These are debt securities that pay a pre-determined rate of return on pre-determined dates and also promise to repay the principal at a pre-determined date.
You are pretty much giving out a loan just like a bank would do to a company or the government.
These are more risky than cash/cash equivalents, hence they offer higher returns particularly when it involves a corporate or a state government.
The investment options here include:
▶FGN Savings Bond – Medium term loans to the federal government of Nigeria. With tenures of 2 & 3 years. This has a minimum of N5,000 and is sold in the first full week of every month.
▶FGN Bond – Long term loan to the federal government. It can be as long as 20 years. You get your coupon (interest) every six months. This gets advertised in the newspapers.
▶State/Municipal Bonds – Issued by state governments and local governments.
▶Corporate bonds – Issued by large companies.
▶Eurobonds – Dollar denominated bonds issued by the government or companies.
▶Supranational Bonds – Issued by multilateral organisations like the World bank, IFC.
These typically get snapped up by institutional and high net worth individuals, so you may not see this advertised. To know about these, you’d have to be on the mailing list of an investment bank, stockbroker and other closed groups. They typically would have a minimum threshold of about N5 million.
Some investment banks and fintech platforms also retail them.