“How to find Dollar investments for Nigerians” is probably something you have searched for, or something similar. No, we do not have your search queries under watch. We are Nigerians also. So, we get it; you want stable investment options that give you a chance against the devaluation of Naira. Well, your search can stop now.

Dollar Investments for Nigerians

With Cowrywise, you can now access the first of our Dollar mutual funds: the United Capital Nigerian Eurobond Fund. Eurobond? Isn’t it supposed to be a Dollar-based investment option? It still is. Let’s explain.

What are Eurobond Funds?

Eurobonds refer to a bond type that is issued in international currencies. That is, currencies different from the host country’s currency. For example, the Nigerian government can issue a bond that is denominated in dollars to allow foreign investors to access them also.

What is a bond?

A bond is an agreement between two parties. One party borrows from the other and agrees to pay back with a set interest rate. So, a government bond is simply the government borrowing money from the public with the agreement to pay back with a certain interest rate.

What is the Nigerian Eurobond Fund?

It is a type of mutual fund that invests in Dollar-denominated Eurobonds, floated by the Federal Government of Nigeria, as well as domestic top-performing companies like SEPLAT, Ecobank and Firstbank.

More important details

The Eurobond Fund is meant for long-term investments. It is not fit for short-term investments that are below a year. This is to help grow and preserve the value of your investments. There are two sources of returns when you invest in dollar-asset like Eurobond with Naira:

  1. The coupon payment or yield. This is the promised return on the Eurobond. Its return currently sits around 8% per annum.
  2. Return from changes in the value of the Naira against the USD. This simply means if Naira loses value against USD, as a Nigerian who has invested in this Eurobond, you have gained additional return.

Here is a simple example to drive this point home

It is 2019
You invest NGN360,000 with a return of 8% per annum. This is converted to USD1,000 at an exchange rate of 360 Naira per 1 USD.

It is 2020
If the Naira loses 10% of its value against USD, the exchange rate becomes NGN400 per USD. Well, we are not making any forecast. This is just an example 😊.

The USD1,000 you invested would have earned 8% over the year: 8% x USD1,000 = USD80. This implies you now have USD1,080 as the total value of your investment.

When you convert this value to Naira at the exchange rate of NGN400 per USD, this gives USD1,080 x 400 = NGN432,000.

Your total return in Naira = N72,000 or 20% of NGN360,000.

In simple terms, you have earned returns from two sources: the fixed return on the Eurobond and the change in the value of the Naira per USD.