How Does Mutual Fund Work in Nigeria

It doesn’t make any sense to have so much money in your bank accounts and it is not doing anything; it is just there, idling away and losing its value by the day. So, you decide to be wise and put say hundred thousand naira (N100, 000) in a mutual fund, let’s say the money market fund.

At the end of the year that hundred thousand naira would have earned thirteen thousand profits compared with how much you would get as interest or lose if you put your money in a savings’ accounts in regular savings accounts in Nigeria. Sometimes, you won’t even get anything – SMS charges, ATM card maintenance fees, stamp duties, etc. would have deducted a good chunk of your money before the year runs out.

Instead of leaving so much money in your bank accounts, you can move the fund that you do not immediately need to a money market fund. You would then enjoy interests on your money accumulated over time with no penalty.

mutual funds

mutual funds

Let’s discuss mutual funds -what it is, what you can do with it, how you can invest in it, and how much you stand to profit from a mutual fund.

So, What Is A Mutual Fund?

First, you don’t need to be in finance guru to invest in a mutual fund and you don’t need to have so much money to invest in a mutual fund; anybody can invest in it. A mutual fund is basically a type of investment fund that pulls money or gathers money from different investors to invest in different securities like Treasury bills, commodities, stocks, securities, etc.

You don’t need to worry about what your money is being invested in because there is a fund manager whose job it is to take care of your investments and then give you your profit at the end of the day.

Types Of Mutual Funds (in Nigeria)

There are different types of mutual funds. Different investment companies offer different types of mutual funds and even call it different names. Some of the mutual funds available are

  1. the equity mutual fund
  2. the Guaranteed Income Mutual Fund,
  3. the money market mutual funds
  4. and many others.

Case Study: Money Market Mutual Fund in Nigeria

The money market mutual fund is really great for people who do not have so much money and people who are looking for an alternative to saving their money in a bank accounts. Now, if you put your money in one of the money market funds for instance you put N100,000 in money market fund, would are assured of earning a descent interest rate at the end of the year.

The current average of the interest rate for money markets mutual fund right now in Nigeria is about 13 percent. So, you put a hundred thousand naira in a money market fund, at the end of the year that N100, 000 would have gained N13, 000 profits. You probably might think that is a small amount but compare that to putting your money in the bank; how much you would get if you put your money in savings accounts in regular savings accounts in Nigeria banks.

I’m not saying don’t put your money in a savings accounts. All I’m saying is don’t be a bulk of your money in your bank accounts; it doesn’t make any sense to have so much money in your bank accounts and it’s not doing anything, not making any profits. So, instead of leaving so much money in your bank accounts, you can move the fund that you do not immediately need to a money market fund.

The good thing about the money market fund is that you can exit the investment(s) at any time with no penalty. You can enjoy your money anytime and you watch the interest grow every day. You get returns on your money every day. In fact, you don’t have to wait for a whole year to get your money back.

For example, you decide to exit the mutual fund investment after six months. All you will get is the accumulated percentage I interest up to that moth which would be half of 13%. This together with the capital you invested with will be paid to you and you go with both your principal sum and the profits.

How Do You Invest in a Mutual Fund in Nigeria?

There are different types of mutual funds in Nigeria and how much money you can make from these depends on the interest rates paid by the mutual fund which in turn depends on the type of mutual fund you are into.

In the money market fund, for example, you can know how much you’ll be able to make from a money market fund because the kind of securities that fund managers invest the money market fund in are fixed income securities.

In the fixed income type of investment, from the entry point of the investment you already know how much you’re going to get. You already have an idea (i.e., they already tell you at the point of starting this investment how the market works including the current interest rate. The interest rate fluctuates anyway.

So, how do you know which one is right for you to pick?

The first thing you need to decide is you need to find out what your risk appetite is. Risk appetite here refers to how much of a risk taker you are. If you are the kind of person that doesn’t like to take a lot of risk, then the money market mutual fund is the best option for you because the risk involved is very low and it’s also very flexible. So, you can decide to just leave at any point.

However, if you are somebody who is a bit more of a great risk taker then you can go for the equity mutual fund. The returns on an equity mutual fund are much higher because stocks are more profitable than the fixed income securities. The profits are higher for equity mutual funds but don’t forget that the risk involved is also high; you can lose some of your money but it is still safer investing in an equity mutual fund. Here, you are not going to trade stocks on your own because there’s a fund manager to handle that on your behalf.

No matter the type of mutual fund, there is always a fund manager who handles everything for the investors. He/she/they take care of the trading and everything for the investors. So, you can go to sleep while your money works for you.

The equity mutual fund is great for risk takers. Like I said, the risk is lower compared to going to trade stocks on your own. The fund manager has a wealth of experience than you in this unless you are good at trading stocks yourself.

If you are a medium risk taker, you should go for the guaranteed mutual fund. I’m not sure if all the investment companies in Nigeria offer this but it is very popular amongst investment companies in the world. The guaranteed mutual fund is like a hybrid of the equity mutual fund and money market mutual fund. Here, some part of your money is invested in stocks and some part of it is invested in fixed income securities. So, you get medium returns and risks involved are also medium.

For someone who is just starting out investing in mutual fund, Iwould advise you to first try the money market fund and see how it is. Understand how it works first instead of just diving into something risky like the equity mutual fund or the guaranteed mutual fund.

If you want to invest in the money market mutual fund, just look for the for an investment company, fill all your details that the company requires and go ahead to deposit the minimum investment amount required. You can deposit as much as you want up to millions of Naira. The higher the principal sum that you invest, the higher the profits that you would earn at the end of the trading cycle.

Some Companies You Can Invest in Mutual Funds in Nigeria

Different investment companies run different mutual funds with different names. Let me examine just two of them below.

1.      ARM Investment Company

ARM Investment Company is one of the companies operating mutual funds in Nigeria currently. Here, you can start with as low as 1,000 naira and you just keep adding and adding to it and it keeps on growing it over time.

2.      Stanbic IBTC Asset Management, Afrinvest

Stanbic IBTC Asset Management and Afrinvest are other companies that operate mutual funds in Nigeria. They are quite good and you can start investing with for as low as five thousand there and just keep on growing and growing from this.

These two companies are great for students and also great for low income earners. They together with the ARM Investment Company mentioned earlier are very good for people who are looking for an alternative to a savings account that will give them better returns which their Nigerian bank accounts would not give.

3.      First Bank of Nigeria Fixed Income Fund (FBN fixed income fund)

One of such mutual funds in Nigeria is the First Bank of Nigeria Fixed Income Fund also known as FBN fixed income fund. It is managed by FBN quest asset management which is a subsidiary of FBN quest merchant bank which in turn is a subsidiary of FBN holdings nigerian limited, the owners of First Bank of Nigeria, the oldest bank in Nigeria.

FBN holdings have been in operation in Nigeria for over a decade now and a lot of Nigerians are shareholders in this company 2007. First Bank of Nigeria, the parent company of FBN holdings which operates the FBN fixed income fund is one of the longest-operating and trusted banks in Nigeria. This, among other credentials accounts for the huge patronage of the FBN fixed income fund in Nigeria.

You can be a happy shareholder in FBN holdings today and also enjoy the dividends from this company.  Since the parent company is a highly trusted company in Nigeria, you should trust its subsidiaries to make good decisions with your money through the fixed income mutual fund.

The FBN fixed income fund started in 2014 and over the period of its operation, the annual yield or annual interest or the profit that the company has made with whatever money they were investing it was 10 in 2014, jumped to 16.17 in 2015, fell to 6.38 in 2016. There has been incredible increase in the profits or percentage margins for the past 4 years between 2017 and now (2020).

However, this year’s performance has not been really resounding because of what happened this year (the coronavirus epidemic, protests, etc.). The data for this year is not available yet because this year is not over yet. However, information from the company has it that the year to date yield is 14 that’s for eight months, January to August.

The fixed income mutual fund is not the only mutual fund that is run under the FBN quest asset management. They have various other mutual funds see all the different mutual funds that are run by the company here: https://fbnquest.com/asset-management/products/mutual-funds/

However, the fixed income mutual fund operated by FBN holdings is arguably the most popular because it is very affordable. With as little as (though “little” is relative) but with as little as 50 000 naira you can invest in this mutual fund. The good thing is that when you get more money you can add to your portfolio to grow it.

If you are a salary owner and you give yourself a share of your salary every month and you are disciplined about it, after your initial investment of 50 000 naira every month, you take your share of your monthly salary and throw it into this fund. What they will do is that they will include the addition for you and hence more yield for you. You keep doing that every month for as long as possible. A mutual fund can be your retirement fund. Just make it a point of duty to be adding money to it every month till whenever you wish to stop. Of course, a mutual fund is a long-term investment and you should treat it as such.


Investing in mutual fund in Nigeria depends on you especially your risk-taking capacity. If you wait till you have so much money before you invest in mutual fund in Nigeria, you may wait for a very long time.

What you can do could be to set aside a particular amount of money that you send to your mutual fund company every month probably deducted from your salary. If you are a business person, you could just decide how much do you want to be putting in your money market fund at the end of every month.

You have to make it a monthly commitment to be putting something, a particular amount into your money market fund and that’s that. The money would keep growing and you’d be glad you did.

I want to believe that you have learnt a thing from this lesson today. Have a nice day and happy investing.



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