Investing

6 Smart Ways to Invest In Nigeria With A Small Amount of Money

What are the ways to invest in Nigeria with a small amount of money?

Is it possible to invest in Nigeria with small money?

Are there opportunities for people who don’t have much money to invest in Nigeria and make money?

Can a poor person invest in the stock market?

These are some of the questions I regularly receive in my email.

And my answer is a big yes to all of them.

Many people think that making an investment is an exclusive preserve of the very rich class.  On the contrary, anybody can start investing irrespective of how much he or she earns.  As a matter of fact, the earlier one starts investing the better. 

The power of compound interest is what makes the difference. It is like planting a seed!

A tiny acorn planted today has the power to grow into a mighty oak tree.  That small Naira bill in your hand is a money seed. If planted well, it has the power to grow into a migty money tree. So go ahead and plant that seed now.

There are many ways to invest in Nigeria with a small amount of money!

Let’s consider some of them.

6 Ways to Invest In Nigeria With a Small Amount of Money

#1. FGN Savings Bond (FGNSB)

The FGN Savings Bond is a debt instrument issued by the Debt Management Office on behalf of the Federal Government of Nigeria.

This particular bond is targeted at retail investors  with the aim of encouraging low income earners to take part in the debt market.

The FGN Savings Bond is issued in the first week of every month for two and three years tenures.  The two year Savings Bond usually attract an interest rate (coupon) of 12 to 13 percent while the three year bond attacts interest of 13 – 14 percent per annum.

These rates of return are not only attactive because they are above what bank offer on their regular savings and deposit account but they are alsos above inflation rate which makes the effective yield on them positive.

Minimum investment in the FGN Savings Bond is N5,000. To purchase the FGN Savings Bond approach your stockbroker. 

#2. Mutual Funds

Another way to invest in Nigeria with a small amount money is via mutual funds.  With as little as N5,000 you can invest in some very viable mutual funds in Nigeria and relax to see your money grow.

A mutual fund is a collective investment scheme set up by a professional money manager. The money manager pools funds from diversed group of people and invest it in profitable financial instruments. The return on investment is distributed amongst all who have contributed to the fund.

Mutual fund is best suited for people who do not have deep knowledge of the sophisticated financial market or those who do not have the time to analyse the market by themselves.  It is also suited for the retail investor or one who have small amount of money to invest.

In 2018, it was estimated that the mutual fund market in Nigeria was worth N600 bilion ($1.96 billion) with an average returns of approximately 15 percent. 

Going by the history of performance of the available funds, some of the best mutual funds in the market based on the 2018 study include:

  • Stanbic IBTC Equity Fund
  • ARM Aggressive Fund
  • United Capital Balanced Fund
  • FBN Money Market Fund
  • United Capital Money Market Fund
  • Stanbic IBTC Money Market Funf
  • ARM Money Market Fund
  • Cordros Money Marlet Fund
  • Coronation Money Market Fund

Why not start  to grow your money tree by investing in mutual funds

#3. Online Investment Apps

The growth in financial technology (Fintech) start up companies is rapidly democratising the financial market with the introduction of many investment and savings apps through which the ordinary individual can start investing without much stress.

Such domestic finteh startups are making it easy for people to invest in Nigeria. Some of the best investment and savings websites, apps or portals in Nigeria include the following:

I-Invest – this is powered by Sterling Bank and allows you to invest in money market instruments such as bank deposits and Treasury Bill with very small amount of money.  The amount of interest you earn by using this app can be as high as 20 percent per annum

Piggy Bank – This app/portal helps you to automate your savings and earn high returns. You decide how much you save and how you do it.  You can also decide to lock in an amount over a period of time by using their safe lock.  Interest accruable on the piggybank app can be as high as 13 percent per annum.

Payday Investor – This app is powered by ARM and it is the first investment app in Nigeria that is focused on mutual funds.  So the funds makes it easy to invest in mutual funds from the comfort your home. Interest you earn using this app is high as 20 percent per annum.

PayVest – This is the investment module in the Paylater app, the online lending portal.  Minimum investment on the payvest app is N50,000 for tenures ranging from 30 to 365 days.  Interest you earn by using this app is as high as 16 percent per annum.

#4. Onlinel Agric Investment Portals – You can invest in agriculture using the many online portals and apps that are dedicated to agricultural projects.  Popular amongst these apps is Farmcrowdy.  This app gives you the opportunity to invest in agriculture by sponsoring different farm projects of your choice for a guaranteed return of   up to 50 percent per farming cycle.

#5. Money Market Instruments – Money market intruments afford the average individual an opportunity to start investing with a small amount of money. 

The most common money market instrument through which an average individual can invest in Nigeria are the regular bank savings and fixed deposit account. The idea here is to carefully identify the bank with the best interest rate. 

Though this may be small on the surface but when done strategically, they can be a good way of building your money tree.

Other money market instruments include Commercial Papers, Bankers Acceptances and Treasury Bills.  These instruments are a bit more sophisticated and may require large amounts in initial investment. However, with an active secondary market for Treasury Bills, retail investors can invest in TBs with as little amount as N100,000.

Ordinary people with little investment capital who are desirous of taking advantage of opportunities in the money market  are advised to start with money market funds.  Money market funds are  mutual funds that are focused on money market instrments.

The money market funds segment is the most active in the mutual funds industry in Nigeria with some of the funds returning above inflation rate in 2018

#6. Stocks

Many people think that the stock market is where only the rich can play.

But ordinary folks can also invest in stocks. As a matter of fact, with as little amount as N5,000 you can start investing in stocks. The thing with stock investment is that it is sophisticated and require some form of analysis that a certain level of knowledge can help you achieve.

Returns on equity investment (stocks) come in three ways, namely, capital appreciation or an increase in price, dividend on company profits and bonus or scrip issues which is additional share given to the shareholder for free instead of cash dividend.

This article on how to start investing in the Nigerian stock market will get you started.

Final Words

That you do not have a lot of money is not a reason not to start building your future.  You can certainly begin with what you have now and you will be amazed at what you will see when you look back ten years from now.

A sound personal financial plan will irequire that you stay debt free as much as possible, have an emergency fund and invest  regularly in interest yielding financial instruments. Your short, medium and long term financial objective are what will determine how to allocate your investment cash.

The general rule is:

Any money you will be needing at any time should be put in an interest yielding savings account. 

Money that you will be needing at least in the next one year is best put in a bank deposit account or a hgh interest yielding online investing app. 

Money you will need in 2 – 3 years time is best invested in FGN Savings Bond,  Mutual Funds or in stocks.

Finally, if you will be needing your money in periods greater than 3 years, consider investing in a dividend paying stock, FGN Bonds, Corporate Bonds or landed property if the amount at your disposal is enough to consider investment propert option.

What do you think?

 

 

 

My name is Buchi and I am the founder of kobotalk. I am a business enthusiast, a retail investor, and a blogger. My goal is to use this platform to provide free but quality market intelligence to people who are interested in business, investing and in being financially free.

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