from customers. One of the old banks. Customer feedback indicated that people are not satisfied with their offerings and they may be hidden charges.

* There are different types of savings account with different requirements

**Withdrawal from savings accounts more than twice in a month will lead to forfeiture of interest in that month when interest is paid for the quarter.

*** E-mail alerts and statements are free.

I hope you have had a basic understanding of savings accounts in Nigeria now. Hopefully, you would be able to make a more informed decision when next you have to open an account.

About Zima Meli

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