Money market is the place (virtual or physical) where money is traded for interest or financial gains. Investments is money market are considered the safest form of investment. Bank Deposit, Treasury Bills, Mutual Funds, Commercial Papers and Bankers’ acceptance are some of the Money Market Instruments available in Nigeria.
They are financial investments where you place funds for a short period of time not more than 1 year but subject to roll over.
Now let us look at the instrument one after another:
- Term Deposit – It is a financial investment in a bank or other financial institution. Most banks will allow minimum investment of N100,000. The available tenures are: 30, 60, 90, 120, 180 and 360 days depending on your bank’s flexibility. Interest Rates: Are flexible and varies from one bank to another, often depends on your bank’s need for funds at the period of your investments. Interest are paid at expiration of your investment.
- Treasury Bills – Also called T-bills or NTB. They are monetary policy instrument issued by the government through the CBN to either borrow money from the public or control inflation. Minimum of N100,000 both in primary and secondary, available tenures are91; 184 and 364 days. Interest rate: It is dependent on economic factors like inflation and policy direction of government.
- Commercial Papers – Are money market instruments issued by large corporations with the support of CBN to fund its short-term funding gaps. Minimum investable amount will be determined at time of offer and as approved by CBN. Tenure not more than 270 days, interest rate is determined and approved by CBN
- Bankers’ Acceptance – Are a promised future payment issued and guaranteed by a bank against customers deposit. It specifies the amount, date and person to whom the payment is due. It can be discounted and transferred by the beneficiary to an interested person. The amount on the Instrument as discounted, tenure is as specified by the instrument but not more than 1 Year.
- Mutual Funds – A type of financial-vehicle made up of a pool of money collected from many investors to invest in securities. Such as stocks, bonds, money market instruments, and other assets. Most mutual fund starts with minimum of N5,000, tenure is subject to agreement with the investment expert while Interest rate are also determined by them.
The question that will readily come to mind of an average person or small business owner in Nigeria is. Where will I get money to invest in these so-called Money Market Instruments, when I am still looking for cheap bank loans for my business? That is true, but have you considered savings?
YES I mean SAVINGS!!!, putting some money aside to be invested in Money Market Instruments. I am sure the response will be: now where will such money come from? But my response will be: It is right there in your personal or business earnings. Now let me show you with this simple exercise.
Let us assume that your net income on a monthly basis is N100,000 will you be able to save part of it? The answer as expected is NO and I will expect the same NO answer from you if your monthly income were to be N80,000 or N150,000 or even N1m
Here is a Jim Rohn quote to ponder about:
“The Rich save first and spend what is left after their savings while the Poor spend first and save what is left after their expenses”
The fact is that no matter how much money you earn or make, you can always put some amount aside for investment purpose
Now let us look at a practical ways to save some money from your earnings
- Open a savings account either in your personal name or your company name. (Some banks don’t allow business savings account while some does).
- Make sure you do not have any withdrawal instrument (ATM card, Cheque book, mobile app or internet banking) on the account.
- Request that your bank do a standing debit order of the amount you want to save every month from your personal or business account to the savings account.
- When your savings has reached an investable amount, you can then request that your bank place the money in any of those Money Market Instruments for you.
I can assure you that in few years, you will be surprised how big an amount you would have saved and invested in the money market.