AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
Multiply by 12 for the simple figure. A rate of 5% a month is 60% a year if you simply multiply by 12, and about 79.6% a year if the interest compounds monthly, because each month's interest is charged on the previous month's interest too. Whether it is charged on the original amount (flat) or on the reducing balance changes the Naira cost far more than the label suggests.
Loan apps, microfinance lenders and some banks quote their rates per month: 3%, 5%, 10%. A monthly figure looks modest next to the annual rates on deposits or the MPR, which are quoted per year. To compare like with like, convert. There are two conversions, and both are worth knowing.
Simple and compounded: the two answers
- Simple (nominal) annual rate
- Monthly rate × 12. For 5% a month: 5 × 12 = 60% a year.
- Compounded (effective) annual rate
- (1 + monthly rate)^12 − 1. For 5% a month: (1.05)^12 − 1 = 79.59%, about 80% a year.
The simple figure is what many lenders use when they show both. GTBank's QuickCredit page, for example, states "2.95% per month, (approximately 35.4% per annum)", which is 2.95 × 12, as published in October 2026. The compounded figure tells you what the rate would cost if interest were left unpaid and charged on itself each month, which is what happens when a balance rolls over.
In Naira, as an example: ₦100,000 left unpaid for a year at 5% a month would grow to ₦160,000 under simple interest, but to about ₦179,585.63 if each month's interest were added to the balance (₦100,000 × 1.05^12).
Conversion table
| Monthly rate | Simple yearly (× 12) | Compounded yearly |
|---|---|---|
| 2% | 24% | 26.8% |
| 2.95% | 35.4% | 41.7% |
| 3% | 36% | 42.6% |
| 5% | 60% | 79.6% |
| 10% | 120% | 213.8% |
| 15% | 180% | 435.0% |
The gap between the two columns widens as the monthly rate rises. At 2% a month it is under 3 points; at 15% a month it is over 250 points.
Flat or reducing balance: the bigger question
A monthly rate can be charged in two very different ways, and this matters more to your wallet than simple versus compounded.
Worked example: ₦100,000 over 12 months at 5% a month
Example figures only.
| Method | Monthly instalment | Total interest | Total repaid |
|---|---|---|---|
| Flat: 5% of ₦100,000 every month | ₦13,333.33 | ₦60,000 | ₦160,000 |
| Reducing balance: 5% of what is still owed | ₦11,282.54 | ₦35,390.49 | ₦135,390.49 |
On a flat rate you pay interest on the full ₦100,000 for all 12 months, even though you have repaid most of it by month ten. The true cost of the flat loan, worked out on the reducing balance, is about 8.09% a month, roughly 97% a year counted simply or 154% compounded. So a "5% a month flat" loan is much more expensive than a "5% a month reducing" one. Our guide to flat rate versus reducing balance covers this in detail.
Daily rates: the same idea, a bigger multiplier
Some apps quote a daily rate instead. Convert it the same way, using 365 days. Example: 0.2% a day is 0.2 × 365 = 73% a year counted simply, and about 107.3% compounded daily ((1.002)^365 − 1). Over a 30-day month, 0.2% a day is 6%, which is more than 5% a month, though both figures look small. A daily rate is easy to underestimate because the number is so low; multiplying by 30 for a monthly figure and by 365 for a yearly one brings it into focus.
Going the other way
To turn a yearly rate into a monthly one for comparison, divide the simple yearly rate by 12. A bank loan at 30% a year is 2.5% a month counted simply. A deposit paying 20% a year earns about 1.67% a month. Put next to each other, a 5% monthly loan rate costs about three times what that deposit earns.
Why loan apps quote monthly rates
- The tenor is short. On a 30-day or 60-day loan, a monthly rate maps neatly onto the repayment.
- The number is smaller. 5% reads differently from 60% or 80%, even though they describe the same price.
- Repayments are monthly. Salaries are paid monthly, so borrowers think in months.
- Comparison is easier between apps that all quote monthly, but harder against bank loans and deposits quoted yearly.
None of this is improper in itself, provided the rate, fees and repayment terms are disclosed. The FCCPC's 2025 regulations require digital lenders to disclose interest rates, repayment terms and associated fees fully before the transaction is completed.
Steps: converting any rate you are offered
- Find out whether the rate is per day, per month or per year, and whether it is flat or on a reducing balance.
- Convert to a simple yearly rate: daily × 365, or monthly × 12.
- Convert to a compounded yearly rate if the loan can roll over.
- Add fees, which raise the real rate; see processing and management fees.
- Compare total Naira repaid between offers, not only the rate. Our guide to converting monthly rates to annual has more examples.
Where Pryme fits
For Loans on Spaces, lent by Solid Allianze Microfinance Bank, the agreement sets out the amount, cost and repayment date in full before you accept, so you can run this conversion first. See what a Loan on Spaces costs.
Questions people ask
Is 5% monthly interest high in Nigeria?
It is 60% a year counted simply, or about 80% compounded. Compare it with the yearly rates banks quote on their loans to judge.
How do I convert monthly interest to annual?
Multiply by 12 for the simple rate. For the compounded rate, add 1 to the monthly rate as a decimal, raise to the power of 12 and subtract 1.
What is 5% interest on ₦100,000 for one month?
₦5,000, so ₦105,000 is repaid at the end of the month, before any fees.
Why is a flat rate more expensive than reducing balance?
A flat rate charges interest on the original amount every month, even after you have repaid much of it. A reducing-balance rate charges only on what you still owe.
Sources
- GTBank: QuickCredit product page and terms · accessed Oct 2026
- FCCPC: Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations, 2025 · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.