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

best investment options in Nigeria
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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 mighty money tree. So go ahead and plant that seed now.  

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

#1. FGN Savings Bond (FGNSB)

The Debt  Management Office (DMO) issues the FGN Savings Bond on behalf of the Federal Government of Nigeria. It is targeted at retail investors. The objective is to encourage 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 attracts interest of 13 – 14 percent per annum.

These rates of return are not only attractive because they are above what bank offer on their regular savings and deposit account but they are also 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 diverse group of people and invest it in profitable financial instruments.

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 analyze 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 billion ($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 Fund
  • ARM Money Market Fund
  • Cordros Money Market 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 democratizing 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 –  I-invest helps retail investors to invest in money market instruments like bank deposits and Treasury Bill with very small amount of money.  The rate 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. Online Agric Investment Portals 

Popular among 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 instruments 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 that offers the best interest rate. 

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.

The easiest way to take advantage that money market instruments offer is to invest Money market funds. These funds focusse on money market instruments and is very easily affordable by small investors.

The money market funds segment is the most active in the mutual funds industry in Nigeria with some of the funds consistentlt returning above inflation rates, overtime.

#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. 

Stock Investors earn in three ways – capital appreciation, cash dividend and bonus issues. Capital appreciation comes with increases in the price of stocks. Dividend is a portion of profit a company distributes to its shareholders. Bonuses are additional shares that shareholders get for free.

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.  Start with what you have now.  Look back ten years later and smile.  

A sound personal financial plan will require that you stay debt free as much as possible. Set up 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 that you will need any time soon, put it 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 high 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 property option.

What do you think?

Buchi creates content and leads the Team at Kobotalk Management Services; a business development and investment consultancy firm. He provides strategic advisory to help SME's, small business owners and HNI's grow profitable business and make informed investing decisions.

11 Comments on “6 Smart Ways to Invest In Nigeria With A Small Amount of Money”

  1. A very informative article. Please which stock broking company would you recommend for the purpose of buying FGN bonds?

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