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Spotlight Stories

Should I Invest In Fixed Deposits?

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Should I be putting my money in a fixed deposit?

This was a question put forward by a Nairametrics visitor last week. Apparently, he had been approached by his account officer who had seen idle funds running into millions lying in his bank account. He had left the money in a savings deposit not knowing what to do with it.

We were shocked by this and asked him the following questions (responses ensued)

Are you saving the money because you need to use it within the next three months?

His response: No

Do you currently earn a steady income? 

His response: Yes

Do you have investments in shares, real estate or other investments

His response: Not really

Do you plan to invest in any?

His response: Maybe real estate but I don’t want to buy land. I want to buy a house, so I will wait till I have the money

Do you have forex?

His response? No I don’t

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On the back of this Q&A we then explained what we would do it we were in his position.

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Fixed deposits – Yea or Nay?

Fixed deposit is a Nay for us in the current economic environment where inflation rate is above 16% and Treasury Bills rate are going for 17%.

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Commercial Banks usually do not like offering fixed deposit rates that are higher than Treasury Bills rates. If they do, then the margins are often not more than 2%. We doubt many will get rates above 19% from Banks as that will be above the return on equity for most banks.

If commercial banks will pay you 17% to keep your money then why keep your money with them for less. If you are one so patriotic as not to like buying forex, then perhaps you can consider buying bonds or treasury bills. You can get as much as 17% currently.

What other alternatives?

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Buy forex?

Forex are the way to go currently and it is hard to bet against the dollar. Not when there is so much unrest in the Niger Delta and oil prices still below $50. A look at your external reserves at less than $26 billion is also a reflection of how bad things are. We will rather at this point buy as much dollars as we can at the right price. What is the right price?

We spoke to someone who buys and sells forex. He tells us that whenever the price of Naira strengthens against the Naira for three days consecutively, his strategy requires that he starts buying. He keeps buying till the price hits a floor. According to him, provided that external reserves remain low and oil prices low, he buys as he believes that the gains being recorded are mainly temporary.

It’s a risk considering how volatile this market can be. We know some people who bought at N400/$1 earlier in the year who have still not covered their losses. It’s a timing game but one that you are more likely to gain than lose. The difference is the time factor. If you wait long enough, you are sure that the exchange rate will cross N400 sooner enough than it will drop to N300.

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Some other investors prefer to keep buying dollars believing that it will even reach N500. It’s hard to argue with these guys after all no one expected to see N400 this soon.

Stocks?

We love Stocks and some of our team members still invest in the stock market. However, we will not recommend stocks for anyone at the moment. Not with the volatility out there and the challenges faced by most industries. Avoid it if you do not have the skill.

Treasury Bills

This is a yay for us if you are looking to diversify your portfolio. A 17% return per annum is hard to beat especially for a risk free investment. Treasury Bills are a loan to the government and require little documentation. Though the returns are fairly lower than FX, it is still very much higher than fixed deposits.

 

 

 

 

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

2 Comments

2 Comments

  1. Legend

    August 23, 2016 at 8:35 pm

    Tell your man to buy NEWGOLD ETF

  2. Anonymous

    September 13, 2016 at 8:57 pm

    So how can we get treasury bills and what are the requirements?

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Business

President Buhari charges newly appointed Service Chiefs to secure the country

President Buhari has decorated the newly appointed Service Chiefs at the State House, Abuja.

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President Muhammadu Buhari has issued charges to the newly appointed Service Chiefs, ordering them to identify competent officers irrespective of seniority and paper qualifications and work with them to secure  Nigeria.

Buhari disclosed this at the State House in Abuja on Friday during the decoration of the Service Chiefs.

“I have charged the new Service Chiefs to keep in mind that the nation is looking to them for rapid relief. They must identify competent officers irrespective of seniority and paper qualifications, and work with them to secure this country,” President Buhari said.

“As I assured at our last security meeting, I have taken responsibility as C-in-C for them to go out into the fields and every part of the country, to ensure peace and security. I have accepted responsibility for all actions taken in fulfillment of the mandate to secure Nigeria,” he added.

What you should know 

  • Nairametrics reported in January that President Muhammadu Buhari has appointed new Military Service Chiefs, and congratulated the outgoing Service Chiefs for efforts of “enduring peace to the country.”
  • The new service chiefs include Major-General Leo Irabor, Chief of Defence Staff, Major-General I. Attahiru, Chief of Army Staff, Rear Admiral A.Z Gambo, Chief of Naval Staff, Air-Vice Marshal I.O Amao, Chief of Air Staff.
  • Meanwhile, the Nigerian Senate endorsed the nomination of the past serving Military Service Chiefs as Non-career Ambassadors.

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Energy

NERC issues order to DisCos on replacement of faulty, obsolete meters

NERC has issued a directive to DisCos on the structured replacement of faulty and obsolete meters for their customers.

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Electricity, Buhari moves against Discos and agents that collect money for prepaid meters

The Nigerian Electricity Regulatory Commission (NERC) has issued a directive to the electricity distribution companies (DisCos) on the structured replacement of faulty and obsolete meters for their customers with effect from March 4, 2021.

This is to remove the bottlenecks that had previously impeded the rapid deployment of meters to unmetered customers and the receipt of complaints from metered customers in fourth-quarter 2020, that they had been served meter replacement notices by DisCos when all stakeholders were preparing for the National Mass Metering Programme (NMMP).

The directive from NERC is contained in Order No. NERC/246/2021, Titled, “In the matter of the order on structured replacement of faulty and obsolete end-user customer meter in Nigerian Electricity Supply Industry (NESI),” issued on March 4, 2021.

The commission noted that over 7 million customers are currently unmetered as indicated by the customer enumeration data. It also estimates that an additional 3 million meters are currently obsolete and due for replacement.

NERC pointed out that the existence of unmetered customers contributes to the threat affecting the financial viability of the NESI as unmetered customers expressed their displeasure with the estimated billing methodology.

The statement from NERC partly reads, “The Commission notes that over 7 million customers are currently unmetered as indicated by customer enumeration data. It is also estimated that an additional 3 million meters are currently obsolete and due for replacement.

“The existence of a large population of unmetered customers contributed to threats affecting the financial viability of NESI as unmetered end-use customers expressed deep dissatisfaction with the estimated billing methodology.

“The revenue assurance objectives of DisCos have also been challenged by being unable to properly account for the utilisation of electricity by end-use customers”.

Following the review from both the metered and unmetered customers, NERC issued the following order;

  1. DisCos shall grant priority to the metering of unmetered customers under the National Mass Metering Program.
  2. DisCos may replace faulty/obsolete meters under the National Mass Metering Program but these replacements must be done in strict compliance with the Metering Code and other regulatory instruments of the Commission.
  3. DisCos shall inspect meters of metered end-use customers and the replacement notice shall contain the following –
  • The date of the inspection
  • Name, designation and signature of the officer that inspected the meter.
  • The fault identified in the meter.
  • The date for the installation of the replacement meter
  1. The Commission shall be copied on all replacement notices issued to end-use customers for the purpose of conducting random reviews of the replacement
  2. New meters must be installed upon the removal of the faulty/obsolete meter and under no circumstances shall the customer be placed on estimated billing on account of the DisCo’s failure to install a replacement meter after the removal of the faulty/obsolete meter.
  3. The customer and DisCo representative shall jointly note the units on the meter being replaced and the customer must be credited with these units within 48 hours after the installation of the meter.
  4. Customers shall only be billed for loss of revenue where the DisCo establishes meter tampering, by-pass or unauthorised access as contained in NERC Order/REG/ 41/2017 on Unauthorised Access, Meter Tampering and Bypass.
  5. Activation tokens shall be issued to customers immediately after replacement of the faulty/obsolete meter.
  6. DisCos shall file monthly returns with the Commission on the replacement of faulty/obsolete meters along with their proposal for the decommissioned meters.

This Order may be cited as the Order on the Structured Replacement of Faulty/Obsolete Meters of End-Use Customers.”

What you should know

  • NERC was mandated in the Electricity Power Sector Reform Act to maximize access to electricity services, by promoting and facilitating customer connections to distribution systems in both rural and urban areas and establish appropriate consumer rights and obligations regarding the provision and use of electricity services.
  • Meters serve as a revenue assurance tool for NESI service providers and a resource management tool for consumers that receive services with the Meter Asset Provider (MAP) Regulations coming into force on April 3, 2018.

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