Nigeria is the best-known African economy. It is the biggest economy based on the GDP and the population. Most of its population is relatively young. Government statistics show that most Nigerians are below 35. At the same time, most people in Nigeria are poor. Yet, there are so many investment opportunities in the country. In this article, we will look at the best investments that pay monthly income in Nigeria.
Top Reasons to Invest in Nigeria
A common question is why one should consider investing in Nigeria. There are many reasons but I will highlight some:
- Peaceful country. Despite some periodic instability, Nigeria is a relatively safe country to invest in.
- Technology country. Nigeria has emerged as the leading technology capital in Africa.
- Banking sector. Nigeria has a vibrant banking sector, which opens many opportunities.
- Vast opportunities. For years, Nigeria depended on oil. This is changing as the country tries to diversify its economy. This is bringing vast opportunities.
- Big population. Nigeria has a big population. This means that businesses have vast customer base.
Risks of Investing in Nigeria
Before we look at the investments that pay monthly in Nigeria, it is important for us to look at the main risks of investing in Nigeria. Some of these risks are:
- Corruption. Nigeria is rated as one of the most corrupt countries in the world. This is a challenge for ethical investors.
- Infrastructure. As with all African countries, Nigeria has poor road and rail network. This makes it difficult to do business there.
- Currency risk. Nigeria’s naira is mostly affected by the movement of crude oil. This is simply because Nigeria’s economy is mostly based on oil.
- Taxes. As with other African countries, Nigeria suffers from over taxation. Taxes are charged by national and regional governments.
- Interest rates. The base lending rate in Nigeria is 13.5%. This is higher than the emerging market average.
Investments that Pay Monthly in Nigeria
Now that we have looked at the benefits and risks of investing in Nigeria, we will look at some of the common investments that pay monthly in Nigeria.
Investing in rental properties
The real estate sector is one of the fastest-growing sectors in Nigeria. A quick visit in cities like Abuja and Lagos shows many developments that are upcoming. There are two main ways of investing in real estate. First, you can build projects and sell them. Second, you can invest in rental apartments.
The challenge is that investing in properties is usually expensive. It takes thousands of dollars to build a single apartment block. This is the main reason why most people in Nigeria have not invested in real estate.
There are several solutions to this. First, you can build in new towns instead of the highly developed cities like Abuja and Lagos. The benefit of doing this is that the cost of buying land in these cities is usually relatively cheaper.
Second, you can team up with a small group, contribute money, and do a project. You and the group will own the development and make money every month. Obviously, the amount will be significantly less than if you build the project by yourself.
Third, you can build cheap houses that target low-income earners. The cost of building these temporary houses is relatively lower. The returns will be low too but they will add-up over time.
Investing in Unit Trusts
A unit trust is an investment that is created by pooling financial resources together and investing in various assets. Unit trusts are offered by big asset managers like Stanbic Asset Management. There are several types of unit trusts, including:
- Balanced fund. This is a fund that invests in stocks and bonds.
- Equity fund. This is a fund that invests in stocks.
- Money market fund. This is a fund that invests in short term commercial paper.
- Bond fund. This is a fund that invests in corporate and government bonds.
Unit trusts bring income every month. The benefit is that the funds compound month-on-month. For example, if you have N100,000 and the fund makes N1,000 in month 1, the fund will invest N101,000 for the second month. Another benefit of unit trusts is that you can withdraw the funds at any time.
The time to save for the future is now. Thanks to compounding interest, the earlier you start putting money away for the future, the more you will save…Alexa Von Tobel
To be clear, the returns of unit trusts are not all that high. In fact, we don’t recommend unit trusts for short term gains. You should invest in unit trusts if you want to leave the funds there for many years.
Investing in Dividend Stocks
The Nigerian stock market is the second most active after South Africa. The exchange has stocks valued at more than $70 billion. If you want monthly income, you can invest in some companies that pay dividends in Nigeria. As a shareholder, it means that you own a small part of the company.
There are many Nigerian companies that pay a dividend. Some of the biggest that pay dividends are MTN, Dangote Cement, Ecobank, Guaranty Trust Bank, Fidelity Bank, and John Holt.
These companies don’t pay a dividend every month. Instead, they pay their dividends once every year. Still, you can be sure that your investment is making money.
Investing in Nigeria’s Transport Sector
The transport sector in Nigeria is highly fragmented. The industry is not well organized as well. This is because most people don’t have cars in Nigeria. One way you can invest in the sector is to buy a bus and give it to a management company. There are many management companies that take your car and then pay you a monthly amount.
An alternative is to buy a car and hire someone who will be driving for Uber and other ride hailing companies in Nigeria.
Investing is the best way to see your money grow. There are many types of assets that you can invest in in Nigeria. Those mentioned above are some of the most popular that pay every month. A good idea to see the money grow is to use compounding. This is how you add your monthly income into your principal amount and watch them grow over time.
Albert Einstein is reported to have said compounding is the eighth wonder of the world. Obviously, a dollar invested in your 20s is worth so much more than a dollar invested in your 60s…Sallie Krawcheck
Crispus is a finance professional with more than a decade experience in the industry. Over the years, Crispus has written in-depth articles on leading platforms like CCN, Marketwatch, and Seeking Alpha. He also runs a Forex education and managed account company called WestEndFx.