2021 Top 4 Safest Investments Opportunities in Nigeria

13 min readOct 6, 2020

The number one thing an investor looks out for before investing is the degree of risk associated with an investment. The foremost risk considered by investors is the risk of losing their principal, and as a result, most investors tend to seek out investments that has a low-risk profile.

There are lots of investment opportunities in Nigeria, but a majority of them are risky as investments are wont to be; and after the 2008 stock market crash ― during which a great number of investors lost trillions of Naira ― most Nigerians have developed an aversion to investing, particularly in the stock market.

Nevertheless, there are certain investment opportunities you can invest in that will greatly reduce the risk of you losing your principal and this article will be discussing such investments and how you can invest in them.

But before I go further, what is an investment?

An investment is an asset or an item that is purchased with the hope that it will generate income or appreciate in value at some point in the future.

You’re probably familiar with the simplest form of “investment” available to most Nigerians; a savings account. You deposit some money into your savings account and you get paid interest on such deposits.

However, as you and I both know, the interest you’re paid hardly surpasses a few hundreds of naira per year; and when you calculate all the charges being deducted from your savings account ― such as text message alert charges, ATM card maintenance fee, stamp duties, and transfer fees amongst other charges ― you realize that at the end of each year, you are left with lesser money than you deposited into your savings account!

The so-called interest you’re being paid doesn’t cover a quarter of all these charges!

As a result of this, I don’t consider a Nigerian savings account as a medium of investment, especially when you consider the definition of an investment.

Hence, based on my personal experience as an Investor and an Investment Analyst, I decided to curate a list of the top 4 safest investment opportunities available to you in Nigeria.

So, what are they and how can you invest in them?

Bonds

Bonds ― especially government-backed bonds ― are one of the safest investments you can ever make. If you’re an investor that prefers low-risk investments, then government bonds should be part of your investment portfolio.

But I’m getting ahead of myself.

Firstly, what is a bond?

A bond is a contract between a lender and a borrower, whereby the borrower agrees to pay the lender interest and also repay the principal at a predetermined date.

You can invest in the bonds of different countries around the world, but in this article, I’ll be explaining FGN Bonds and how you can invest in them.

What are FGN Bonds?

FGN Bonds are debt securities issued by the Debt Management Office (DMO) for, and on the behalf of, the Federal Government of Nigeria (FGN).

When you buy FGN Bonds, you are basically lending your principal to the FGN for a specified period, and the FGN is obligated to pay the bondholder (you) the principal and the agreed-upon interest at a predetermined date.

It goes without saying that FGN Bonds are the safest securities you can ever invest in in Nigeria, and this is because the bonds are 100–percent guaranteed by the FGN. Hence, FGN Bonds are classified as risk-free debt instruments.

Furthermore, FGN Bonds have no default risk. This means that it is absolutely certain and guaranteed that your interest and principal will be paid to you whenever you’re due for payment.

How to Invest in FGN Bonds

FGN Bonds can be bought via the Primary Debt Market (PDM) and the Secondary Debt Market (SDM) through Primary Dealer Market Makers.

The PDM is where the DMO auctions FGN bonds on a monthly basis, while the SDM is where trading in FGN Bonds are done on a daily basis by licensed broker-dealers ― such as banks and stockbrokers ― on the floor of the Nigeria Securities Exchange (NSE) and on the FMDQ OTC Securities Exchange.

If you need to sell your FGN Bonds before they mature or buy some more bonds after the PDM auction, you can do so through the SDM.

As an individual investor, you can invest in FGN bonds through Primary Dealer Market Makers (PDMMs). PDMMs are banks appointed by the DMO to act as authorized dealers in FGN Bonds. Each of them has their operational strengths and weakness like their turnaround time, their responsiveness to clients, their client service excellence, and so on. Also, they differ in their commissions and other charges as well, so, I recommend you pay attention to these things as you evaluate which institution you want to handle your bond-buying transactions.

Here’s a list of licensed PDMMs:

Access Bank Plc
Citibank Nigeria Ltd
Coronation Merchant Bank Ltd
Ecobank Nigeria Ltd
FBNQuest Merchant Bank Ltd
First Bank of Nigeria Ltd
First City Monument Bank Plc
FSDH Merchant Bank Ltd
Guaranty Trust Bank Plc
Stanbic IBTC Bank Plc
Standard Chartered Bank Nigeria Ltd
United Bank for Africa Plc
Zenith Bank Plc

To invest in FGN Bonds, simply approach any of the aforementioned institutions and request for an FGN Bonds form. You will be guided on how to fill the form and additional information will be provided to you should you need it.

Benefits of investing in FGN Bonds

It is a risk-free investment as it is guaranteed by the FGN.
The income earned ― that is, interest payments ― are not taxed.
It provides relatively high and stable returns when compared to keeping your money in a savings account.
It is a liquid investment. This means that you can easily trade your bonds on the floors of the NSE or FMDQ OTC Securities Exchange for immediate cash before maturity.
You can use the principal as collateral for securing credit from financial institutions such as banks.

For more information on FGN Bonds, simply visit www.dmo.gov.ng/fgn-bonds.

Treasury Bills

What are Treasury Bills?

Treasury bills are short-term debt instruments issued by a particular government of any country through its Central Bank to raise short-term funds from the general public ― such as individuals, institutional investors, non-governmental organizations ― to finance its national budget.

Treasury Bills in Nigeria are issued by the Central Bank of Nigeria and like FGN Bonds, treasury bills are also fully guaranteed by the FGN.

Treasury bills are referred to as discount debt instruments because an investor gets their interest upfront.

Let me explain.

Interest on a treasury bill is payable on the very first day the investment commences. For instance, if a treasury bill promises a 10% rate per tenor and an investor wants to invest ₦100,000, the investor pays only ₦90,000 from the day of investment but gets back ₦100,000 at maturity. Hence the reason why they are referred to as discount debt instruments.

How to invest in Treasury Bills.

A Treasury Bill can be purchased either in a Primary Market or Secondary Market.

In the Primary Market, an investor buys directly from the CBN through a bi-weekly auction conducted by the CBN, wherein buyers are requested to quote bids after which the average minimum bid will be selected. The minimum amount that can be bought in the Primary Market is ₦50 Million.

On the other hand, in the Secondary Market, an investor buys from an existing holder of a treasury bill and such transactions can be carried out every working day.

Also, the bills are issued for specific periods known as tenors.

In the Primary Market there are three regular tenors; 91-day tenor (3 months), 182-day tenor (6 months), and 364-day tenor (1 year), whereas in the Secondary Market, you can buy treasury bills at irregular tenors ranging from 1–363 days.

Prior to 2017, you could invest in Treasury Bills for as low as ₦10,000 and in multiples of ₦1,000 thereafter, but, in 2017 the minimum was increased to ₦50,001,000. However, if you don’t have up to ₦50 million, there’s a way you can still invest in treasury bills.

How?

Read on.

Some banks and investment institutions in Nigeria have designed products that pool funds from customers which they then use to invest in treasury bills on behalf of members of the pool.

These banks and investment institutions pool small sums of money into a portfolio that is at least more than the minimum required ₦50 million. The funds are pooled in line with the regular Primary Market tenors, 3 months, 6 months, and 1 year respectively, after which they are invested under a collective fund, owned by the bank or investment institution on the behalf of investors in the pool.

They then bid for Treasury Bills through CBN and if their bid is accepted, interest earned from the fund is shared equally to all fund contributors according to their individual contributions. For instance, if you invested ₦100,000 in a pool that invested in a 364-day Treasury bill that pays an 18% interest rate, you will be paid ₦18,000 as your gross interest. If someone else invested ₦2 million they will get ₦260,000 as their gross interest.

It is worth mentioning that banks and investment institutions typically charge a fee for this service and the amount they charge varies, so you will have to confirm this with your chosen bank or investment institution.

To invest using the pooling option, simply approach your chosen bank or investment institution and inform them of your desire to invest in Treasury Bills. You will be given a form and provided with detailed instructions on how to fill it.

According to Sterling Bank and Afrinvest, with a minimum of ₦100,000, you can invest in Nigeria’s Treasury Bills.

Benefits of investing in Treasury Bills

Treasury Bills can be used as collaterals to secure credit from financial institutions.
Treasury bills are risk-free investments as they are guaranteed by the FGN.
Treasury Bills are highly liquid and there’s a secondary market for ease of entry and exit.
Treasury Bills are a good source of steady income.
Interest payments from Treasury Bills are not taxed.
Repayment is guaranteed at maturity.

If you’re building a low-risk portfolio, Treasury Bills will be a good addition to such a portfolio.

Digital savings

For ultra-conservative investors, savings accounts can be a good way to invest, provided such savings account pays a reasonable amount of interest; sadly, Nigerian bank accounts are lacking in this regard.

At the beginning of this article, I wrote that I don’t consider a Nigerian savings account as a medium of investment. However, there’s a way you can earn up to 10% per annum on your savings in Nigeria and that’s through Digital Savings Platforms (DSPs).

What are DSPs?

DSPs are online savings platforms whose raison d’état are to make savings more rewarding to you and I. They offer better interest rates on your savings than all Nigerian banks, and on some of these platforms you can save your money with a guaranteed 10% interest being paid into your account per annum. Plus, unlike Nigerian banks, they don’t deduct your money criminally ― you know what I mean lol.

These DSPs can afford to pay you and I these higher interest rates because they have a low operational cost than traditional banks as their operations are lean and mostly cloud-based.

These platforms are safe to save your money in because some are insured and guaranteed by Meristem Trustees ― a Private Limited Liability Company licensed by the Securities & Exchange Commission (SEC) ― while some insure your saved funds with AIICO ― the leading asset management company in Nigeria. In addition to this, DSPs are legal entities, licensed to operate by the FGN.

So, be rest assured, your saved funds are very safe on these platforms. :)

Benefits of DSPs

Zero fees & charges to use the platform.
Access to higher interest rates than traditional banks.
Ease of access to saved funds.
Zero deductions from your hard-earned saved funds.

How to start earning higher interest rates with DSPs

Just like banks, the interest rates these DSPs offers differ from each other. In this article, I’ll be analyzing 2 of the most popular DSPs in Nigeria and the rates they offer.

PiggyVest

PiggyVest ― formerly known as PiggyBank ― is the first online “Savings & Investment” platform in West Africa, although when it first launched on the 7th of January, 2016, it launched as a savings-only platform.

PiggyVest takes away the stress associated with saving in most traditional banks by combining simplicity, discipline, convenience, and flexibility to enable you to manage your finances and achieve financial freedom. It is also one of the largest online savings and investment platforms in Nigeria with over 350,000 users.

Since I’m talking about savings as a form of investment, I’ll focus on the saving aspect of PiggyVest in this article.

Benefits of PiggyVest as a Savings Platform

You earn 10% per annum on your normal Piggybank savings.
You earn up to 12.5% per annum when you SafeLock™ your savings. SafeLock is like Fixed-Deposits that traditional banks offer, although their interest rates are way lower than PiggyVest’s. The best part is that the SafeLock™ interest is paid to your account upfront and you can immediately access it.
You can convert your Naira to Dollars and earn 5% per annum when you save in their Flex Dollar™ plan.
You are rewarded for saving by earning Piggy Points whenever you save on the platform and these Piggy Points can be converted to cash. 1 Piggy Point = ₦10.
The minimum amount you can save is ₦100.

To start earning the highest savings interest rate available in Nigeria, create an account with PiggyVest today via www.piggyvest.com or simply search for their app ― PiggyVest ― on your phone’s app store and sign up. Their app is supported by both IOS and Android phones.

Cowrywise

Just like PiggyVest, Cowrywise is a Digital Savings and Investment Platform (DSIP). At Cowrywise, they pride themselves on digitizing investment management for Africans while enabling secure access to savings and investment products.

Since I’m currently talking about savings as a form of investment, I’ll focus on the saving aspect of Cowrywise in this article.

Cowrywise savings plan is similar to a Fixed Deposit Plan offered by traditional banking institutions. For every savings plan you create on the platform, there is a maturity period assigned to it, and the minimum maturity period is 90 days. This, according to them will develop [in their clients] the discipline to keep their savings for a long period without tampering with them ― and I agree with them.

This means that when you save, your saved funds are kept for a fixed duration, during which you will earn a particular interest. When you save for a fixed duration between 3–6 months you earn a 5% interest per annum, however, when you save for a fixed duration of 7 months and above, you earn a 6% interest per annum.

Benefits of Cowrywise as a Saving Platform

You earn 5% interest per annum when you save for a fixed duration between 3–6 months.
You earn 6% interest per annum when you save for a fixed duration of 7 months and above.
The minimum amount you can save is ₦100 and there’s no upper limit to any amount you can save. According to them “ [if] you have a billion Naira you want to save with us? Please go ahead”

To build a disciplined habit of keeping your savings for long periods without tampering with it while also enjoying a higher-than-Nigerian banks-standard interest rate, create an account with Cowrywise today via www.cowrywise.com/signup or simply search for their app ― Cowrywise ― on your phone’s app store. Their app is supported by both IOS and Android phones.

Other DSPs you can check out include KudaBank, KoloPay, I-invest, SmartSaver amongst others.

Digital Agricultural Investments (DAIs)

After relying heavily on petroleum as our major source of national income for decades, Nigeria is finally “diversifying our dependence on oil” and developing the agricultural sector of the country, albeit rather slowly, in my own opinion.

Despite the “diversification”, enough funds are not allocated to the agricultural sector to enable it to operate on a large-enough scale that is suitable for a country like Nigeria ― which has an estimated population of 200 million people. As if that’s not enough, in 2019, Nigeria slashed its budgetary allocation to the agricultural sector by almost 50% from ₦203 billion in 2018 to ₦107 billion in 2019. These yearly poor budgetary allocations to Nigeria’s agriculture sector cannot address issues relating to mechanization, insurance, research and development (R&D) at the barest minimum, and this is negatively affecting farmers’ productivity.

However, ― thankfully ― a couple of investment platforms have designed, developed, and now offer digital agricultural investments to enable Nigerian investors to invest in the agricultural endeavors of our local farmers. Technology-driven platforms such as Farmcrowdy, FarmAgric, Thrive Agric, FarmKart and even PiggyVest are enabling their users to invest in real farms with returns between 10–25%; and you can invest as little as ₦5,000 on some of these platforms.

Additionally, your investments on these platforms are insured and as a result, your principal is completely safe.

How to Invest in DAIs

The agricultural investments available and their expected ROI ― return on investment ― differ from platform to platform. Hence, it’s advisable to check out a couple of the different agricultural investments available on different platforms before settling for which one you want to invest in.

To check out DAIs available on:

Farmcrowdy ― Visit Farmcrowdy
FarmAgric ― Visit Home
Thrive Agric ― Visit Thrive Agric — Enabling Agriculture
FarmKart ― Visit Farmkart — Invest in Agriculture
PiggyVest ― Visit PiggyVest

Benefits of investing in Digital Agricultural Investments

They are low-risk investments.
Income generated from these investments is tax-free.
You don’t need a lot of money to start investing in DAIs.
Your investments are insured.
You can earn up to 25% interest from DAIs.

Conclusion

Every investor would love to have a guarantee that their principal is secured and can’t be lost to the markets. With the investment opportunities discussed in this article, you can diversify the risk of your investment portfolio as well as reduce its volatility.

In my opinion, allocating up to 50% of your investment portfolio to these extremely low-risk investment opportunities is not a bad idea at all!

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P.S.: Wanna discuss Investments or Forex trading or 8-Ball Pool? :)

Tweet at me via @boladeakinfenwa

Send an email to me via aboladeakinfenwa@gmail.com

Auf Wiedesehen.