Today we’re going to be talking about money/finances a.k.a Ego, Owo. I am probably not the bestexpert in granting tips on how to invest and save in Nigeria, but myqualification as an Accountant (ACCA) and earning an MBA has its benefits, here is a practical guide of how these things (investments and savings) workwhether you’re in Nigeria or in diaspora, no matter the amount of money youhave, even with as little as N50,000, N100,000 and you’re just thinking how canyou invest money? What can I do with this money that would yield more returns?I am going to be giving you valuable advice to yield some positive returns onyour savings. Whether you live in Nigeria or not, I understand these schemesalso work in every country and part of the world.
Once again, these are best ways to save and invest money, whetheryou’re based in Nigeria or a national of another country.
1. TreasuryBills
I am going to try as much as possibleto break the terms down in lay man’s terms. Treasury bills are short terminvestments. Basically, it’s just a way of borrowing your money to thegovernment in order to check inflation, for instance, when there is so muchmoney in circulation, prices of goods and services would increase, if you haveN10,000 in your hand, you’ll be willing to spend more than if you had N1000 inyour hand. Treasury bills are ways the government decides to mop up excess fundfrom the population where people have too much money to buy and to spend, alsoforging a way to borrow money to finance their projects.Now the question,how do you invest in Treasury bills? You cannot go the door of the CBN toformally state that you have the interest to buy treasury bills, the governmentusually sell their Treasury bills through commercial banks, you can go to thesebanks and find out the interest rates on Treasury bills. Some two years back,Treasury bills used to be for a very high rate, in fact it was around 17%, 18%.However now, the interest rates on Treasury bills has really come down tobetween 3% to 6%, but because it is a government backed investment, a lot ofpeople still love to go for it!!! Another thing to note about the treasury billis that the interest is paid up front, let’s say you invest N100,000 intreasury bills, and the interest is 10% for instance, you are paid N10,000 theday the investment is done, and the principal of N100,000 would drop back inyour account at the end of the tenure.
The major risk in Treasury bills isthe chance of the money devaluing due to inflation, after investing money for ayear in treasury bills, the worth of the money would diminish. But as for beingeasy, safe and secure, treasury bills are still top notch investments to gofor, the governments cannot afford to owe you or withhold your money.
2.Fixed Deposit
In very simple terms, banking is allabout collecting money from the people that have so much and lend to those thatneed money and every commercial bank offers Fixed deposit to its customers.Fixed deposit is simply telling the bank Youwant to invest a certain some of money and you are not going to touch it over afixed period of time. The interest rate is lower than treasury bills, but it’sa preferred option to leaving your money in the ordinary savings account.Several banks have their different caps on fixed deposits, some would say youcan’t fix less than N5million, some say you can’t fix less than N500,000,varying and depending on the commercial bank. It’s better to walk up to 2 ormore banks and compare the amount of money capped to fix into a depositaccount. It’s important to note that when you fix a certain amount of moneyunlike Treasury bills, the interest accrues at the end of the deposit tenure,so if you fixed N100,000 for 30 days and the interest is N10,000, the total ofN110,000 would be received at the end of the 30 days. An interesting questionyou might want to ask is what if I have and emergency and need to withdrawfunds? Do I have to suffer and wait till the expiration of the investment? Theanswer is no, there is full liquidationand part liquidation. Full liquidation is when you want to cancel the fixeddeposit and recover all the money, but if you want just a part of it, let’s sayN100,000 out of N500,000, and the N400,000 remain as an investment, you canpartly liquidate, but I must warn you liquidating your fixed deposit before theend of the tenure comes with a percentage charge, you are going to penalized,because the agreement with the bank was for it to be fixed for a certain periodof time e.g. one year and you decide to withdraw partly six months into thetenure.
Again, fixed deposits are safeinvestments, since banks are structured organizations that can’t be exhaustedeasily. However, the same risk that applies to Treasury bills i.e. your moneyloses its value to inflation applies to Fixed deposits.Alternatively, you decide to invest money in a business, it’s may triple, butalso the business can fail entirely and you lose the money, your capital andinterest. Fixed deposit is however a way you can get your principal and yourinterest at the end of the investment.
3.Real Estate/Property Investment
So many people have sworn that this isthe best type of investment. This is one of the safest investments where youcan triple or quadruple your money. Now, there are different forms of investingin real estate. You can either buy a property and sell 10 years later or youcan buy and build, then sell 10 years later. I don’t know if you knew of Magodoestate in Lagos, that place was an empty piece of forest many years ago. A plotof land went for N50,000, currently with development in that area, a plot of landdoes not go less than N40 million naira. Same goes for almighty Lekki in Lagos,Lekki was a slump, it was more like a hood, a ghetto! The land sellers wouldeven beg you to take a plot of land for N100,000 and you would not even want totake it. Now, if you point a building/plot of land in Lekki, it cannot be lessthan a N100million naira, that is the value of Real estate, Land and propertynever depreciate. It always appreciates. A land you bought for N50,000 can giveyou N40m in 5 years’ time, that is the magic of investing in Real estate.Whether you are in Nigeria or in diaspora, investing in property is a verysmart investment type. I don’t think there is any type of investment that wouldgive you that kind of money! Once you have enough money to build, you can buildlocked up shops.
Real estate and property is not a badidea but it comes with a risk, one of them is acquisition by the government.The government can decide to build a road on your property and they are notforced to give you compensation for it. The Land Use Act that governs the lawsconcerning land in Nigeria states that all the land in a state belong to theGovernor, so a Governor can decide to use your land without compensating youoh! Another risk of property investment is that you can buy yourself a land andbuy yourself a court case; probably you went to buy a land in dispute and youdid not run due diligence i.e. you did not know that the Land is in court, orthat there are two families fighting over the land, and one of the families quicklysold to you, and you find yourself in the middle of the devil and the deep bluesea! Those are some of the risk that come with property investment.
4.HirePurchase
Another business you can invest inwhile in Nigeria or in diaspora is Hire purchase. Now what is Hire purchase? Iown an item and give it to another person to continually use, the person isobliged to pay me little by little with interest (of course!) till the finalinstallment is paid to purchase the item. For example, you can borrow a penfrom me for 10 months and pay N1 each month till the end of the 10-monthperiod, then the ownership of the pen passes fully to you. In Hire purchase, itis possession that passes to the hirer, not ownership. So if it is my pen, I amstill in ownership of that pen, I only gave you possession of that pen to useat a cost. Usually, there is a Hire Purchase Agreement stating the terms outclearly in paper and it must be signed by both parties. In Nigeria, am sure youknow many of these tricycles a.k.a Keke Napep, minivan and buses are not ownedby drivers, they are actually out on hire purchase. So, that is also abeautiful way of investing, it just gives you this illusion of a salary earner,at the end of the month, you have money coming to you. Also, if the hirer doesnot meet his/her end of the agreement, you still have the right to repossessthe item from him/her.
In Hire purchase, there is emphasis ona guarantor, because of risks such as the hirer absconding with the property,and if you don’t have a concrete guarantor, it might be impossible to recoverthe property. Another crucial risk is that the guarantor would not be able tolocate the absconded hirer and eventually the property is lost.Therefore, it is paramount to have hire purchase agreement with people you canactually trust.
5.High Interest Savings Account.
Another way to invest no matter theamount is either a Savings Account or a Super Savings Account. So many peopledon’t know banks have other savings account apart from the regular savingsaccount. It’s like a high interest account where people who want to save theirmoney but don’t want the money trapped in an account, or the process of writingto liquidate their money but want the money saved away without spending it,keeping it for emergencies without fixing it into Deposits or Treasury bills.Many banks have that arrangement where they provide High Interest Deposit Accounts.These accounts come without a debit card or cheque books where the banksmake it difficult for you to withdraw more than a restricted number of times.These accounts come with interests monthly, unlike fixed deposits where theinterests come at the end of the tenure. Let’s say you’re entitled to aninterest of N120,000 per annum on a Super Savings Account, the amount iscredited to your account every month of N10,000, which is a cool way to earnpassive income.
However, you forfeit your interestwhen you withdraw out of these accounts more than thrice, so if you’re runningyour savings account like a current account, you forfeit your interest for thatmonth.
