5 investment opportunities you can tap with N5,000 or less
The wait to accumulate significant investment capital to earn fatter returns is one of the reasons many Nigerians are yet to start their investment journey.
Low per capita income which has been declining since 2015 on account of slow economic growth that has remained lower than population growth is another factor.
Investment advisers, however, believe it is wise to start investing, regardless of the volume of the available capital. The Chinese proverb-‘the journey of a thousand miles begins with a footstep, is the best representation of the advice.
This is because, as another proverb explains- ‘half bread is better than none.’
The opportunity to invest with small capital ranging from N5000 and below has been created by several investments firms whose quest to grow customer base came up with unit investment products that can be affordable for the many low-income earners.
Investors should re-invest their return to accelerate the growth of their, for example, N5000 investment, according to Ayodeji Ebo, Head, Retail Investment, Chapel Hill Denham.
Below are some of the investment opportunities that investors can tap with N5000 or less.
Mutual fund, a type of financial vehicle made up of a pool of money collected from many investors and invested into different securities, offers the opportunity for investors to tap from the market by putting down a capital that is as low as N5000.
“With N5000 you can invest now and get great returns later,” the asset management arm of Stanbic IBTC, one of the fund managers in Nigeria, said.
A Mutual fund is a professionally managed investment scheme operated by an asset management firm that put investors’ money in securities such as bonds, short-term debt and stocks.
In the case of bond funds, the fund manager only invests in bonds while an equity fund invests solely in equities/stocks of listed companies and a money market fund invests in short-term debt instruments like Treasury Bills. Fixed income funds mostly invest in government and corporate bonds.
The Securities and Exchange Commission (SEC), the industry regulator has six registered different types of mutual funds on its website.
Analysis of the mutual fund industry in Nigeria showed that bond funds was relatively attractive to investors and investors’ appetite for the instrument stemmed from the higher yields they offer compared to other types of a mutual fund.
Although the return on the 10-year bond funds was below the inflation rate, which eased to 17.93 percent in May, after it quickened to a four year high in March (18.17%), it still offered a higher return when compared to other mutual fund instruments.
FGN Savings Bond
The FGN Bonds are debt securities of the Federal Government of Nigeria (FGN) issued by the Debt Management Office (DMO) for and on behalf of the Federal Government. The FGN must pay the bondholder the principal and agreed on interest as and when due. This is one of the instruments investors can tap into with low capital.
“When you buy FGN Bonds, you are lending to the FGN for a specified period,” DMO said on its website.
The FGN Bonds are considered as one of the safest of all investments in the domestic debt market because it is backed by the ‘full faith and credit’ of the Federal Government, and as such it is classified as a risk-free debt instrument. They have no default risk, meaning that it is certain your interest and principal will be paid as and when due. The interest income earned from the securities is tax-exempt.
Unit of sale of N1,000 per unit subject to a minimum subscription of N5,000.00 and in multiples of N1,000 thereafter, according to a statement by FBNQuest, the asset management arm of FBN Holdings.
It announced while publicising the June offering of the FGN savings bonds. “We are pleased to inform you that the June edition of the Offer for Subscription of the Federal Government of Nigeria Savings Bond (FGNSB) is now open.”
The Debt Management had announced that it was authorised to receive applications for fresh Issues of the FGNSB on the following terms: 2-Year FGN Savings Bond due June 16, 2023, at interest Rate: 8.889 percent; 3-Year FGN Savings Bond due June 16, 2024, at interest Rate: 9.889 percent and it opened on June 7, 2021, and closed on June 11, 2021.
The terms shares, equities and stocks are used interchangeably to refer to securities that denote ownership in a company.
When a person owns stock in a company, the individual is called a shareholder and is eligible to claim part of the company’s residual assets and earnings, should the company ever have to dissolve. This is the reason that equity (stocks) investments are considered higher risk than debt (credit, loans, and bonds) because creditors are paid before equity holders, and if there are no assets left after the debt is paid, the equity holders may receive nothing.
A shareholder may also be referred to as a stockholder. The stock market consists of exchanges where investors can buy and sell individual shares of a company.
Although the Nigerian stock market closed last week on the green as it appreciated by 0.09 percent as at market close on Friday, its year-to-date return of -4.03 percent is nothing close to the 50 percent, the most since December 2007, gain it returned for investors in 2020. The 13-year record of last year that led the Lagos Bourse to emerge as the world’s best performer has failed to curb the Exchange from becoming one of Africa’s worst performers year-to-date.
The sustained but marginal gains that were seen on the Bourse in recent days were on account of the positive results being published by some of the listed companies.
The Nigerian Exchange Limited (NGX) All Share Index (ASI) moved up by 33.80 points to 38,648.91points from the preceding day’s 38,615.11 points.
Fintech refers to the ecosystem where technology companies, as well as financial institutions, use innovations in technology to foster financial services and increase access to finance in the market.
It is an umbrella term that refers to the innovations in technology that are challenging and changing the traditional approaches in the financial service industry.
With high smartphone penetration in Nigeria, more people are transacting at the comfort of their palm. Many financial services providers in the country are riding on technology to deliver their services are offering returns on savings.
When consumers leave their funds with them for a particular period, many of the Fintechs offer a wide range of return on their savings and investors do so with N500 or less.
This is similar to a mutual fund, except in Nigeria, the funds that are gathered by the asset managers are mostly invested in the agriculture sector and some other time, the real estate market. Players in this sector promise high return but it also comes with high risk as the industry is yet to be well regulated.
Under this investment opportunity that can be tapped with as low as N5000, agrotech has been the leader. It involves using internet technology to close the funding gap and infrastructural deficits plaguing the agricultural sector. They look to help farmers feed the world, cutting off middlemen and making farming more profitable.