Investing

Your Best Investment Options In Nigeria

Are you looking for areas to invest money in Nigeria and do so with peace of mind? Then read on!  In this post, I tried to highlight the best investment options in Nigeria that are suitable for people with low risk appetite.

The reason most people don’t realize their goals is because they either lack information or do not act on information at their disposal.  You are lucky to have landed here because this post conatins the information you need. 

It is also important that you conduct your own due diligence before investing your money in any financial product or business.  If possible seek the help of your professional adviser.

Now the Best Investment Options in Nigeria for those who want to make money with peace of mind.

#1  FGN Bonds

Government Bonds offer the best investment option for people who seek security and safety of their money while creating enduring wealth.

In Nigeria, the FGN Bonds is issued on behalf of the federal government by the Debt Management Office (DMO).  These bonds have long tenors ranging from 2 to 20 years and are issued by the government to raise money to finance projects such as roads, railways, housing, power, and other infrastructures, etc.

Minimum subscription to FGN Bonds is usually NGN10,000 and multiples of NGN1,000 thereafter.  Interest is paid semi-annually until maturity date when the principal is paid. An investor who does not want to wait till maturity to get his principal sum can sell the investment at the secondary market.  The secondary market for bonds in Nigeria is the FMDQ  OTC platforms and the Nigerian Stock Exchange.  DMO does primary auctions for FGN Bonds on a monthly basis while the secondary trading takes place on a daily basis.  If you are interested in investing in FGN Bonds, contact your stockbroker for guidance.

#2  FGN Savings Bonds

The Federal Government of Nigeria launched the FGN Savings Bonds in 2016.  The FGN Savings Bond is a retail investment programme designed to provide Nigerians of all income levels the opportunity of contributing to national development by lending to the government.  It is also intended to make savings attractive to the average Nigerian.

Minimum amount you can invest is NGN5,000 and maximum  is NGN50,000,000.  FGN Savings Bond tenor ranges from two to three years and primary auctions are conducted on monthly basis.  Like the FGN Bonds, there is a secondary market for Savings Bonds at the Nigerian Stock Exchange which means that if you don’t wish to hold to maturity, you can exit by selling at the NSE.

Interest payable ranges from 11 to 13% which is far above what you can get from a regular savings account in a commercial bank in Nigeria.   This is tax-free and the bonds can be used as collateral to obtain loans from the banks.

The FGN Saving Bond is one sure way you can make money with your savings, thus it is suitable for retail investors and low income earners who are desirous of building long term wealth.

Want to invest? Contact your stockbroker.

#3  Treasury Bills

One of th best investment options, Treasury Bills are short dated instruments issued by the government through the Central Bank to control money supply as well as provide short term funding for the government.

In Nigeria the CBN auctions Treasury Bills bi-weekly in tenors of 91 days, 182 days and 364 days. There is also a secondary market for this security existing in the money market.  The money market comprises of the banks and other financial institutions dealing in short term instruments..

Treasury Bills are the most liquid and safest investment instruments you can find in the money market.  They offer guaranteed returned and are risk-free because they are backed by the full guarantee of the Federal Government.

How does it work?

A Treasury Bill has a face value which is the actual amount the bill is worth at maturity.  However, the bills are usually sold for less than their face value.  For example, if you buy a Treasury Bill for NGN100,000, you may pay NGN90,000.  On maturity of the investment, you will receive NGN100,000, meaning you have earned a NGN10,000 interest on your investment or  a 10% return.  The unique thing about TBs is that you earn your interest up front which effectively increases its true yield.

The interest you earn on Treasury Bill is called the stop rate and this is determined by the Central Bank of Nigeria on every auction day.  The CBN determined the stop rate by selecting the bids that fall below the marginal rate.

Wondering how you can invest?

Well this is easy enough.  Simply work into your bank and collect the necessary forms.  The rest of the whole process is easy and your bank will guide you through the process.  You can also approach your stockbroker .

Before March 6 2017 you didn’t really need so much money to invest in Treasury Bill.  They were sold in units of N1,000 and in multiple of N1,000 thereafter at the primary auction,  though banks usually would prefer to sell in units of N100,000 and in same multiples thereafter.  However, from March 6, 2017, the CBN increased minimum subscription to NGN50 million.  This effectively pushed retail investors away from accessing the TB primary market and leaving that segment to the banks, stock broking houses, other institutional investors and high networth individuals.

But the secondary market still provides a window for retail investors.  The secondary market is where investors who bought from the primary auction resell to enhance liquidity.  This segment of the market is now active as it has seen a lot of institutional investors accessing it for liquidity management.

So to buy from the secondary market, approach your broker or bank and be guided through the process.  What you may find is that minimum investment requirement may differ and  the rates could be lower with a lower maturity date. Most investment houses will require a NGN200,000 minimum investment on their Treasury Bills products.

Treasury Bills remain an easy way to grow your income.  It is safe.  It is secure. It is a guaranteed way of letting the money you have work for you with peace of mind.

#4  Commercial Paper (CP)

With the establishment of the FMDQ OTC platform in November 2013 the Commercial Paper markt in Nigeria became active again after a long period of lull. Commercial papers are short dated money market instrument issued by corporate organisations to borrow money from the investing community to finance working capital needs.  Commercial paper is more or less a promisory note and approximates Treasury Bill in the sense that:

its is a short term instrument with a minimum tenor of 15 days and a maximum tenor of 270 days (two weeks – 9 months);

it is discounted, meaning that investors receive their interest upfront.

However, commercial papers offer higher returns than Treasury Bills peharps because they are riskier as they are issued by private sector organisations unlike Treasury Bills that are issued by the government and has the full backing of the state. 

But commercial papers are also safe because they are issued by companies that have sound credit rating, good reputation, companies that are profitable and have good record of corporate governance practices. To give an assurance of security, the issuing company may get the bank to guaranty the CP. Once a bank guarantees a CP, the commercial paper, becomes a Banker’s Accetance. What this means is that if the issuer fails to honour its promise to pay on due date, the bank pays.

Some of the companies that are active in the commercial paper market in Nigeria include: Nigerian Breweries, Guinness Nigeria Plc, UPDC, UBA, Acess Bank, Skye Bank, Ecobank, amongst others.  Interest payable on commercial paper usually vary but a review of previous issues and those trading on the FMDQ OTC shows rates between 15% and 25% per annum.

Who Can Invest in Commercial Papers

According to the guidelines, only Acctedited Investors can invest in Commercial Papers. Hold on, dont run yet, for yo to be reading this post you are qualified to be an accredited investor.  An accredited investor is any person or institution who has the knowledge to understand the risk associated with investing in an unregistered security like a CP. There are two classes of AIs, the Qualified Institutional Investor (QII) and the Eligible Individual Investor (EII).  An EII is any individual who has an agreggate net asset of N2 million or whose aggregate family earnings (you and your spouse) is up to N500,000 annually.

How to Invest in CP

To invest in Commercial Paper, walk into your bank and tell them you are interested in investing in CP’s.  You will be given a list of CP’s in the market, the minimum subscription of each issue, the interest rate and tenor.  Take your decision and proceed to fill the necessary papers.

Also Read: Earn High Returns By Investing In Corporate Bonds in Nigeria

Commercial papers is attractive and is easily embraced by investors because it offers higher return than most money market insrument, it has an active secondar market, it is very liquid and it provides you with a profitable window to diversify your portfolio and spread your risk.  If you do not want to hold to maturity, you can easily exit by trading the instrument on the FMDQ platform.

#5  Mutual Funds

This is one sure investment vehicle that so many Nigerians do not take advantage of due to ignorance. In 2014, of about 46 mutual funds offered by 23 fund managers and approved by the Securities and Exchange Commission (SEC), there were less than 250,000 unit holders. Compared this to the United States market, where about 38 percent of households invest in mutual funds. In Brazil, about 10 million people invest in mutual funds.

What then is a Mutual Fund?

It is a collective investment scheme under the management of a professional fund manager.  Monies in the fund are invested in different instruments such as stocks, treasury bills, bonds, real estates and such other assets in line with the investment strategy of the funds.  Profits made from these investments are thereafter distributed as dividend to unit holders.

If you are a beginner investor or you are one who is averse to risk or do not understand how to navigate the murky waters of financial market, mutual fund may just be what you need.

How to invest

There are more than 50 investment firms in Nigeria operating as mutual funds.  Some are strictly equities; others are money market focused while a good number of them operate mixed funds.  There are funds that appeal to ethical and religious beliefs, in case you are such a selective investor.

The most popular companies with the most thriving funds include Stanbic IBTC, ARM, FSDH, Afrinvest, UBA group and FBN Capital, amongst others.  You can contact these companies and discuss your investment choices.  These funds have reported Net Asset Value of over between 15 and 20%  while some others have even beat the broad market in the past. For more information on approved funds, visit the SEC website.

#6  Gold

It is golden to invest in Gold. It certainly will make you a lot of money.  Gold is one commodity whose intrinsic value never falls.  If you have a 15 carat gold today, it will still be 15 carat in 20 years time but the worth may have increased tens of thousands fold over that period.  It is a store of value.

Many ways you can invest in gold include buying gold jewelries and storing for a period of time.  You can buy gold jewelries in Abuja, Kano and even Lagos.  You can also invest in gold plated items and allow sometime to offload.  You will be amazed at the return. Other gold commodities include bars, coin and bullion.

To be able to trade in gold products, you must first learn some tricks. You must know how they are measured, weighed and valued.  You must also know where to source and identify original gold.

With less than NGN200,000 you can start investing in gold. However, if you do not have the time to source for the products or you want to remove the risk of buying fake products from your shoulders, you may consider investing with gold based  network marketing companies.  I have seen people make 2 times their investment over a period as short as 90 days working with these companies.  I have seen people who became millionaires using this model. But before you join any of such companies, you must do your due diligence, ascertain its credibility and understand its systems and policies.

Another way of investing in Gold is to trade in its derivative.  I however, do not recommend this model if you are not financially savvy.  It is highly volatile and you can burn your fingers if you do not do things right.  If properly done, you will make more money trading gold derivatives than you will ever make trading in foreign currency.

#7  Stocks

Nigerians are yet to forget the shock of 2008 when the stock market melted and so many people lost money. But the stock market has since recovered, albeit slowly and discerning investors are making money.  But the truth is that, if carefully done, investing in equities can offer incredible return.  Return on equity investment is not only in terms of capital appreciation but it also come in dividend and script issues or bonuses.

It has also been shown that, perhaps, the only investment that beats equities over a period of time is real estate.  But you don’t need as much capital outlay to invest in stocks as you will need for real estate and most importantly, stocks is more liquid and comes very handy in times of emergency.

The secret is to develop a winning system, conduct your research very well, do not speculate, invest in quality stocks with sound fundamentals and pay attention to developments around you that may affect the value of your investment. Of equal importance also is to carefully choose a stockbroker and other investment professionals to work it because to some extent your success or otherwise depends on the quality of the stock broker you use.

#8  Real Estates

You can make a lot of money by investing in real estates.  If you say it requires huge capital to play in the property market, you are right.  However, I have discovered that there are places for different income group to make money in real estates.    With as little as N500,000, you can  start by buying a piece of land in an area that has potential to develop, hold it for a while and thereafter sale when demand for property in the area rises. You can also use the piece of land for open space rental.  This will guarantee you steady cashflow over time.

You will need to be careful so that you do not deal with crooks – there are so many of them.  To avoid being scammed, you will have to develop relationships with property lawyers, land owners and even relate well with the charlatans that call themselves sons of the soils (or omoniles).

 

Also Read 10 Sure Ways to Get Rich In Real Estates With Small Money

If you have the resources you can invest in already developed properties like apartment houses and hostels.  Such properties are managed by real estates development companies and there as so many that allows investors to pay in installments or even arrange mortgage financing.

It may not be as liquid as other investment discussed here, but one thing is sure, investing un real estate’s provides you with cash flow over a long period of time and prices of properties will always appreciate.  So whether you invest directly or indirectly by buying real estates stocks, mutual funds or REITs, your investment will always appreciate over time.

#9  Farming

You may not know it, new set of millionaires are emerging from farming in Nigeria and the trend will continue as government at all levels continue to drive agriculture as a way of diversifying the economy. Apart from this, farming will continue to be viable in Nigeria because of its huge population and the emergence of industries that require input from the agric sector.

Subsectors that are open to investment include produce farming such as rice, cassava, plantain, beans, maize, pineapple, etc; livestock production such as poultry, pig and snail; fish farming as well as vegetable farming or horticulture

Also Read: How to Make Money With Water Melon Farming

If you don’t like farming but want the money that comes from it, you may adopt the indirect model by investing in organizations that have the expertise and are engaged in large scale farming.  These organizations use your money to acquire lands, cultivate, plant, monitor, harvest and market the products. You are paid agreed returns on your investment periodically and on maturity, you have the option of exiting with your principal or reinvesting for the next farming round. One of such platforms you can explore is farm crowdy wich allows you to sponsor a farm project with minimal amounts and earn up to 25% returns on your investment.

That’s it.  My 9 Best Investment Options In Nigeria for people who want to make money and still sleep with their eyes closed.  I personally have invested in some of these and found that they are profitable.  These investment windows will continue to be money spinners  based on my readings of the economy and the policy framework of the government.  Make your life better by investing wisely and profitably and if you require assistance, feel free to consult with me.

This is to your success.

16 thoughts on “Your Best Investment Options In Nigeria

  1. why didnt you mention cryptocurrency? seems like the most talked about venture on many platforms with its huge potential

    1. Good observation, Tunde. The omission of cryptocurrency on this list is deliberate. This article is intended to highlight sure investment windows that any average person can explore and make money. I invest in cryptocurrency too, but I believe it is yet an unconventional asset class, unregulated, highly speculative and risky. However, I covered cryptocurrencies in another article: Understanding Cryptocurrencies – a beginner’s guide. You can check it out.

  2. thanks a whole lot for this wonderful piece of financial guide. however, I would like to reach you via any available means for more insight on some of these platforms.

    aikeonline247@gmail.com or whatsapp 07038915216. Thanks

    1. Glad you find the post helpful. You can reach me via the details on the contact page and I am available to explore with you, these and other investment opportunities out there/

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