10 Passive Investment Opportunities In Nigeria Today

10 Passive Investment Opportunities In Nigeria Today

People who don’t actively manage and check their investments on a daily basis are said to be passive investors.

In essence, you are making your money work for you while concentrating on other activities that contribute to your capital source. This group primarily consists of middle-class and upper-class Nigerians.

However, the past three years have been extremely challenging for developing nations in Africa, especially in sub-Saharan regions like Ghana and Nigeria. The Covid-19 pandemic caused a flight of foreign capital from Nigeria and other emerging countries, which in turn sparked a currency crisis that has caused the naira to decline by nearly 50% against the dollar since early 2020.

Due to people’s fear of losing their money, this has made passive investing extremely unattractive and appear less profitable. Despite these worries, a macroeconomic climate marked by high inflation rates, declining exchange values, and other difficulties offers passive investment opportunities.

Risk-taking investors frequently take advantage of unstable economic conditions to make decisions on their investments that result in enormous rewards. Others who are risk averse choose investments that are less risky yet offer returns that are above average and outperform inflation over the long run.

For those who are eager to put their money to work for them, we have selected some of the most alluring passive investment possibilities.

Eurobonds

These are government-issued bonds with a $1 par value that have been issued by governments.

Depending on the type of security, the bonds have a coupon or interest rate that is paid once or twice a year.

In times of currency swings and devaluation, eurobonds make a great hedge.

Additionally, depending on when they were issued, the yield on interest rates on Eurobonds ranges from 6 to 8%.

Since bond prices have dropped, the identical Eurobonds that originally sold for around 8% now fetch yields of 13–14%.

Government Securities

Just six months ago, this might not have made the cut, but recently, things have changed.

Treasury bills and FGN Savings bonds have increased in price ever since the central bank began its program of hiking interest rates (which are currently 16.5%).

The government recently released 2-year and 3-year FGN Savings Bonds with interest rates of 12.25 percent and 13.25 percent, respectively.

The current yield on one-year Treasury bills is likewise 14.8%, which is the highest in approximately two years.

It is one of the safest investments available, even though it is still below inflation, especially if you are a passive investor with a very low risk tolerance.

Stock Market

There has never been a better time to heed the advice of the renowned Warren Buffet, who once said, “Be greedy when everyone is scared, and fearful when everyone is greedy.”

Investing in the stock market at a time of high valuations is a common error that investors make. Even though there is still money to be gained in some equities, particularly if you time it well, the majority lose money.

The best moment to invest in stocks is when they are undervalued, especially for businesses with strong fundamentals.

The plan is to buy them when their share prices are still relatively low and sell them later when things are much better economically and more people are wanting to buy.

Investing in stocks like this is frequently best done in December and early January.

For wise stock selections, returns can range between 25% and 50% between market downturns and boom times.

Real Estate (local)

In terms of rising inflation, this is a no-brainer, yet it has a certain ring to it. Real estate agreements may be a money-making machine if the appropriate developer is chosen and the right area is targeted.

Locations along the Lekki, Ikate, and Agungi axis are highly sought-after, particularly for young and upwardly mobile professionals searching for apartments, according to some developers who spoke with THEEAGLE.

With these sites, you can buy to sell or buy to rent and generate a fixed yearly income.

Depending on the location, a two-bedroom home that costs about N60 million can bring in between N1.5 million and N3 million in yearly rent.

Short-let is another way to make money with real estate investments. You can host visitors in your flat for a day, two days, a week, or even a month rather than renting it out. Owners of short-term rentals profit by their apartment by an average of N100k every day.

Rental yields for real estate transactions range from 8 to 12 percent annually, and capital profits from 30 to 60 percent when the asset is sold.

Real Estate (foreign)

Few investments are as delicious as those that generate foreign currency income, and real estate is the only one that does so abundantly.

Smart Nigerians have begun to see this potential and profit from the expanding international real estate market.

It is normally an extremely expensive endeavor to own property outside of Nigeria if you reside there. Some shrewd men, however, partner with trustworthy Nigerians who reside abroad in order to co-own houses.

The main benefit in this situation is a mortgage, which you cannot obtain without an international credit history. However, you can break into the real estate market in nations like the US and Canada by teaming up with a person who resides overseas but has a strong reputation.

However, if you have money, you don’t need to hunt for a companion. Just be sure to locate the best realtors and attorneys who can assist you in completing this.

Returns on real estate transactions range from 20% to 30% for capital gains on the sale of the asset and from 4% to 8% annually for rental yields.

Cryptocurrencies

Few people were familiar with Bitcoins when we suggested buying them as an investment a few years ago.

Now, even if they are infamous, cryptocurrencies are well-known financial choices.

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The most recent cryptocurrency crash hasn’t done anything to help, particularly for the exchanges like FTX and altcoins that have shut down.

Startups

Investors are now putting all of their money into companies that truly earn cash and pay dividends because the winds of chronically raising money startups have now died down.

Prior to now, companies were solely focused on raising capital at exorbitant valuations in exchange for phenomenal increases in customer acquisition.

However, as interest rates increase globally, attention is now being paid to firms’ ability to generate profits and provide investors with some kind of return.

Equity, debt, or preference shares may be used to make this investment.

The informal market is home to many excellent small enterprises like this one, all of which have the potential to offer their owners fantastic returns.

Investors may receive returns for this type of investment of up to 30% annually.

Fixed Income

This is the old-fashioned practice of depositing money with financial institutions like banks and companies in return for interest payments.

Due to the current high interest rates, investors with access to liquid cash can anticipate receiving substantial interest rates for their investments.

Simply ask your bank for investments in fixed deposits in exchange for interest.

The majority of commercial banks will offer you more interest and vice versa depending on the size of your fixed deposit.

Microfinance institutions that engage in lending give their depositors much higher interest rates.

Depending on how much money you have, commercial banks charge interest rates ranging from 8% to 16%.

If you have more than N100 million to deposit with a bank for a year, they may offer fixed deposits at a rate of up to 16%.

On the other hand, if you’re willing to deposit your money with them for at least six months, microfinance banks may be able to give you 1.5% to 2% a month on fixed deposits.

P2P Lending

P2P Lending, also referred to as “Peer 2 Peer,” is the practice of using applications to distribute funds to users who have registered for the apps in exchange for interest.

This is a risky enterprise and is not suitable for those who are not adventurous.

Through platforms that establish a market for these kinds of transactions, you may essentially lend individuals your assets (stocks, cryptocurrencies, etc.) or cash.

We won’t list names because it’s important to highlight that most are not regulated in Nigeria.

“Proof of Funds” lending, or lending money to Nigerians wishing to meet some of the requirements for obtaining a visa in order to travel overseas, is another beneficial form of Peer-To-Peer (P2P) lending.

These kinds of transactions may have interest rates of up to 4% per month, but as already said, they also carry a substantial level of risk.