Say your savings account paid you ₦40,000 in interest this year and you felt good about it. If prices rose faster than your balance did, you can buy less with the money now than you could at the start. That gap between what your money earned and what prices did is your real return, and most people never calculate it.
This guide gives you a five-minute method to check any savings or investment against inflation, including your own personal inflation, which is often different from the national figure.
What the latest inflation headlines tell you (and what they don't)
Two recent reports are useful context. Business News Nigeria reported that Nigeria's inflation was seen easing to 13.99% in October. CNBC Africa reported that SAMTL's base case sees inflation around 13–14% by early 2027. Both are forecasts or projections from the outlets' reporting, not final official numbers, so check the National Bureau of Statistics release for the actual figure.
Here's the part people miss. Easing inflation does not mean prices are falling. It means prices are rising more slowly than before. If annual inflation is 14%, something that cost ₦10,000 a year ago costs about ₦11,400 now. Your savings still need to grow by roughly that much just to stand still.
For the wider picture on the government's target, see our post on the single-digit inflation target for 2027.
The formula, with no jargon
Real return is what is left of your growth after inflation takes its share. The accurate way to calculate it:
- Take your yearly rate as a decimal and add 1. Example: 18% becomes 1.18.
- Take the inflation rate the same way. Example: 14% becomes 1.14.
- Divide the first by the second, then subtract 1.
So 1.18 ÷ 1.14 = 1.035, which is a real return of about 3.5%. The shortcut of simply subtracting (18 minus 14 = 4) is close enough for quick checks, but the division is more honest when rates are high.
A worked example (hypothetical numbers)
These rates are made up to show the method. Use your own. Suppose you have ₦1,000,000 and assume inflation of 14% over the next year. Here is what ₦1,000,000 becomes in three places, measured in today's buying power:
| Where the money sits | Assumed yearly rate | Balance after 1 year | Buying power in today's naira |
|---|---|---|---|
| Cash at home or zero-interest account | 0% | ₦1,000,000 | about ₦877,000 |
| Savings account | 4% | ₦1,040,000 | about ₦912,000 |
| Fund or bill earning | 18% | ₦1,180,000 | about ₦1,035,000 |
Look at the first row. You didn't lose a single naira, yet you lost about ₦123,000 of purchasing power. The third row is the only one that grew in real terms, and only by about ₦35,000. That's the size of the prize, and it's why fees matter so much (more below).
Step 1: Collect the true rate you actually earn
The advertised rate is rarely the rate you get. Work out your own:
- Start balance and end balance. Pull both from your statement, excluding money you added or withdrew in between.
- Subtract charges. Account maintenance fees, transfer fees, SMS alerts, stamp duty, and fund management fees all shrink the return.
- Check tax. Some instruments are taxed and some are not. Confirm the treatment of your specific product with the provider or a tax adviser rather than assuming.
- Annualise. A 3-month return of 4% is not 4% a year. Multiply carefully, or compare only yearly figures.
If you hold a fund, the fact sheet shows the charges. Our guide on reading a fund fact sheet walks through where they hide.
Step 2: Work out your personal inflation
National inflation is an average across a big basket. Your basket may be heavier on food and transport, or on school fees and rent. A quick way to build yours:
- List your five biggest regular costs: for example rent, food, transport, data, and school fees.
- Write what each cost 12 months ago and what it costs today. Old bank alerts, receipts and your phone's notes help.
- Add up both columns and divide the new total by the old total.
Hypothetical example: last year your five costs totalled ₦300,000 a month, and today they total ₦351,000. That's 351 ÷ 300 = 1.17, so your personal inflation is 17%, higher than a 14% national figure. Against that, the 18% fund above barely keeps you level.
If you don't track spending yet, this 30-minute statement method gets you the numbers fast.
Step 3: Compare and decide
Once you have your real return, put it in one of three buckets.
Real return is negative
Your money is shrinking in buying power. That's fine for a few weeks of rent or emergency cash you need instantly, but not for money you won't touch for a year. Ask whether a safer interest-paying home exists for it.
Real return is around zero to 3%
You're holding your ground. This is common for low-risk options. Don't chase a higher number without understanding why it's higher; extra yield usually means extra risk, longer lock-up, or both.
Real return looks high
Be suspicious, not excited. Promised returns far above inflation, especially "guaranteed monthly" ones, are the hallmark of Ponzi schemes. Check that the provider is regulated before you send a naira.
Match the money to the time you need it
Beating inflation is only one test. Money you may need in an emergency should stay accessible, even if its real return is poor. Money for a goal 12 months or more away can sit in something with a lock-up.
- Next 0-3 months: accessible account. Accept a weak real return for safety.
- 3-12 months: instruments with a fixed maturity or a money market fund; read the withdrawal terms first. See sinking funds for rent and school fees.
- 1 year plus: government-backed or other regulated options, such as the FGN Savings Bond, if the lock-up suits you.
Common mistakes
- Celebrating the nominal number. "My balance grew 15%" means little without the inflation figure beside it.
- Using the wrong inflation. Food inflation and headline inflation can differ. Use the one closest to what you spend on.
- Ignoring fees and lock-ups. A 2% annual fee takes a big bite out of a 3% real return.
- Treating a forecast as fact. Projections like the ones above can change. Recheck every quarter.
- Moving everything for a slightly higher rate. Switching costs, delays and new risk can wipe out the gain.
Frequently asked questions
Does falling inflation mean I should stop worrying?
No. Slower price growth still means higher prices. Keep checking real return, just with less urgency.
Is it better to hold dollars?
Not automatically. Dollar savings protect against naira weakness, not against rising costs in naira. Our domiciliary account guide lists the questions to ask first.
Where do I find the official inflation rate?
The Central Bank of Nigeria homepage shows headline indicators such as inflation, and the National Bureau of Statistics publishes the full release. Use those rather than a social media screenshot.
Readers in Ghana, Kenya or South Africa: does this work for us?
Yes. The formula is identical. Swap in your own country's latest inflation figure from your statistics office or central bank, and your own account rates.
Your next step
Open your latest statement today. Write down your start balance, end balance, charges, and your personal five-item cost change. Then divide, and you'll know in one sitting whether your money is growing or only looking busy.
Source: Nigeria inflation seen easing to 13.99% in October (Business News Nigeria)
Sources
Details checked against the official sources above on 9 November 2026. Things change, so confirm on the official site before you act.
This article is for general information only and is not financial, legal, or tax advice. Prices, rates and rules change quickly, so check current details before making money decisions.