Invest in Nigeria.

Invest in Nigeria.

In Nigeria, there are lots of investment opportunities to benefit from, an investor needs to understand the types of investments to invest in, the risk and likely returns to be earned on the investment.

Investment One, a leading financial services firm in Lagos outlined 10 top Investment Recommendations for 2018 [see report here]. The 10 investment opportunities that are profiled in the report are treasury bills, commercial papers, sovereign bonds, state bonds, corporate bonds, Eurobonds and equities. Others are mutual funds, real estate and venture capital. These investment options are for anyone – whether you have a job already or a business that you already make money from.

In 2018, economic indicators are on the brighter side. The oil sector is expected to continuously improve economic activities, with a Gross Domestic Product (GDP) growth of about 2.50%. This is premised on increased government engagement in the Niger Delta and stability in Brent oil price on the back of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC agreements to extend oil production cuts until the end of 2018.
Also, the non-oil sector is expected to see support from the administration’s commitment to Capital Expenditure (CAPEX), election spending and Central Bank of Nigeria’s (CBN) potential shift to a more accommodative monetary policy.

This is a great year for everyone, both new and existing investors, to create wealth. The various investment options in Nigeria in no particular order are…

FGN Bonds: Government Bonds offer the best investment option for individuals who seek security and safety of their money while creating wealth through investing. 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.

Bonds are one of the safest investments in the country as they are guaranteed by the government. They are recommended for anyone with loose cash who is looking to save towards the future and earn a fixed income over a long period of time. Interest is paid biannually and annually. The likely risk of FGN Bonds is zero risk as the government is not expected to default. The returns an investor can make is between 13 and 18% per annum in 2018. The Minimum period is 2 years though you can sell whenever you want. Least membership to FGN Bonds is generally NGN10,000 and products of NGN1,000 from that point, anything less than N1 million would not yield a meaningful profit. If you have idle cash and you are a risk-averse investor [dislikes taking risky investment] then this will be a suitable investment to own. Contact your stockbroker/investment advisor for direction..

Land: land does not only increase in value as it ages; it is also what drives real estate appreciation. As the population and economic activities in Lagos is constantly increasing, more people are coming into Lagos and will need shelter, more and more properties are getting built, land becomes more and more expensive. The opportunity forgone on real estate appreciation is getting higher by the day as prices have continued to rise during the past several years, you really can’t afford not to buy into Real Estate in Lagos State.
Real estate is tangible, it is something you can feel and touch, it is a safe haven investment and one feels secured in it. It has come to be seen as a safe wealth-building asset.
Real Estate has a steady price appreciation, high yielding returns and gives you a high borrowing power. When you sell real estate, you receive a large sum of capital. 90% of millionaires have become a millionaire as a result of owning real estate.
Variation of riskiness in fluctuation of home prices is substantially less than the variation in stock prices and other liquid investment returns.
Thus adding real estate property to an existing investment portfolio composed of stocks and bond improves diversification, lowering the risk of your overall portfolio.
Real estate can be a leveraged investment by purchasing on margin i.e. making a down payment and financing the remaining value. There are mortgage banks and some commercial banks (through their real estate unit) offering these facilities. The sellers sometimes do also have easy payments plans.

Treasury Bills: This is a government short-dated fixed income security that is offered for 91 days, 182 days and 364 days tenors, it is issued by the government through the Central Bank to control money supply as well as provide short-term funding for the government. Treasury Bills are the most liquid and safest investment instruments you can find in the money market for anyone with loose cash who is looking to save towards the future.

Treasury bills offer guaranteed returned and are risk-free because they are backed by the full guarantee of the Federal Government. The returns are steady with interests paid up front. 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. The secondary market 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 have zero risk as the government is not expected to default. 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. It was one of the most popular investments in 2017 due to the high-interest rates it attracted in the early part of the year. Interest rates were as high as 20% for one-year treasury bills. It dropped to about 15% by the end of 2017. An investor can make between 10 and 15% per annum in 2018. If you have idle cash and you are a risk-averse investor [dislikes taking risky investment] then this will be a suitable investment to own. Contact your stockbroker/investment advisor for direction.

Mutual Fund: This 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. It is basically giving your money to experienced fund managers to invest on your behalf in exchange for high returns. You also get to pay them fees for this.

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, mutual funds and other types of funds such as Exchange-Traded Funds (ETFs), Real Estate Investment Trusts (REITs) are viable investment options for anyone who has the cash to invest but no time to manage and monitor their investments.

The risk of investing in mutual funds is that your investments may not be managed well. This can result in very little or no returns. It can also lead to loss of capital, even though this is highly unlikely. You also get to pay the fund managers fees whether or not they make money for you or not. Likely return ranges between 9 and 14% per annum in 2018. Period ranges from 3months to 12 months. Though you can sell whenever you want. Minimum investment amount is at least N50,000 monthly.

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.

Money Growth

Stocks: This means investing in the Nigerian stock market. 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 recovered. If carefully done, investing in equities can offer an incredible return. Return on equity investment is not only in terms of capital appreciation but it also comes in dividend and script issues or bonuses.

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.

The Nigerian Stock Exchange returned 42% in 2017 and was one of the best performing stock markets in the world. Stocks have been rallying mainly because foreign investors have resumed investing in Nigeria. This has created an appetite for investing in stocks, resulting in an exponential increase in marketing their values. This trend is likely to continue in 2018.

Investing in stocks is still considered risky by some people. The risk is that you might invest in a stock and lose all your money. However, you could mitigate this risk by careful stock picking and tracking every bit of information about the stock that you buy to ensure that you know when to sell or even buy more. You can make between 5 and 200% per annum from investing in stocks.

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