Investing in Nigeria

What if knowing how to invest properly is the key to achieving your financial goals? It’s been proven severally how the right investments turned around people’s lives and finances for good.

Investing is important because it helps you to accumulate wealth over time and achieve financial stability.

Unlike saving, which generally yields low returns because of low interest rates and inflation, investing can provide better returns through the appreciation of assets like stocks, real estate, and mutual funds.

Investing in different investments also enables you to benefit from compound interest, which allows your wealth to grow exponentially by earning additional returns on your initial investment.

 It also enables you to meet certain goals such as buying a home, financing your education or having a comfortable retirement life.

Having established how important it is to invest, it is even more important to invest wisely. Choosing the location and assets to invest in will ultimately have an effect on whether or not your investments succeed.

With its thriving economy and growing population, Nigeria, presents an appealing opportunity for investors. Are you one of them? Are you ready to grow your wealth by investing in Nigeria? Let’s explore together!

7 Reasons to Invest in Nigeria

Here are some reasons why I think investing in Nigeria can be a smart move.

Population

1. With over 200 million people, Nigeria is the most populous country in Africa and this population is steadily growing. According to this report, Nigeria is the largest economy in Africa, largest market and most sought business destination on the continent. It is not only the largest economy in Africa but the largest country by population in the continent, the sixth biggest country in the whole world, and is projected to even be the third biggest country in the world by 2050.

Economically speaking, this means that Nigeria has the largest consumer base and potential market for businesses in the whole continent.

Oil Producing Nation

2. The country is one of the largest oil producers in the world. It is actually very rich in other natural resources like natural gas, and minerals, etc. This provides huge investment opportunities in these sectors.

Beyond oil and gas, there are also opportunities to invest in renewable energy, especially solar and wind energies.

High Value in Real Estate

3. In the area of real estate, I’ve observed that property values have consistently been on the rise, especially in major cities like Lagos, Abuja and Port Harcourt.

Urbanization and population growth has really led to the demand for more residential, commercial, and industrial properties.

Food Supply Demands

4. Also, in the agricultural sector, there are numerous opportunities in crop production, livestock, and agribusinesses. There is huge potential in this sector especially because of the vast arable land suitable for various crops and livestock.

ICT Infrastructure

5. Nigeria is not left out in technology as well. The tech ecosystem is really thriving in several states like Lagos, Rivers, Oyo, and Edo, to mention a few. The fintech sector, in particular, has seen rapid growth in recent years. Startups are gaining attention and attracting  investments both locally and internationally.

Telecommunication

6. Telecommunications sector is another booming aspect of the economy that is gaining a lot of traction. With a growing population and increasing internet penetration, there is significant potential in telecom and ICT.

Encouraging Policies

7. Government Policies: There are various government policies whose aim is to attract foreign investments, including economic reforms and incentives in the manufacturing, agriculture, and mining sectors.

Categories And Types of Investment In Nigeria

There are so many different types of investments in Nigeria. These many investment types may be grouped into four  major categories.

To better understand the types of investments, we will look at them under the major categories of investment available in Nigeria.

Categories of investment refer to the broad asset classes to which you can allocate your money. Investments are classified into these groups based on their common traits and behaviors.

As a potential investor, it is important to know these different categories so that you can allocate your resources appropriately. For an active investor, understanding these different categories can help you diversify your investment portfolio anytime and anyhow you’d prefer.

The main categories of investment are:

1. Equities
2. Fixed Income Securities
3. Cash and Cash Equivalents
4. Alternative Investments

1. Equities: Equities are often known as stocks or shares and they represent ownership in a company.

Buying equity is like buying a portion of that company, (e.g. Dangote Cement or MTN Nigeria), making you a shareholder. Because of this, you can benefit from the company’s growth and profits through capital gains and dividends.

Capital gains happen when the stock price of the company increases, you can then sell your shares and make a profit from it.

Dividends are portions of the company’s profits that are periodically shared among shareholders. This could be a source of regular income for you.

Equities can be readily bought and sold on stock exchanges and sometimes come with voting rights, allowing you to participate in important company decisions.

The Nigerian Exchange Limited, a subsidiary of the NGX Group, is the actual marketplace where equities (stocks) and other securities are traded. 

2. Fixed-income securities: Fixed-income securities are debt instruments that pay a fixed rate of interest.

They are like loans made by an investor to a borrower (corporate or governmental), that provide regular and predictable income returns over a specified period, while preserving capital.

This particular category of investment is usually considered to be lower risk than stocks because of how predictable their income is, and their lower volatility.

For instance, if you buy a Nigerian government bond from the Central Bank of Nigeria for ₦100,000 with a 5% annual interest rate, it would yield ₦5,000 annually, with the principal being repaid to you after the bond’s term.

Fixed-income instruments are common among conservative investors who just want their money to be safe and while being assured of steady returns.

3. Cash and Cash Equivalents:

These refer to financial assets that are either in the form of cash or can be readily exchanged for cash with little risk of losing its value. They are the most liquid assets available and are sometimes thought of as being very secure investments.

Some examples are:

Physical cash in your wallet or purse.

Money that you have in your  savings or current accounts.

Treasury Bills: Short-term government securities that mature within 90 to 364 days.

4. Alternative investments: Alternative investments refer to all other investment opportunities that are different from regular investments like bonds, cash, and stocks.

These types of investments help investors diversify their investment portfolios and potentially increase returns because, unlike traditional asset classes, they tend to move independently, and are not affected by market downturns.

This category of investment is often considered to be high-risk with high potential returns; and a lower liquidity than other categories of investment. GetEquity offers a variety of alternative investment options, depending on your risk tolerance and investment goals.

Investments in Nigeria

There are different types of alternative investments in Nigeria. They include;

1. Real Estate Investments: 

This category of investments in Nigeria mainly refers to buying, owning, or developing properties for the purpose of generating income from it or  for capital appreciation. There are four major types of real estate investment in Nigeria:

1. Residential Real Estate: This involves buying or building properties that people live in (like houses, hostels, or duplexes) so that you generate rental income from it or use it personally.

As an investor, you can earn rental income from tenants on your property and over time, the property’s value may appreciate.

1. Commercial Real Estate

 This entails buying or building properties for people to do business in. It includes office buildings, retail spaces, shopping malls, hotels, and warehouses.

When you lease out these properties to businesses, you earn rental income as an investor and you also benefit from potential appreciation of the property’s value.

iii. Land Acquisition and Development: Some real estate investors prefer to buy undeveloped land with hopes that its value will increase over time.

Land development involves building housing estates, shopping centers, etc on the land they’ve bought and selling them off for a profit.

1. Real Estate Investment Trusts (REITs): REITs are companies that invest in real estate projects. A person whose capital is not enough for the types of real estate investments listed above, can invest in a REIT with their limited capital. This company will then pool the funds of several investors together and invest them in real estate projects.

Periodically, the companies pay dividends to these investors from rental income and capital gains of the property(ies) they invested in.

1. Commodities: In Nigeria, commodities make up a major investment sector and it includes raw materials and natural resources like natural gas, crude oil, and agricultural goods as well as solid minerals.

The country’s economy largely depends on its large deposits of crude oil and natural gas, which makes these resources valuable assets for investors.

As an investor, you can participate in this sector by investing directly in real commodities, commodity-based equities, futures contracts, or exchange-traded funds (ETFs). 

To diversify economically, the Nigerian government also promotes investments in solid minerals and agriculture.

Agricultural commodities such as cocoa, palm oil, and rubber also present attractive business opportunities because of Nigeria’s fertile soil and suitable climate.

1. Private Equity: These are investments in companies that are not publicly traded on a stock exchange. They fall under two major categories, which are venture capital and venture buyout also known as Acquisitions.

Venture capital focuses on investing in early-stage startups with high growth potential, while buyouts focus on more established or mature companies.

Private equity could be a great way to invest in both startups and high-growth companies, but it is also a high-risk investment with a long holding period and threshold.

1. Cryptocurrency: In Nigeria, cryptocurrency is a rapidly growing alternative investment class that provides a new way to diversify portfolios and aim for high returns. Cryptocurrencies like Bitcoin and Ethereum use blockchain technology to function on decentralized networks, making their transaction transparent, secure, and immutable.

The high inflation rate, the depreciation of the Naira, and the desire for greater financial autonomy have all contributed to making cryptocurrencies popular in Nigeria.

Investors can buy, sell, and trade cryptocurrencies on local and international exchanges, typically taking advantage of the convenience of digital transactions and reduced entry hurdles compared to traditional financial systems.

However, investing in cryptocurrencies in Nigeria comes with serious risks and challenges. The market is very volatile, with prices fluctuating rapidly in response to market sentiment, regulatory announcements, and technology improvements. Also, the government and banking institutions have raised concerns about the usage of cryptocurrencies. 

Despite these risks, there is still a potential for high returns and the increasing acceptance of cryptocurrencies by forward-thinking investors. It is advised to check regulatory conditions before investing to avoid losing both your and potential profits.

CoinMarketCap is a top Cryptocurrency Exchange in Nigeria.

In conclusion, investing in Nigeria can be very profitable as the investment landscape offers a wide range of categories and types of investments. Each of these different categories caters to different investors based on their risk appetites, financial goals, and time horizons.

Whether you are just beginning your investment journey or you are looking for alternative investment options to add to your portfolio, there is something here for you.

It does not matter if your budget is N10,000 or N10 million, in this article I’m sure you’ve seen the most common types of investment you can explore.

From equities and fixed-income securities to real estate, commodities, and alternative investments, you have a lot of  options to diversify your portfolio and capitalize on the country’s economic potential.