{"id":467,"date":"2018-06-02T13:14:06","date_gmt":"2018-06-02T13:14:06","guid":{"rendered":"https:\/\/kobotalk.com\/?p=467"},"modified":"2018-12-26T18:39:57","modified_gmt":"2018-12-26T18:39:57","slug":"earn-high-returns-by-investing-in-corporate-bonds-in-nigeria","status":"publish","type":"post","link":"https:\/\/kobotalk.com\/BLOG\/earn-high-returns-by-investing-in-corporate-bonds-in-nigeria\/","title":{"rendered":"How to Invest in Corporate Bonds in Nigeria"},"content":{"rendered":"Reading Time: <\/span> 5<\/span> minutes<\/span><\/span>
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One profitable way to make money in Nigeria is by investing in corporate bonds. The Nigerian corporate bonds market is generating quite a lot interest in recent time; unfortunately, most retail investors do not think about corporate bonds when they are considering their investment options. <\/a><\/span><\/p>\n

This apathy is not peculiar to Nigerian retail investors.\u00a0 Corporate bond is a specialized investment instrument which requires a level of knowledge that may not be easily available to the average man on the street.\u00a0 Hence, companies that issue bonds usually target institutional investors like pension funds, asset managers and insurance companies. <\/span><\/p>\n

These institutional investors usually have technical units that are staffed with trained analysts whose jobs are to research on investment instruments and make recommendations.\u00a0 However, s<\/span>avvy retail investors can also take advantage of the attractive returns that corporate bonds offer to byuidl long term wealth. <\/span><\/p>\n

What is Corporate Bond?<\/b><\/span><\/p>\n

In case you don\u2019t know, Corporate Bonds are debt instruments issued by corporate organizations as well as public corporations. While corporate organizations here refer to private sector companies, public corporations are those government owned <\/span>organizations set up to run as businesses and make profits. With the increasing privatization of public sector institutions, the number of public corporations in Nigeria is becoming less and less. <\/span><\/p>\n

At the moment the most notable public corporations are the Nigerian National Petroleum Corporation (NNPC), the Nigerian Ports Authority (NPA), Federal Radio Corporation of Nigeria (FRCN) and the Nigerian Television Authority (NTA), etc.<\/span><\/p>\n

Blue Chip enterprises issue bonds to borrow long term <\/span>money. Proceeds of <\/span>bond issue is <\/span>usually applied to restructure a company\u2019s balance sheet or to enable them finance long term <\/span>projects or public infrastructure.<\/span><\/p>\n

How Corporate Bonds Work<\/b><\/span><\/p>\n

Corporate Bond works just like the FGN Bonds except that corporate bonds are riskier. A company may issue bond because it is confident that it is able to meet its obligations and investors will buy up the bond because they believe the company is credible enough to meet its obligations and timely too.
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Generally, corporate bonds are secured by the assets and cashflow <\/span>of the issuing company. For a company to issue bond<\/span>, it must have undergone a process of rating by an approved and recognized rating agency. Such rating gives a certain level of comfort that the company can be trusted, is able to meet its obligations, has sound corporate governance and has attained a measure of stability.<\/span><\/p>\n

Corporate bonds offer coupon rates higher than Sovereign bonds, payable on monthly, quarterly or yearly basis through to maturity when the principal investment is redeemed.<\/span><\/p>\n

There is a strong secondary market for corporate bonds which allows investors to trade it at anytime <\/span>without having to hold to maturity, hence they can be said to be very liquid.<\/span><\/p>\n

From the investor perspective, corporate bonds may be safer than stocks in that should the issuing company\u2019s business fails and the company goes bankrupt, bonds holders are creditors who are entitled to be paid after statutory obligations in line with bankruptcy laws; whereas ordinary share holders in this case, <\/span>would have lost all their investments.\u00a0 <\/span><\/p>\n

There are three fundamental differences between corporate bonds and ordinary shares:
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