Top 7 Investment Opportunities in Nigeria for 2025

 

Year 2025 is here on us. It’s young and fresh, and we must do great things this year. One of such great things is to improve our personal finances and boost up our incomes. As Jaywon sang in his evergreen song This Year (Odun Yi), “We’re making money this year”. You want to make money this year and I want to make money too.  Of the many sources of extra income available in Nigeria, one is investment.

The year is still fresh and investing your money in Nigeria in 2025 doesn’t have to be a daunting task. With little change, a variety of investment options, coupled with knowledge, you can empower yourself to make informed decisions that align with your financial goals. Therefore, let me give you a quick rundown of 7 profitable investment opportunities you can put your money on in 2025.

1.        Federal Government Sovereignty Bond

Imagine lending money to the Nigerian government and earning interest in return. That’s essentially what a Federal Government Sovereignty Bond is. This investment tool is issued by the Federal Government to finance public projects like roads, healthcare, and education. If you want to keep your risk at a very low level, this is` the investment option for you since it is backed by the government. And government don’t liquidate!

A sovereignty bond promises an average investor a regular income through steady interest payments, and tax benefits as the interest earned is often tax-exempt in Nigeria. However, the returns might not be as high as other investments, and bonds typically have long maturity periods, which may not suit you if you’re a short-term investor. For example, the Federal Government of Nigeria (FGN) Savings Bond requires as little as ₦5,000 to invest, making it accessible to average Nigerians.

2.      State Government Bond

State Government Bonds operate similarly to Federal Bonds but are issued by individual states. These funds are used for state-level projects such as infrastructure development. State Government Bonds offer moderate risk, slightly higher interest rates compared to Federal Bonds, and contribute to the state’s economic growth. However, the safety of these bonds largely depends on the economic stability of the issuing state. Additionally, they may not be as easy to sell if you need cash quickly. Lagos State, for instance, has been a reliable issuer given its strong economic base.

 

3.      Local Government Municipal Bond

These are bonds issued by local governments to fund community projects like schools and local roads. Here, your investment directly benefits your local area and may come with potential tax advantages. However, they carry higher risk due to potential financial instability of the local governments and limited availability since not all local governments issue these bonds. If your local government issues a bond for building a public health center, your investment contributes to that cause while earning you returns.

 

4.      Common Stock or Ordinary Shares

Buying shares means owning a piece of a company. If the company does well, you share in its profits. Stocks can offer significant capital appreciation, and shareholders often have voting rights in company decisions. However, they are high-risk investments as stock prices can be volatile, and dividends are not obligatory. Investing in companies listed on the Nigerian Exchange Group (NGX), like Dangote Cement or MTN Nigeria, can yield substantial profits over time.

5.      Irredeemable Convertible Preference Shares

Irredeemable Convertible Preference Shares blend features of equity and debt, allowing conversion into common stock. They pay fixed dividends and offer the option to convert to common stock, benefiting from potential price appreciation. On the downside, understanding the terms of conversion might be tricky if you’re a beginner, and these shares are not as widely traded as ordinary shares. An investor in a Nigerian manufacturing firm’s convertible preference share might later benefit from converting to equity when the company’s stock price surges.

6.      Irredeemable Non-Convertible Preference Shares

Irredeemable Non-Convertible Preference Shares also pay fixed dividends but cannot be converted into common stock. They offer predictable returns and priority over common stock in liquidation scenarios. However, since they aren’t convertible, you miss out on stock price appreciation, and being irredeemable means you might not get your principal back. Nigerian banks often issue non-convertible preference shares to raise capital.

7.       Redeemable Preference Shares

Redeemable Preference Shares are preference shares that the issuing company can buy back after a certain period. They provide predictable returns through fixed dividends and guarantee capital return at redemption. On the downside, they generally offer lower yields than ordinary shares and have limited upside since there is no opportunity for capital appreciation. Companies like Nestle Nigeria might issue redeemable preference shares to attract investors looking for lower-risk options.

Conclusion

Each of these investment instruments offers unique opportunities and challenges. By understanding their characteristics, risks, and rewards, you can craft a diversified portfolio that matches your financial aspirations in 2025.