Alternative investments are gradually gaining attention in Nigeria to diversify risk, protect against inflation, and enhance long-term returns as investors look beyond traditional assets like equities, treasury bills, and bonds.
These assets typically offer lower correlation with public markets and can serve as a hedge during periods of market volatility.
At the top of Nigeria’s alternative investment landscape are Real Estate Investment Trusts (REITs), private equity and venture capital, infrastructure funds, commodities, and private debt instruments, all of which are gradually attracting institutional and high-net-worth investors.
What are alternative investments?
Alternative investments are asset classes that fall outside traditional stocks, bonds, and cash. They are typically less liquid, longer-term, and often require higher minimum capital, but they can deliver superior risk-adjusted returns when properly structured.
They are not ideal for investors who need quick liquidity or predictable short-term returns.
In Nigeria, alternative investments are regulated primarily by the Securities and Exchange Commission (SEC), with participation from the Nigerian Exchange Group (NGX), FMDQ, and private fund managers.
Why investors are turning to alternatives
- Diversification: Lower correlation with equities and bonds
- Inflation hedge: Real assets like property and infrastructure preserve value
- Higher return potential: Especially in VC and private equity
- FX protection: Offshore VC and private assets provide currency hedge
Key Risks to Consider
- Illiquidity (difficult to exit before maturity)
- Valuation opacity
- Regulatory uncertainty
- Manager and governance risk
- Higher minimum investment thresholds
Who should invest in alternative assets?
Alternative investments are best suited for:
- Long-term investors
- High-net-worth individuals
- Pension funds and institutional investors
- Investors with strong risk tolerance and patience
Major alternative investment options in Nigeria
1. Realestate investment trusts (REITs)
REITs allow investors to gain exposure to income-generating real estate without directly owning property.
Nigeria’s REIT market overview
- Listed on the NGX
- Key listed Nigerian REITs – UPDC REIT, SFS REIT, Union Homes REIT, Sky Shelter Fund
- Invest in commercial properties, malls, offices, and mixed-use developments
- Provide rental income and potential capital appreciation
Market characteristics
- Nigeria’s listed REIT market capitalization runs into billions of naira, still small compared to equities. UPDCREIT, for example, is estimated to have N18.68 billion market capitalization.
- REITs pay dividends. UPDC REIT, SFS REIT, Union Homes REIT all pay dividends historically.
- REITs appeal to income-focused investors seeking regular cash flows
- Key risks include property valuation risk, occupancy and rental income risk, interest rate sensitivity.
How to invest
- Open a brokerage account with an NGX-licensed broker.
- Fund your account with the amount you wish to invest.
- Select listed REITs and place a buy order on the NGX platform via your broker.
- Monitor dividend announcements, occupancy rates, and property valuations for income and capital growth prospects.
- Minimum investment: unlisted/private REITs may require N1–5 million.
2. Venturecapital (VC) & private equity (PE)
Venture capital and private equity represent some of the fastest-growing alternative investment segments in Nigeria, driven by the country’s expanding tech ecosystem and youthful population.
Despite the risks, VC investments have produced outsized returns for early investors in successful Nigerian startups. Fulterwave, Moove, Chowdeck, Kuda and are popular startups in Nigeria.
Notable venture capital firms in Nigeria are Future Africa, Aruwa Capital Management, EchoVC Partners, Microtraction, while the prominent private equity firms are African Capital Alliance (ACA), Verod Capital Management, Helios Investment Partners.
For HNIs, the following arfe angel investors networks that allows induividuals invest in startups – Lagos Angel Network (LAN), VC4A Nigeria, Consonance Investment Managers Angel Fund.
Nigeria VC landscape and structure
- Nigeria consistently ranks as Africa’s top destination for VC funding
- Dominated by fintech, healthtech, edtech, logistics, and e-commerce
- Investments are typically USD-denominated, offering FX hedge benefits
- Long-term investment horizon (5–10 years)
- Investors of venture capital includes institutional investors, family offices, offshore funds, HNIs
- Illiquid – not easily sold or transferred.
- High-risk, high-return profile
- Key risks include startup failure risk, regulatory and FX policy uncertainty, exit risk (IPOs and acquisitions are limited). Paystack was acquired by Stripe in 2022 for $200 millions.
How to invest
- Identify VC/PE funds with regulatory approval from SEC or reputable fund managers.
- Complete the fund’s KYC and subscription process.
- Choose a fund aligned with your risk tolerance and sector preference (e.g., fintech, edtech, healthtech).
- Make the minimum capital commitment
- Hold for the fund’s investment horizon (usually 5–10 years), and monitor fund reports and valuations.
3. Infrastructure funds
Infrastructure investments focus on power, roads, ports, telecom towers, and renewable energy.
Examples of infrastructure funds in Nigeria include – Chapel Hill Denham Nigeria Infrastructure Debt Fund (NIDF) (listed on NGX), ARM‑Harith Infrastructure Fund (ARMHIF), Stanbic IBTC Infrastructure Fund, Coronation Infrastructure Fund (CIF).
Why infrastructure matters
- Nigeria’s infrastructure gap runs into trillions of naira
- Stable, long-term cash flows
- Often backed by government guarantees or concession agreements
- Typical investors are Pension funds, Development finance institutions (DFIs), Long-term asset managers
How to invest
- Identify SEC-registered infrastructure funds or projects
- Complete KYC via the fund manager or pension fund administrator (PFA).
- Review project documentation, expected cash flows, and risk profiles.
- Make a capital commitment according to the fund minimum.
- Hold for the project’s concession period; typically 5–15 years.
4. Commodities &agriculture investments
- They are often marketed as inflation hedges, but investors must be cautious of execution and governance risks, especially in non-regulated schemes. AFEX Commodities Exchange Limited is an example of organized commodities exchange in Nigeria.
- Farmland investment schemes
- Commodity-backed investments / organized commodities exchange.
- Export-oriented agriculture ventures
How to invest
- For commodity-backed instruments: register with an exchange like AFEX Commodities Exchange or through an issuing broker.
- For farmland/agribusiness schemes: invest through SEC-approved agricultural funds or private offerings.
- Complete KYC and subscribe to the investment product.
- Monitor commodity prices, production reports, and export demand.
5. Private debt & structured products
These products offer higher yields than government securities, but carry credit and liquidity risks. Private debt includes.
- Asset-backed notes – for instance, DLM SBCNs (N30bn Sovereign Bond‑Backed Composite Notes), and Norrenberger Structured Investment
- Mezzanine financing – for example, FCMBTLG Private Debt Fund
How to invest
- Open an account with licensed investment banks, asset managers, or private placement brokers.
- Review the issuer’s credit rating, cash flow, and financial statements.
- Select a product based on tenor and expected yield.
- Complete subscription and transfer the investment amount.
- Hold to maturity to receive principal plus interest; monitor secondary market liquidity if early exit is desired.
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