The pursuit of profit is the driving force behind all investments, as every investor wants to turn their money into something profitable and get a high investment return, but safety and liquidity are also very critical in today’s investment climate
FGN bonds are widely considered one of the safest forms of investment in the country. Unlike individuals’ assets that are highly likely to default.
FGN bonds are relatively safe and liquid, but the safer the bond investment, the lower the yield.
The DMO has proposed a 2-year FGN Savings Bond due 14 June 2025 at an annual interest rate of 10.301%. The second issuance will be a three-year savings bond due June 14, 2026, with an annual interest rate of 11.301%, according to the DMO.
Such returns are rarely achieved in the real estate market.
FGN Bonds Features and Benefits
FGN Bonds offer the benefit of regular income with semi-annual interest payments. For investors looking for a regular income stream while retaining capital, this is a viable investment option.
Additionally, bonds can be easily sold to other investors before their maturity date, providing an easy way for investors to resell their bonds.
FGN bonds are tax-exempt, including infrastructure bonds, which generally have maturities of more than 5 years.
Challenges of real estate investment in Nigeria
The Nigerian real estate market is still new and not as transparent as the Fixed income market space, where buyers and sellers can easily get in via their investment banks or brokers.
Additionally, the Nigerian real estate market is largely unregulated, so fraud can occur.
For example, many unlicensed brokers in the country can mislead investors about property valuation.
Additionally, significant communication barriers can make it difficult to find the right property or work with the right agent.
Building collapses across the country show that the building materials used by some contractors are substandard.
This means that some of these contractors in Nigeria lack the necessary educational qualifications and work experience.
Government real estate laws are generally poorly enforced in Nigeria, often resulting in investors being stripped of the legally acquired land.
This is common in developed parts of the country like Lagos and is mostly carried out by a group of land thieves called the Omo Onile.
These notorious real estate scammers tend to harass investors using the label “transaction fees.” They are also frequently seen at construction sites where construction projects are taking place and use force or deception to intimidate them.
FGN Bonds Advantages and Economic Impact
All FGN bonds generally have a term (effectively the term of a loan). At the end of the term, the federal government returns the original amount (principal) to the lender.
FGN bonds offer a risk-free investment opportunity with tax-exempt income and can be used as collateral for loans.
It also encourages long-term investment in the economy and alternative sources of government funding, promotes self-reliance, and reduces over-reliance on external funding.
Real Estate Investment Challenges – Illiquidity and Depreciation
Real estate is extremely illiquid compared to other assets. The reason for this is that it takes time to sell real estate, so it cannot be converted into cash immediately.
Even if interest in a property grows quickly, it can take some time before the sale closes. Also, real estate can depreciate over time.
Therefore, if you have owned the property for many years, you may need to sell it for much less than you paid.
Why patronize unlicensed broker for valuation? For the investor that requires valuation in Nigeria,you need to get the services of an Estate Surveyor and Valuer,issued a licence to practice and regulated by Estate Surveyors and Valuers Registration Board of Nigeria.
As a stakeholder in the real estate sector,the return and the yield from real estate investment with its risk cannot be compared to that of bond.
Should there be limited accommodation and increase in population,the demand for accommodation increases and who do you think will benefit from it.
Minimal risk do bonds,maximum returns do real estate,to convert to liquidity patronize the right brokers.
Well said!
Stock market and bonds returns in Nigeria for the past years have never outpaced real estate investment
In a city like Lagos, investment in real estate at choice areas such as:
– GRA Ikeja
– Omole Phase 1 and 2
– Magodo Phase 1 and 2
– Arepo
– Ikoyi
– Victoria Island
– Lekki
– Banana Island
Have skyrocketed by well over 500% in the past 10-15 years
Stock prices fluctuate up and down, they never go up continuously!
Sometimes bad economic spells and poor management mess up company results, leading to poor pricing on the stock market
Real estate is risky as with any other businesses in Nigeria. So you should be prepared to take the risk. Any investor looking for a safe investments to make profits is not fit to be called “an investor” because in reality, there is no such thing as a “Safe investment”. Everything in business is risky as with Life itself. The media try to be so delusional by saying “safe investments exists while in reality, there is no such thing”.
Unpopular opinion: High risks yield the highest profit!!. So in my opinion, I will invest in real estate, invest in the knowledge, gain experience and make tons of money rather than invest in paper assets which in reality has no value, and all it really is is giving your money to the government/banks and hope they pay you what they promised. Lol.
As an information platform, you should give more information about those licenced to practice and give valuation advise which is known to organisations like you. Teach to the end and not just give half information so we can clean up the mess of fraudulent real estate deals. Like Aladeitan said, let’s guide people to the right places. You can sell FGN Bonds without crushing legal and qualified people in real estate or you can sell FGN Bonds and also project.ane advocate th services of registered practitioners in Real.Estate ie Estate Surveyors & Valuers.
Good Morning,
The comparison of Bonds to Real Estate Investments are two Parallel lines that can never derive the same results.
Bonds has a fixed or expected outcome and your investments are largely used to generate
Revenues or profitability that are not controlled by you but you only get paid the fraction that you have agreed to.
In Real Estate, the best way to increase your profitability is owning the asset and knowing when, how and where to invest.
Two examples, what was the cost of a property in Magodo 8years ago, what is the cost of purchase now ?
In 2015, a unit of a Terraced Duplex was selling for 45m in Kunsela Road in Ikate but now its almost a 100m.
Same 2015, Gran Imperio was selling 2Bedroom Terraced Bungalow on Orchid Road for 12m, but value of property on orchid Road now values between 60m – 90m.
Also, the Bonds you buy from the Government are used or expended to improve infrastructures that also aids appreciation in Property Valuation.
While both investment options are good, they also have their benefits.
As regards regulations and the scams associated with Real Estate, the answer is simple, never invest in any business you don’t have full understanding or knowledge about.
Let regulations be left to the same Government you are investing into through Bonds to handle and enforce where and when necessary.
Rather, kindly write a well informed article on Mortgage Banking and our Mortgage Laws in Nigeria.
A major intervention is required there by the CBN and National Assembly Sir.
Thank you