A new investment opportunity – FGN Savings Bond

Posted on Posted in Personal Finance Advice

Hello Everyone,

Welcome to the month of March.  I pray the month will be productive for everyone of us in Jesus Name.

Last month was a month on growing our active income and this month, it’s our month on investment.

What is investing? According to investopedia, it is the act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit.

I define investment as a way of getting your money to work for you. Getting your money to work for you is classified under passive income. Isn’t it so sweet to know that your money is generating more money as you are sleeping? 

One rule of investment is to start early.  Another rule of investment is to ensure that your capital is not depleted but rather it should appreciate or at least preserved. I always advice that if investing in fixed income instruments (bond, treasury bills,mutual funds, deposit certificates), the interest rates should be higher or at least close to the current inflation rate; with this your capital is preserved.

There are different forms of investment; stock, bonds, treasury bills, mutual funds and real estates.

Investment is not gambling. In gambling you put your money on high risk and it is a game of chance, it has a lot of uncertainty, however in investing you do not throw your money randomly. An investor researches on profitable instruments to put their money in.
The stock market used to be a good investment instrument, but sadly stocks are now too uncertain in Nigeria unless you are investing in the high end stocks.

I usually advice people who are new to investing and have little capital to start with mutual funds. In mutual funds, the custodian pulls funds from various investors and invests on their behalf.  I will talk more about each form of investment in subsequent posts; but for today, I want to introduce a new instrument; The FGN Savings Bond.

What is the FGN savings bond? It is debt instrument issued on behalf of the Federal Government of Nigeria by the Debt Management Office. They are 100% secured and are targeted at low income earners. It gives investors the opportunity to save and earn interest which will be higher than the bank’s interest rate. The FGN savings bond has a tenor of 2-3 years and you can invest with as low as N5,000. It’s interest rate which is yet to be announced will be fixed and will be paid quarterly. Interest earned on them are also tax exempt.

Interest rates on banks savings account pay between 3- 5 %. This is well below the monetary policy rate (MPR) of 14 percent while the country’s inflation rate is more than 18%. I hope the FGN saving bond’s interest rate will be in two digit.

The certificate can  be used as a form of collateral if you need a loan facility and it can also be traded in the secondary market para-adventure you need your money before the end of it’s tenor. The bond is a good form of investment for people savings towards marriage, retirement,house projects etc.

The commencement date for it’s issuance is March 13th 2017 and it will only run for 5 days. New issues will be sold every month.To subscribe, you need to contact a registered stock broker accredited by Debt Management Office.

Now, there is a good and bad news as to the recently released investment policy;

The good news is this new Federal Government Debt instrument.  It affords investors will little capital the opportunity to participate, but the bad news is that the  minimum entry for treasury bills have been raised. Treasury bills had a minimum entry for N100,000 but now it has been raised to N50,000,000 (N50M) effective March 6th, 2017.

I am sad  about the treasury bills because they were my main investment instruments. It’s interest rate are paid upfront and are usually high , tenors are also short (91, 182, 364 days).

So Ladies and Gentlemen, if you are interested in the FGN savings bond, start now to talk to your stock broker.
God bless you all.

Together we will win with money and regain control!


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