Few weeks ago, I wrote on 50 ways to save money in Nigeria(http://lightednation.com/2015/08/50-ways-to-save-in-nigeria/); by the way the list is not exhaustive, not by any means. Sound financial management entails not only saving your money; which for me is the beginning but also investing them.

Starting off, I wish I can tell you that the one million naira you have stashed up somewhere as savings in the hands of commercial banks will be worth the same or more in a year time. But it won’t! That’s the harsh reality! The forces of inflation will act on it and erode any paltry interest that your commercial bank may credit to it before descending on your principal. Am I against saving your money in a bank? No; just save an amount that can cover your running costs and have something aside for emergencies.

The value of your savings may be more in nominal terms after a period of time but you stand the risk of having its purchasing power going down. And the longer you leave it there the more its purchasing power (real value) decreases. It’s what every finance person and anyone who has a keen interest in their finance knows. This is called time value of money by economists.

Time value of money simple means that one naira today; 18th September 2015 is more than one naira on 17th September 2016. This is akin to comparing ten thousand naira in 1980 to ten thousand naira today; the latter could have bought you several cars then, while the former can’t even buy you a tyre today. There are no grey lines; you are either making money or you are losing it somehow. Putting your money in a savings account may be one way of losing it albeit gradually. The implication of this is that ultimate saving is investing your money.

I will try to highlight few ways that you can grow your money, but it is important to understand that investing is an act of faith. Because we saying no to the present and yes to the future hoping that our monies will generate returns that would at least guarantee that we would still be able to afford the same cup of garri we are buying for ten naira today if the price rises to twenty naira in the future.

6 ways to grow your money

1. Saving in precious metals. As a gift for getting into Obafemi Awolowo University, mom gave me an 18 carat gold chain. That chain never left my neck; from the ancient city of Ile Ife to the warm tropics of Talata Mafara in Zamafara state where I served in the youth corps, it was my humble companion. While lot of things came and went in my life it remained, until in 2012 when I sold it because my family was in some kind of tricky patch. It went for 15k representing an 88% appreciation in value in six years over 8k mom had paid for it.
Precious metal appreciate in value over time

2. You can almost always not go wrong on real estate; buy some piece of real estate today. You don’t need to have lots of money to start investing here; however that won’t do you any harm. All you need is a good plan and a good real estate agency. You may want to peruse the web for guide on how to buy property in Nigeria.

3. Treasury Bills This is a short term low risk investment that has the full backing of the Federal Government of Nigeria issued at a discount on its redemption price sold at an auction every Wednesday by CBN. The maturity period is usually three or six months
Implication of Treasury bills is that they are not taxed by the government.
The benefits of the Nigerian Treasury Bills
i. Receiving your interest on the investment upfront which you can reinvest in something else.
ii. Since the chances of the Federal Government going bankrupt is quite small, the risk of losing your money is very minimal compared to other investment alternatives.
iii. It could be used as a collateral for borrowing.
iv. It is also tax-free.
Primary market Procedure for investing in treasury bills:
a. An ad, inviting bids for the securities is placed in selected national dailies in advance of the auction.
b. Interested investors obtain and complete application forms through authorized dealers usually banks and discount houses who subsequently submit the tenders.
c. Tenders for the Bills or Certificates are submitted on Mondays, Tuesdays and Wednesdays before 1.30p.m
d. Successful subscribers at the auction pay for their allotment at the price quoted by them. Result of is announced before the close of business on Wednesdays.
e. Allotment letters are issued to successful tenders on Thursday while payment in full for the amount of the successful tender must be made to the CBN not later than 1.30 p.m on the issue date – Thursdays. The accounts of the authorized dealers which must be funded are debited with the cost.

4. Fixed Deposits; is a short investment security that is much like T bills with fixed interest rates. It merely involves lending money to a financial institution usually a bank for a fixed period of time on an earlier agreed interest rate as against T bills which is to the Government. The risk of losing your investment here is higher compared to T bills though still lower compared to some other investments. You simply lose when the lender; the bank in this instance goes bankrupt.
However the interest on this investment is subjected to a with-holding tax of 10% so effectively you are getting 90% of your interest income, while the government coffers swells by the remaining 10%

5. Mutual Funds; A mutual fund is a diversified portfolio of investments owned by investors but managed by administrators of the fund. Much like shares, investors buy some units of the total pool of fund. Mutual funds administrators usually have a catalogue of investment portfolios that matches the risk appetite of the individual investor. A portfolio may have different mix of stocks, bonds, money market instruments etc. When people invest in these funds, they are expressing their faith that the fund administrators will be good stewards of their money, allowing them to use their expertise and experience to pick and trade on different securities and investments. These administrators charge a premium for this service. If you are looking to diversify your investment this is a very good option; in fact the best in my opinion however the challenge lies in picking the right fund administrator.
When you do your search, look out for the average returns/yields they have generated over a period of time. This is the nominal return which is not enough to convince you to part with your money. Look out for the cost of investing which would be their charges, then discount that average rate further by the amount of tax that the tax authorities would take from that interest. The balance is your real interest rate.
Say for instance the average interest rate for the particular portfolio you are considering is about 11%, the charges may be about 3%, leaving you with 8% yield, discount further by 10% of the 8% leaving you with about 7.2%. 7.2% is your real yield not 11%.

6. Peer Investing or Partnering; this an informal form of mutual fund; if you will, that we all must have done at one point or the other in our lives. Its simply entails gathering a pool of funds with someone or people you trust and that trusts you and investing in something as an entity. It can be starting a business, buying real estate, or even investing in any of the six called out above. This way you leverage on the size of new portfolios and invest in something that ordinarily would be beyond your reach as individual investors.

So there you have it; some six ways you can grow your money in Nigeria today. However there are a lot more options out there, please add more, comment and share so that others can also be lighted.

http://lightednation.com/2015/09/6-ways-to-grow-your-money/