How to Save and Invest Living in Nigeria | Best Ways to Invest Money in Diaspora | Damie Ojo

Today we’re going to be talking about money/finances a.k.a Ego, Owo. I am probably not the best expert in granting tips on how to invest and save in Nigeria, but my qualification as an Accountant (ACCA) and earning an MBA has its benefits, here is a practical guide of how these things (investments and savings) work whether you’re in Nigeria or in diaspora, no matter the amount of money you have, even with as little as N50,000, N100,000 and you’re just thinking how can you 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 on your savings. Whether you live in Nigeria or not, I understand these schemes also work in every country and part of the world. 

Once again, these are best ways to save and invest money, whether you’re based in Nigeria or a national of another country.

1.   Treasury Bills

I am going to try as much as possible to break the terms down in lay man’s terms. Treasury bills are short term investments. Basically, it’s just a way of borrowing your money to the government in order to check inflation, for instance, when there is so much money in circulation, prices of goods and services would increase, if you have N10,000 in your hand, you’ll be willing to spend more than if you had N1000 in your hand. Treasury bills are ways the government decides to mop up excess fund from the population where people have too much money to buy and to spend, also forging 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 to formally state that you have the interest to buy treasury bills, the government usually sell their Treasury bills through commercial banks, you can go to these banks 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 to between 3% to 6%, but because it is a government backed investment, a lot of people still love to go for it!!! Another thing to note about the treasury bill is that the interest is paid up front, let’s say you invest N100,000 in treasury bills, and the interest is 10% for instance, you are paid N10,000 the day the investment is done, and the principal of N100,000 would drop back in your account at the end of the tenure.

The major risk in Treasury bills is the chance of the money devaluing due to inflation, after investing money for a year in treasury bills, the worth of the money would diminish. But as for being easy, safe and secure, treasury bills are still top notch investments to go for, the governments cannot afford to owe you or withhold your money.

2.   Fixed Deposit

In very simple terms, banking is all about collecting money from the people that have so much and lend to those that need money and every commercial bank offers Fixed deposit to its customers. Fixed deposit is simply telling the bank You want to invest a certain some of money and you are not going to touch it over a fixed period of time. The interest rate is lower than treasury bills, but it’s a preferred option to leaving your money in the ordinary savings account. Several banks have their different caps on fixed deposits, some would say you can’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 or more banks and compare the amount of money capped to fix into a deposit account. It’s important to note that when you fix a certain amount of money unlike 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 of N110,000 would be received at the end of the 30 days. An interesting question you might want to ask is what if I have and emergency and need to withdraw funds? Do I have to suffer and wait till the expiration of the investment? The answer is no, there is full liquidation and part liquidation. Full liquidation is when you want to cancel the fixed deposit and recover all the money, but if you want just a part of it, let’s say N100,000 out of N500,000, and the N400,000 remain as an investment, you can partly liquidate, but I must warn you liquidating your fixed deposit before the end 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 period of time e.g. one year and you decide to withdraw partly six months into the tenure.

Again, fixed deposits are safe investments, since banks are structured organizations that can’t be exhausted easily. However, the same risk that applies to Treasury bills i.e. your money loses its value to inflation applies to Fixed deposits. Alternatively, you decide to invest money in a business, it’s may triple, but also the business can fail entirely and you lose the money, your capital and interest. Fixed deposit is however a way you can get your principal and your interest at the end of the investment.

3.   Real Estate/Property Investment

So many people have sworn that this is the best type of investment. This is one of the safest investments where you can triple or quadruple your money. Now, there are different forms of investing in real estate. You can either buy a property and sell 10 years later or you can buy and build, then sell 10 years later. I don’t know if you knew of Magodo estate in Lagos, that place was an empty piece of forest many years ago. A plot of land went for N50,000, currently with development in that area, a plot of land does 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 would even beg you to take a plot of land for N100,000 and you would not even want to take it. Now, if you point a building/plot of land in Lekki, it cannot be less than a N100million naira, that is the value of Real estate, Land and property never depreciate. It always appreciates. A land you bought for N50,000 can give you 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 very smart investment type. I don’t think there is any type of investment that would give you that kind of money! Once you have enough money to build, you can build locked up shops.

Real estate and property is not a bad idea 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 not forced to give you compensation for it. The Land Use Act that governs the laws concerning land in Nigeria states that all the land in a state belong to the Governor, so a Governor can decide to use your land without compensating you oh! Another risk of property investment is that you can buy yourself a land and buy yourself a court case; probably you went to buy a land in dispute and you did not run due diligence i.e. you did not know that the Land is in court, or that there are two families fighting over the land, and one of the families quickly sold to you, and you find yourself in the middle of the devil and the deep blue sea! Those are some of the risk that come with property investment.

4.   Hire Purchase

Another business you can invest in while in Nigeria or in diaspora is Hire purchase. Now what is Hire purchase? I own an item and give it to another person to continually use, the person is obliged to pay me little by little with interest (of course!) till the final installment is paid to purchase the item. For example, you can borrow a pen from me for 10 months and pay N1 each month till the end of the 10-month period, then the ownership of the pen passes fully to you. In Hire purchase, it is possession that passes to the hirer, not ownership. So if it is my pen, I am still in ownership of that pen, I only gave you possession of that pen to use at a cost. Usually, there is a Hire Purchase Agreement stating the terms out clearly in paper and it must be signed by both parties. In Nigeria, am sure you know many of these tricycles a.k.a Keke Napep, minivan and buses are not owned by drivers, they are actually out on hire purchase. So, that is also a beautiful 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 does not meet his/her end of the agreement, you still have the right to repossess the item from him/her.

In Hire purchase, there is emphasis on a 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 recover the property. Another crucial risk is that the guarantor would not be able to locate the absconded hirer and eventually the property is lost. Therefore, it is paramount to have hire purchase agreement with people you can actually trust.

5.   High Interest Savings Account.

Another way to invest no matter the amount is either a Savings Account or a Super Savings Account. So many people don’t know banks have other savings account apart from the regular savings account. It’s like a high interest account where people who want to save their money but don’t want the money trapped in an account, or the process of writing to 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 banks make it difficult for you to withdraw more than a restricted number of times. These accounts come with interests monthly, unlike fixed deposits where the interests come at the end of the tenure. Let’s say you’re entitled to an interest of N120,000 per annum on a Super Savings Account, the amount is credited to your account every month of N10,000, which is a cool way to earn passive income.

However, you forfeit your interest when you withdraw out of these accounts more than thrice, so if you’re running your savings account like a current account, you forfeit your interest for that month.

Thanks for reading this post, I sincerely hope it was helpful and it would give you the much needed ginger to start up those investments no matter how little you have. In this era such as Covid-19 its best to have alternative ways to make money. Please if you felt enlightened by this post, share with your loved ones, professional colleagues and friends.

Warm Regards

Damie x