fixed deposit
A fixed deposit is money you agree to leave with a bank for a set period, in exchange for a higher interest rate than a savings account.
In plain English
A fixed deposit is a simple bargain. You promise the bank you will not touch your money for an agreed number of days, and the bank pays you more than it would in an ordinary savings account.
The bank likes this because it can plan around your money. You like it because the rate is better and known in advance. Nothing to watch, nothing to decide, nothing that can surprise you.
The cost is access. Break the deposit early and you usually forfeit most or all of the interest, and in some cases you pay a penalty on top. Which means a fixed deposit is exactly the wrong home for an emergency fund, because emergencies do not check your maturity date first.
It is worth comparing honestly against a money market fund. The fund often pays a similar rate and still lets you withdraw within days. If the bank is not paying you meaningfully more for the lock, then you are giving away flexibility for nothing.
Use a fixed deposit when you know, with real confidence, that you will not need the money before the date.
You place ₦1 million on a 180 day fixed deposit at 16 percent. You know today roughly what you will receive in six months. If your car breaks down in month two, you either break the deposit and lose most of the interest, or you borrow.
Questions people ask
Can I break a fixed deposit early?
Usually yes, but you will typically lose most of the interest and may pay a penalty. Read the terms before you sign, not after.
Is a fixed deposit better than treasury bills?
Compare the rates directly. Treasury bills are backed by the government and often pay more, though the minimum amount at a bank can be higher.
What tenor should I choose?
Choose based on when you will genuinely need the money, never on which rate looks best. A high rate you have to break early is worse than a lower one you can keep.
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