Treasury bill rates attraction for individual investors may have ended with 2019 after drops to record lows towards the end of the year.
Investors will be looking forward to new opportunities with rates above 10 percent in 2020.
The drop below 10 percent was largely a fallout of the instruction by the Central Bank of Nigeria (CBN) in October to lenders to ban individuals and startups from buying treasury bills from primary or Open Market Operation (OMO) auctions if such customers are borrowing customers or those of other banks. The aim was to push banks to lend more to businesses.
The apex bank had also mandated deposit money banks (DMBs) to increase their lending to deposit ratio (LDR) by 65 percent before the end of the year. The apex bank plans to increase the LDR target to 70 percent in 2020.
Following the mandate, the rates for the 182 days tenor dropped from 11.02 percent in October, to 8.12 percent in November and 5.60 percent in December. Experts say the rates might drop further as the CBN push LDR target to 70 percent.
With the treasury bill firmly out of the way as an investment option, the following are the three places you can put your money in 2020.
Read also Fintechs mull mergers, rates adjustment in 2020 as treasury bill continue freefall
Agriculture
The agriculture sector has always been investors’ keepsake because people will always eat and they will willingly pay for it. But the increased attention in recent times from the Nigerian government has made the sector even more attractive. Particularly in 2019, some of the notable policies taken by the government, which brought up controversies, were aimed at boosting productivity in the agriculture sector. For instance, the land border which overshadowed most public discussion in 2019 was because the government took a decision to curb the smuggling of rice and other food items.
Consequently, rice production received significant investments including a rise in platforms that enable people to be part of the agricultural revolution without having to physically be present in the farms.
Technology-driven platforms such as Farmcrowdy, FarmAgric, FarmKart, Growsel, Thrive Agric, among others, are enabling their users to invest in real farms with returns between 10 and 20 percent. PiggyVest, a fintech company allows its users to invest as low as N5,000 and N10,000 in farms for returns above 10 percent.
Equity stake in startups
This may not be a space for speculators or short term investors, but, for investors with money, they are not going to need in 5 to 7 years and an appetite for risks.
Investing in startups is not new. If you have ever given money to a cousin for a business idea you thought sounded promising and which you expected to be paid back, you invested in a startup. The only difference is, not only were your decision driven by sentiment but you didn’t sign up for equity.
Investment in startups has grown over the years driven by venture capital firms that are able to establish a process that ensures investors do not lose their money and that they make significant returns. VC firms like Microtraction, TLcom, Venture Partners, Trium Capital have participated and even led investments in several startups across the country. Although startups that have received investments are yet to declare profits, the investments are closely monitored by VCs ensuring investors’ funds are protected.
Using a VC is usually a good bet if you are unsure of how to go about investing in startups. However, should the VC space proof too complicated, there is Angel Investment. Angel investors are typically individuals who have spare cash available and are looking for a higher rate of return than would be given by more traditional investments. They invest in new or small business ventures, providing capital for startup or expansion. An angel investor often looks for returns of 25 percent or more.
Whatever the choice is, startups are definitely one of the best vehicles you want to board as an investor in 2020, especially now that the market has grown so much a number of them are thinking of going public. There is also increased expectations of mergers and acquisitions in the new year. If you bought a share in companies considered takeover targets, then you stand a good chance of making a profit when a bid is made in the future, either by the offer being accepted or because it propels the valuation of the company upwards.
Fixed deposits on online savings platforms
Interest rates on fixed deposits in commercial banks may have lost their allure due to recent cuts in bank fees by the CBN which is forcing commercial banks to adjust the rate, but online platforms have proven resilient. Saving your money for longer periods on platforms like PiggyVest, CowryWise and Carbon could earn you returns between 10 to 15 percent annually. There is more money to be made if you meet the referrals standards on PiggyVest.
While you are earning returns of 10 to 15 percent on CowryWise, the platform also gives you the opportunity to invest in assets like mutual funds for returns as high as 15.3 percent.
Nevertheless, do not release your money until you have done your due diligence and are satisfied with the terms and conditions of service. Also lookout for the fees you will be charged for those services.
