- FGN Bonds
FGN Bonds are debt instruments issued by the FGN to raise funds to finance fiscal deficits, service maturing debt obligations, finance projects, and basically run the country and conduct day-to-day operations. Through this means, the FGN also enhances the savings and investment opportunities of the populace, while an investor by lending money to the government contribute to national growth and development.
Buying FGN Bonds is equivalent to lending money to the Federal Government for a specified period of time at no default risk because it is backed by absolute faith in the Government. This is why the FGN Bond is considered to be one of the most secure, guaranteed and risk-free investments options in the domestic debt market because the Government is obligated to pay the bondholder the principal and agreed interest as and when due.
Hence the bondholder is absolutely certain that the principal and interest will be paid by the government.
The minimum investment for an FGN savings bond is N5000 and a maximum of N50,000,000. With tenor ranging from 2 to 3 years.
- Mutual Funds
Mutual funds are the most popular and preferred form of investments. Mutual funds are a type of investment that involves pooling funds from several investors and investing those funds in multiple securities like bonds, stocks, FGN bonds, Treasury Bills etc. Due to the amount of funds invested, investors are able to enjoy the benefit of scale because they would otherwise be able to invest in funds, securities or stocks to which there exist entry barriers such as cost and size of minimum investments. Mutual funds often offer better returns rates than other forms of investment because they are managed by fund management that tries to select the best securities for investments.
In selection, in particular when dealing with equity mutual funds (Mutual funds invested in the stock market) or hybrid mutual funds (Mutual funds invested in a combination of various securities, it could be equities and debt instruments for instance), the specialists that manage the fund make use of diversification, a diversified portfolio also leads to lower risks of investments.
The easiest way for investors to invest in every aspect of the capital market is through mutual funds and you can diversify your investment due to the different types of securities that are invested in through mutual funds. It also has the advantage of yielding capital gains in the price as well as yielding dividends which can be paid out at intervals or reinvested to get compound returns.
Golden Treasury Notes (GTN) is an example of a safe, high yield mutual fund in Nigeria that offers competitive returns of up to 10% annually.
- Stocks
Stocks are equity investments that represent legal ownership in a company. By purchasing shares in a company, you become part-owner of the company. You profit when the share price increases via capital appreciation and receive dividend payments or bonuses.
Stocks are considered to be one of the investment options with the most risk and most returns as well.
Buying into the stock of good companies can be an excellent investment. According to experts, the Nigerian stock market attracts many foreign portfolio investments due to the possibilities of better returns than foreign equity markets. In addition to trading domestic stocks, you can also invest in foreign stocks.
- Treasury Bills
Issued by the Central Bank of Nigeria (CBN) On behalf of the government, Treasury Bills are short term debt instruments used to raise funds to finance budget deficit or national borrowing requirements. Much like FGN Bonds, they are also debt securities but with a maturity of less than a year. So, buying treasury bills is like borrowing the government money for a short period of time.
Treasury Bills are indicative of the government’s debt to the holder for a specified period of time. They are considered the best, risk-free and most secure form of investment in Nigeria because they are backed up by the Federal Government of Nigeria’s absolute faith. Treasury bills are also very liquid and can be converted to cash easily.
- Ethical Funds
This is an investment plan that the Sharia Advisory Boards approve. It is a financial investment system operating in accordance with Islamic law. It follows therefore that both the fund generation (deposits) and utilization (asset creation) must follow Islamic principles.
The investor’s funds are invested in approved ventures like real estate, stocks, Sukuk bonds, etc. and not invested in interest-bearing businesses, businesses with excessive uncertainty, businesses involved in gambling, arms, tobacco, alcohol etc.
It is also a system of contracts, where a partnership is entered into by the investors and fund managers. There are several types of partnerships possible under these contracts, this often determines the nature of gains or losses to be shared.
A common type of contract is the “Mudaraba” type arrangement where the party providing the capital (Rabul Maal) bears the loss while the other party providing labour (Mudarib) is liable only if negligence is proven. It could also be “restricted Mudaraba” where the nature of the business to be invested in is specified by the provider of capital, however, the more common type is the unrestricted Mudaraba where the Mudarib is free to invest the money as he deems fit.
REFERENCES
Nairaland
The Balance
https://www.thebalance.com/the-complete-beginner-s-guide-to-investing-in-stock-358114
Debt Management Office Nigeria
https://www.dmo.gov.ng/fgn-bonds
Naija Quest
https://naijaquest.com/how-to-invest-in-treasury-bills-in-nigeria-all-you-need-to-know/
Nigerian Finder
