Figures from the National Bureau of Statistics (NBS) show that 50% or $8.4 billion of the foreign capital imported into Nigeria last year, went to money market securities. The most liquid form of money market securities are treasury bills which are sold by the CBN every two weeks.
The key buyers of these instruments were foreign investors. Why? Yields on money market securities are at double digits, much higher than in their home countries.
Treasury bills are also backed by the full faith of the Federal Government of Nigeria, thus making the risk of default quite low.
At the last CBN treasury bills auction, 364-day treasury bills went for 14.9%. Recent inflation figures went for 11.37%. For investors that were able to get in, they would have returns better than inflation. Naturally, they were massively oversubscribed.
So, you have the best of both worlds: You beat inflation with minimised risk.
Despite this, a large number of investors are seemingly locked out from this market. A minimum of N50 million is required to participate at the Primary Market Auction (PMA).
In order to meet demand, banks and other big players in the financial space, resell from their holdings or bundle up small bids. Here again, is another stumbling block, as some banks require as high as N1 million and N500,000 as the minimum amount customers can subscribe.
Prospective investors have to write ahead, sometimes a week ahead. If their bids come at lower cut off rates, they then have to wait for another two weeks. As with anything Nigerian, you sometimes have to go to the bank, to make sure you are attended to. That’s more inconvenience.
Sterling Bank and Parthian partners have come up with an app called I-Invest to solve this problem. You don’t have to write countless letters to your banker, or pay several visits either. Everything can be done from the comfort of your phone.
The best thing about the app, is that you get to see and pick the rates yourself, and it’s easy to use. It also doesn’t cost an arm or a leg. You need a minimum of just N100,000 to buy treasury bills. So far, I-Invest has generated over N2 billion transactions in less than 6 months.
The app also has some new products in the works. The whole idea is to promote a savings culture in Nigeria and across Africa. The new products will expand the product base of the platform and ultimately help diversify the portfolio of our clients. So watch out!