Types Of Bank Accounts In Nigeria
Types Of Bank Accounts In Nigeria; A bank account is a financial account that enables you to keep money, perform financial transactions safely, and access various credit facilities within a bank’s available products and services. Banks and other financial institutions provide their customers with different accounts that best suit their needs while putting in place terms and conditions of adherence to the bank’s regulatory framework and, by extension, the country’s central bank regulation.
In Nigeria, a bank account is essential to initiate transactions from and within banks, as it takes a semblance of an individual’s identity in the banking world. More and more Nigerians are opening bank accounts due to the country’s growing urbanization and regulatory attempts to increase financial inclusion in the country’s banking landscape. As such, commercial banks have employed innovative marketing strategies to entice potential account holders to their banks to capture as much market share as possible.
Following the paradigm shift in the traditional operations of banking towards robust technologically-driven banking, there has been a significant increase in Nigeria’s total number of bank accounts from 124.8 in December 2019 to 191.4 million as of December 2021, with 133.5 active bank accounts.
Therefore, this article aims to explain different types of bank accounts in Nigeria to better understand anyone who does not know much of the banking system in Nigeria.
Types Of Bank Accounts In Nigeria
There are seven (7) bank accounts in Nigeria today, each with distinguishing features from the other types.
- Current account
- Fixed account
- Joint account
- Domiciliary account
- Non-resident Nigerian account
1. Savings Bank Account
A savings account is considered the most popular and commonly used bank account in Nigeria. This bank account is opened to individuals who want personal savings towards a project or future, with a minimum opening deposit as the requirement. Irrespective of the status of opening (individual or corporate), most banks in Nigeria can open a savings account for you with a 0.00 NGN deposit. In contrast, some banks might require you to open an account with 1,000 NGN.
Banks have created several products with a savings account, each with little differences from the standard model. The initial balance and minimum operational balance requirements vary amongst banks. However, you can be sure that you will need a government-approved form of identification, such as a national ID, an international passport, or a driver’s license, as well as a utility bill (such as an electricity bill, water bill, rent receipt, or tenancy bill) to open a savings account.
Pros Of A Savings Account
- Access to ATM card
- Online banking and other E-banking channels
- Low-interest rate of at least 1.25%
- Payment of deposits in the event of your bank is unable to pay up, according to the NDIC Act, 2006
Cons Of A Savings Account
- Limited daily withdrawal
- Unqualified for overdraw and cheque facilities
2. Current Account
A current bank account is designed for entrepreneurs, companies, and corporate societies requiring regular third-party transactions. Also, individuals who want to plan and manage their funds can open a current account. The major difference between a current and a savings account is the ability of a third party to withdraw from the existing account, which is lacking in a savings account.
Banks provide a variety of products under current accounts that are designed to appeal to various consumer groups. Although the opening and operating balances of these products can vary, they are often higher than those of a savings account. In addition, having a current account gives you the freedom to issue cheques, overdraw anytime, and pay orders.
You must be at least 18 years old, have a valid form of identification, a utility bill serving as evidence of address, and a fully filled-out signature specimen card to open a current account(s).
Pros Of A Savings Account
- Unlimited number of withdrawals monthly
- Savings account holders can access loans and other bank services
- Some banks have SME current accounts designed for entrepreneurs
- Managing your current account helps you to know how to file taxes correctly
Cons Of A Current Account
- Current account maintenance fees
- Maintenance charges for using any e-banking products
- Limited daily fund withdrawal
3. Corporate Account
A corporate account is a bank account created for corporate entities or organisations to receive and save business revenue. As a corporate account holder, your company can easily transfer money to individuals or organisations within and outside Nigeria.
However, the required documents for opening a corporate bank account include CAC documents, valid identifications of directors and signatories, passport of signatories, bank verification number (BVN) of directors and signatories, proof of address, tax identification number (TIN), two references, relevant licenses, and board resolution.
Depending on the bank, a Nigerian corporate bank account’s minimum opening amount varies. A current account typically costs between N 10,000 and N 100,000 to start.
Pros Of A Corporate Account
- Loan accessibility
- Improves credibility of doing business with other entities
- Higher investment opportunities
- Easier financial transactions within and outside Nigeria
Con Of A Corporate Account
- Double taxation on the funds entering the account
4. Fixed Deposit Account
A fixed deposit account is a bank account tailored towards investment strategy. This account guarantees high returns on savings within a pre-arranged period, usually 30 days to 180 days, or more, as the case may be.
In exchange for this, the fixed deposit account holder is also entitled to interest at a rate set before the arrangement begins. The agreed-upon time frame is referred to as the tenor. Upon expiration, the holder will have the choice of rolling over the investment for another period with the same terms or withdrawing the investment’s principal (liquidating). However, the holder will forfeit earned interest if he decides to end the contract before the end of the tenor for whatever reason.
Moreover, the interest rates on fixed deposit accounts are higher than on savings accounts, although they can be subjected to Withholding Tax (WHT) upon withdrawal of the funds. A current account is the primary requisite to opening a fixed bank account, with every bank having its respective minimum amount to put into the account. Other required documents include a valid means of identification, passport photograph, and utility bill.
Pros Of A Fixed Deposit Account
- Potential to earn interest regularly
- Higher interest rate
- Guaranteed returns of saving
Cons of A Fixed Deposit Account
- Fixed deposits are taxed at average taxation rates
- Not suitable for everyone
- Low returns compared to other investment options
5. Joint Account
A joint bank account takes a semblance of a regular savings account. Still, the only difference is the multiple ownership and access to a joint account, unlike a savings account that an individual owns. A joint account involves different parties (family or business associates) bounded by trust and cooperation. Therefore, any individual included in the joint account can have direct access.
In a joint account, conjunction words of “and” and “or” between names of the parties play a vital role in interpreting the operations of the account. When two parties are opening a joint account with an “and”, it means that the two parties must both append their signatures before they withdraw money from the account. Also, when the parties names are separated with an “or”, either of the parties has access to the funds in the account without the approval of the other.
Pros Of A Joint Account
- Tracking expenses
- Financial planning for the future
Cons Of A Joint Account
- In the event of death, the account will be subjected to a right of survivorship
- Poor management of the funds by one party
6. Domiciliary Account
A domiciliary account is a bank account that enables you to perform transactions in foreign currencies like US dollars, British pounds, Canadian dollars, etc., other than the Nigerian naira (NGN). As a domiciliary account holder, you can easily pay your tuition fees abroad, receive remittances, save, etc. Opening a domiciliary account requires your BVN and other requisite documents to affirm your eligibility for the account.
A Domiciliary account is very important to content creators, online businesses, and Adsense partners that receive funds in foreign currency. A valid identity, passport photos, a utility bill, and a minimum initial balance—which varies by bank and the foreign currency you choose—are requirements for creating a domiciliary account.
Pros Of A Domiciliary Account
- Control over unstable naira
- You can stand as a referee for another person
- Fast and easy payment for the information of goods into Nigeria
Cons Of A Domiciliary Account
- High withdrawal charges
- Inability to withdraw anywhere or directly fund your account with naira
- Referees and guarantors are required to open the account
7. Non-Resident Nigerian Account
It is a type of bank account specially designed for Nigerians living in the diaspora but wants to have a Nigerian bank account still. You can open a Non-resident Nigerian (NRN) account from anywhere in the world. To have this NRN account, you must complete your bank’s migration of account form either online or in person. You must also provide documents like proof of identity, proof of residential address, and references.
Pros Of A Non-Resident Nigeria Account
Con Of A Non-Resident Nigeria Account
- Conversion depends on the exchange rate of the naira at that time
A bank account in Nigeria is a gateway to having safe and reliable transactions, savings, and investments without hassle. However, it is important to open an account that best suit your needs for an optimum result.