Safe Investments with high returns in Nigeria

A lot has happened in the world of investing in recent years. While many people have shifted gears in their finances by reason of investing, many others have gone bankrupt in an attempt to invest and become wealthier.

Even in Nigeria, Africa’s largest economy, uncertainties still happen. There are so many investment opportunities in Nigeria especially with all its natural resources, large and growing population, and its strategic positioning at the heart of Africa.

These and more have made it catchy to  invest in the country’s economy.

However, while some have had sad memories of losing money in the past and now want to explore safer investment options, others already have their investment portfolios filled with high risk options and want to diversify into safer options so as to balance their risk profile.

There is also a third category; those who are willing to begin their investment journey and want to start by exploring safe options.

No matter the category you may be long to, this article will show you some very safe investments in Nigeria you can explore and how you can take advantage of them.

What Makes An Investment Safe?

Let’s start by explaining what kind of investments we consider “safe”. In our context, a safe investment is the kind of investment that allows an investor to preserve their capital and yield returns without a high risk of potential losses.

With this type of investment you can go to sleep knowing that your money has over 95% chance to return to you without loss but with some profit.

It is worthy to note at this point that the general rule of investing is that the higher the risk involved, the greater the potential  returns on investment and also, the higher the chance of losing the capital and vice versa.

This means that the safe investment options we will be considering in this article may not be the most profitable ones available, but you can be assured that your capital is safe and will most likely yield returns.

With that being said let’s get straight into the most important part of this discussion.

Type of safe investments in Nigeria

There are several investments in Nigeria that are considered to be safe. They include:

1. Regular savings account

2. High yield savings account

3. Fixed deposits

4. Treasury bills

5. Government bonds

6. Real estate

7. Regular savings account

Did you know that a savings account can be a type of investment? Well, now you know. 

Remember in our definition of safe investment that the capital does not disappear and but makes some profits on it? So if you have some money in your savings account, it is safe and will yield some interest on it for as long as the money stays there.

If you had withdrawn the money from your account, there is no way it could’ve earned an interest on it. Leaving it there in your account gives some interest while ensuring the security of your money.

The first downside of using this as the only type investment is that your money is easily accessible and can be withdrawn at any time.

So it takes a great deal of discipline to keep the money in your savings account for a long time to enable it to earn interest.

The second disadvantage is that the interest rates are usually low depending on your bank’s policies and the account type.

What makes it safe?

Most of the savings accounts in Nigeria are insured by the Nigeria Deposit Insurance Corporation (NDIC), irrespective of the bank. This means that you are guaranteed of the safety of your money to a great extent.

If your goal for investing is to be financially free I wouldn’t recommend locking up your money in a savings account because the interest alone may not help you achieve your financial goals.

2. High Yield Savings Account

A high yield savings account is an account that offers higher interest yield than the regular savings account. They are also low risk and insured with the Nigeria Deposit Insurance Corporation.

While the average savings account may have an Annual Percentage Yield of around 2-3%. High-yield savings accounts provide over 5% and above.

Different Banks have different names and conditions for their high yield savings accounts. There are minimum savings requirements, maximum number of withdrawals and transfers per month, and other similar conditions.

This type of account uses compound interest to consistently grow your money. That is why it is important that you don’t withdraw from it every other day.

In a high yield savings account, the interest you earn gets added to the principal balance, allowing you to earn interest on top of the previous interest and so on.

Zenith Bank for instance has something they call the Save For Me account and offers about 7%, Fidelity Bank offers 6% on balances above 100,000 naira, and Alat by Wema offers up to 7.5%.

However many online finance platforms like Piggyvest, Cowrywise, Palmpay, etc tend to have a higher percentage of interest rate than most commercial banks. 

Piggyvest offers up to 12% per annum while Palmpay offers up to a whopping 20% interest on savings and free 1000 naira for signing up.

A high yield savings account is a great option for short-term savings if you want to make some interest on your capital without compromising on the safety of your money. If you’re also looking for a place to keep your emergency fund, then this is a great option for you.

High yield savings accounts are safe because they are also insured by the NDIC like I mentioned earlier.

3. Treasury bills

Treasury Bills or TBills for shorts, are short-term debt instruments given out by the CBN on behalf of the Federal Government. They are usually issued when the government needs to borrow money from the public for a period of time.

Treasury bills usually last anywhere from 3 months or 90 days to a year before expiration and so what happens is that you buy the bill at an amount lower than its value. At the end of the duration, you are   paid the real value of the bill, not the value you bought it at.

That means, if for instance you decide to buy a treasury bill for 200,000 naira with a discount rate of 10% you will only pay 180,000 naira not the 200,000 naira. You will hold on to the Treasury bill till it matures. When it does, you will be paid 200,000 naira which is the real value of the Bill.

So the interest you make is the difference between the discounted price you bought it at and the amount you were paid at maturity.

Treasury bills are often considered to be among the safest investment options because they are backed by the Federal government. 

Treasury bills can be bought from brokers license by the CBN or through your bank. The least amount you can invest is 50 million naira but if you don’t have up to that, you can invest with your local bank with as little as 100,000 naira. Your bank will then pool funds from multiple investors to meet up with, or exceed the 50 million Naira limit on the behalf of these investors.

At maturity the interest gained is shared equally among the investors depending on the capital they invested.

Treasury bills are considered safe because they are backed by the Federal government. You can be sure of repayment at maturity with no stress and no stories at all. TBills are another good way of saving money and can become a steady source of income for you, especially if you are a conservative investor. Also, treasury bills can be used as collateral.

4. Government bonds

Government bonds are more like an extended version of treasury bills. They are a type of long term loans and when you buy them, you are committing to lend money to the Federal Government for an agreed duration.

A specific amount of money (called coupon) is paid at regular intervals, maybe quarterly, annually, or yearly until maturity where you will be paid your investment capital as well as the interests accrued.

The Federal Government of Nigeria bonds (FGN bonds) are actually considered to be the safest form of investment in the debt market. This is because it enjoys the full backing of the Federal Government.

It is not just a low risk investment, it is a NO RISK investment. That is, there are no risks involved with investing in FGN bonds, this makes it the absolute best for conservative investors because you are guaranteed 100% that your principal and its accrued  interest will be paid to you exactly when due and as agreed.

Another advantage is that interest income is not taxed.

The least maturity for the FGN bond is two years; most bonds mature after 3,5,7, 10 years or more.

FGN bonds can be bought from the primary market with at least 50,001,000 and multiples of 1,000 Naira thereafter. It can also be bought at the secondary market through brokers.

5. Real Estate

The real estate sector in Nigeria is one of the most lucrative industries and has been so for a very long time. With the country’s growing population, there is a need for commercial and residential property.

Also, there is a general assumption that properties tend to appreciate in value over time. This has made it an inviting opportunity for a lot of people to venture into the business.

However, investing in real estate in Nigeria is very capital intensive and requires a lot of research. For a step by step guide on how to begin your real estate journey, check out this article.

Conclusion

Over the years, some investment vehicles have been the secret behind the financial success of a lot of people. Unfortunately there are also certain approaches towards investing that have left investors broke.

This article first considered what a safe investment is and went on to list and explain the different investment types that are considered “safe” in Nigeria. 

It’s good to acquire the information here but even better to choose the investment options that align with your goals and begin your investment journey. Money grows best when invested.