Rising inflation is shrinking the value of Nigerians’ savings, making traditional accounts a risky place to keep money. To protect your wealth, Nigerians must explore smarter investments and stay financially savvy. Act now before inflation erodes your hard-earned cash, writes TEMITOPE AINA
As inflation continues to weigh on Nigeria’s economy, the financial security of millions of citizens is coming under threat. While the rising cost of food, transportation, and energy dominates the headlines, a less visible but equally damaging effect of inflation is quietly unfolding: the erosion of personal savings.
For many Nigerians, particularly the salaried middle class and small-scale traders, savings are a lifeline for future plans and emergencies. But with headline inflation remaining stubbornly above 20 per cent in recent months (23.71 per cent as of April 2025), according to the National Bureau of Statistics, the purchasing power of their naira savings is rapidly diminishing.
What is inflation and how does It undermine savings?
Inflation is the general increase in prices and the fall in the purchasing power of money over time. It means that the N10,000 you saved last year can no longer buy the same amount of goods or services today.
In practical terms, if inflation is running at 20 per cent and your bank savings account offers five per cent interest per annum, you are effectively losing 15 per cent in real value. This is known as a negative real interest rate. While your balance may grow nominally, the goods and services you can afford with that money shrink.
This scenario is particularly devastating in Nigeria, where inflation is driven by multiple overlapping factors: currency devaluation, high transportation costs due to petrol subsidy removal, and insecurity affecting food supply chains. These pressures are not just statistical abstractions; they are reflected in the price of garri, rice, transport fares, rent, and even school fees.
Why traditional savings accounts may not be enough
Conventional savings accounts in Nigerian banks typically offer interest rates between two and five per cent annually. In an inflationary environment such as Nigeria’s in which the rate consistently outpaces interest rates, such savings options fail to preserve wealth.
Even fixed deposit accounts which offer slightly better rates than ordinary savings often fall short. For example, a bank might offer eight to 10 per cent on a fixed deposit, but with inflation hovering near 20 per cent, the value of the money still erodes.
Moreover, many traditional savings accounts come with hidden charges or minimum balance requirements that further reduce effective returns. Simply put, if your money is not growing faster than inflation, it is shrinking.
Savings Protection Strategies
Opting for high-yield savings and fixed deposit accounts
Not all bank savings products are equal. Savers should actively compare rates offered by different financial institutions. Some banks, especially digital banks and microfinance institutions, offer more competitive returns on high-interest savings accounts or fixed-term deposits.
While fixed deposits limit access to funds for a set period (usually 30, 90, or 180 days), the higher interest can help partially shield savings from inflation erosion. However, it is essential to match deposit terms with your financial goals and not lock in emergency funds.
Investing in treasury bills and government bonds
Treasury bills and Federal Government Bonds remain among the safest ways to hedge against inflation in Nigeria. Issued by the government and backed by the Central Bank of Nigeria, these instruments often provide better returns than commercial bank savings.
T-bills can offer yields in the range of 10 to 16 per cent depending on market conditions. They are accessible through banks and brokers and are ideal for conservative investors seeking low-risk returns. Government bonds, especially longer-tenured ones, may yield even more and also offer tax advantages.
In uncertain times, such instruments help protect savings from the twin threats of inflation and currency volatility.
Understanding treasury bills and government bonds
Treasury bills, commonly referred to as T-bills, are short-term debt instruments issued by the federal government through the Central Bank of Nigeria to raise funds for government expenditure. They are typically offered in tenors of 91, 182, or 364 days and are sold at a discount on their face value. This means that when you invest in a T-bill, you pay less than the amount you will receive at maturity. For example, if you buy a 364-day T-bill with a face value of N1,000,000 at a discount rate of 10 per cent, you would pay N900,000 and receive N1,000,000 after one year. The N100,000 difference is your return on investment. T-bills are considered one of the safest investment options because they are backed by the Federal Government and come with little or no risk of default. They are ideal for investors looking to preserve capital while earning predictable returns over a short period.
On the other hand, government bonds are longer-term debt securities also issued by the Federal Government through the Debt Management Office. Unlike T-bills, which mature in less than a year, bonds can have tenors ranging from two years to as long as thirty years. When you invest in a bond, you are essentially lending money to the government, and in return, you receive periodic interest payments, known as coupons, usually paid every six months. At the end of the bond’s tenure, the government repays the face value of the bond to the investor. Government bonds generally offer higher yields than T-bills due to the longer investment duration and are suitable for investors seeking stable and long-term income. They are also considered low-risk investments and can be traded on the secondary market, giving investors the option to sell before maturity if needed.
Both T-bills and bonds are vital tools in the government’s effort to manage public finances and control the money supply in the economy. For individual savers and institutional investors alike, these instruments provide a way to earn returns that often exceed what traditional savings accounts offer, especially during periods of high inflation. Investing in them can help protect the value of money, generate passive income, and contribute to a diversified financial portfolio.
Diversifying into inflation-resistant assets For Nigerians with a medium- to long-term investment horizon, diversifying savings into real assets is a practical strategy. These include:
Real Estate: Property prices generally rise with inflation. Buying land or investing in rental property provides both capital appreciation and potential rental income.
Equities: The Nigerian Exchange offers opportunities to invest in publicly traded companies, some of which outperform during inflationary periods. Sectors like Fast-Moving Consumer Goods, agriculture, and banking often adjust pricing to reflect inflation, preserving profitability.
Commodities like gold: Although gold isn’t widely traded in Nigeria, it remains a global hedge against inflation and currency devaluation.
These investments are not without risk, and professional guidance may be needed, but they offer a chance to grow wealth even in inflationary conditions.
Leverage digital savings platforms and fintech innovations
Nigeria’s burgeoning fintech ecosystem has opened new frontiers in personal finance. Apps like PiggyVest, Cowrywise, Bamboo, and Rise offer savings and investment plans tailored for the digital generation. These platforms allow users to save in foreign currencies, invest in foreign stocks, or automate their savings, all with competitive returns.
Some fintechs even offer access to mutual funds or dollar-based investments that provide better insulation from local inflation and naira devaluation.
For example, saving in dollars or investing in U.S.-based funds through a platform like Rise can protect savings from local inflation and currency depreciation.
Monitor, adjust, and set financial goals
Inflation is not static. As Nigeria’s economic conditions shift, so should your personal finance strategies. Regularly reviewing your portfolio, adjusting savings contributions, and aligning with short-term and long-term goals ensure your financial plans remain viable.
Setting realistic goals, whether it’s buying a car, paying school fees, or building an emergency fund, allows for better budgeting and decision-making.
The importance of financial literacy
Despite the growing number of financial tools and products, millions of Nigerians still lack basic financial literacy. This knowledge gap is one of the key barriers preventing people from protecting their savings.
Financial institutions and government agencies need to ramp up financial education through workshops, radio programmes, digital campaigns, and school curricula. When Nigerians understand how inflation works and the tools available to counteract it, they are more empowered to make sound financial choices.
What government and regulators can do
The Central Bank of Nigeria has introduced various monetary tightening policies, including raising interest rates to combat inflation. While these measures aim to bring down inflation over time, they also affect borrowing costs and investment appetite.
To better support savers during such challenging economic periods, financial regulators in Nigeria can take proactive steps beyond just monetary policy. One important measure is mandating banks to disclose real interest rates more clearly to customers. The real interest rate reflects the nominal rate minus inflation, showing the actual growth in purchasing power of savings. Clear disclosure would help Nigerians understand whether their money is genuinely growing or losing value, empowering them to make more informed decisions.
Another effective approach would be promoting inflation-indexed savings instruments. These are savings products where the returns are directly linked to inflation rates, so the interest paid rises when inflation rises, preserving the saver’s purchasing power. Many countries use such instruments to protect ordinary savers from the corrosive effects of inflation. Introducing or expanding access to these products in Nigeria would provide a valuable option for savers seeking to shield their funds.
Furthermore, regulators can create incentives for banks and fintech companies to develop and offer more accessible savings products that beat inflation. This might include tax breaks, reduced regulatory hurdles, or innovation grants aimed at encouraging financial institutions to design savings solutions that provide better returns without compromising safety or accessibility. Fintech firms, with their agility and technology-driven platforms, can especially help reach underserved populations with flexible and attractive savings options.
Transparency also plays a crucial role in safeguarding savers. Banking fees, such as maintenance charges, transaction fees, and penalties, can significantly reduce the effective return on savings, sometimes erasing interest gains altogether. Regulators should enforce policies that require clear, upfront disclosure of all fees and promote competitive interest rates across banks. This will help ensure that Nigerians are not unknowingly losing money to hidden charges while trying to save.
In essence, while the Central Bank’s monetary tightening is necessary to address inflation, it is equally important for regulators and financial institutions to work together in creating an environment where savings are protected and financial products meet the real needs of Nigerians. Improving transparency, promoting inflation-protected savings, and encouraging competitive, accessible investment options will help ordinary citizens maintain their financial stability even in difficult economic times.
Conclusion
While macroeconomic policies play a role in curbing inflation, the reality is that individuals must take proactive steps to protect their financial future. Inflation may not be fully within your control, but how you manage your money in response to it is.
By exploring smarter saving options, investing wisely, and seeking financial knowledge, Nigerians can cushion the impact of inflation and ensure their savings work harder, not just sit idle.
In an economy where every naira counts, the key to financial resilience is not just saving but saving smart.
