The Money Market in Nigeria

The Money market in Nigeria is an open-ended investment market that allows investors to invest in short-term securities such as Treasury bills, Fixed Deposit, Certificate of Deposit, Bonds, Commercial Paper and Bankers Acceptance.

Reasons to Invest in the money market in Nigeria

Low Risk

The is little risk of losing your money when investing in free securities like Treasury Bills and FGN bonds. You are safe from the volatile fluctuations inherent in the Nigerian Stock market as your capital is safe since these investments are m the federal government.

High Liquidity

Another advantage is that your investments can be quickly converted into cash at short notice. Investments such as Certificate of Deposit can be cashed out whenever needed, although penalties exist.  You are not stuck and you can pull out your funds whenever you need them to attend to urgent issues, accrued profits that period are also accessible.

Higher Returns Than Standard Saving Account

The first and most popular investment for the average Nigerian is saving spare cash in the Bank. However, most savings Deposit accounts earn negative real interest rates after adjusting for inflation. This is in stark contrast to the money market instruments, they are designed to earn rates that are higher than inflation, making them a more attractive investment proposition than the savings account.

Start little and Grow

With as little as N10,000, you can start enjoying the benefits of the money market in Nigeria. This investment is very useful for parents looking to save money for their children’s future education. Salary earners can also use this medium as a hedge against higher inflation environments by strengthening their purchasing power.

Money Market Instruments and how to invest in them

Treasury Bills

The federal government issues treasury bills at discounted prices for maturity periods between 91-304 days, at the end of the selected maturity period, the government buys back the bills at full price. For example; you buy a 91 day N100,000 Treasury bill from the government at a discounted price of N80,000. The government writes an IOU (I owe you) document for N100,000 and agrees to pay back N100,000 at the end of 91 days. The profit gained is N10,000, Treasury bills can be accessed at commercial banks. The minimum deposit varies in different banks.

Fixed Deposit

They are offered by banks. To investment in this type of security, visit any commercial bank of your choice in Nigeria and tell them you want to invest in fixed deposit. They will give you the interest rate that will accrue to the specific amount you are depositing as fixed also note interest rate of various banks varies. FirstBank gives a higher interest rate than GT bank(please correct me where necessary). For example; you place a fixed deposit of N1,000,000 in any bank of your choice and the give you an interest rate of 10% (please note it is compounded annually). Let’s do the math N1,000,000 x 10%= N100,000/12 =N8,333. Your interest per month for N1,000,000 at an annual interest rate of 10% is N8,333 per month.

Certificate of Deposit

They are generally issued directly by commercial banks. CD has a specific maturity date (from three to five years) with a stated interest rate. They have a fixed interest rate and a fixed maturity time. For example, an investor purchase N100,000 CD with a fixed interest rate of 2% compounded annually with an agreed time of 2years. For the first year, his profit will be N2000 (N100,000x 0.02)  and for two years it will be N4000. per month and investor should be expecting N167.

Commercial Paper

These are short-term loan issued by companies, they use this fund to finance their projects. Commercial Paper is considered a safe investment only for companies with a high profile of creditworthiness. Maturities on Commercial paper are usually no longer than 9 months, with maturities between one and two months being the average. They are issued to the public at a discounted rate just like Treasury bills. This type of investment requires huge, so check your pocket before going into it.


If you know other Money market instrument with which you can share with us, please feel free to comment and share your knowledge.