This might be your first time hearing about corporate bonds, or you have heard about corporate bonds in the past; this post is a perfect in getting to know all you need to know corporate bonds. In this post, we’ll be treating what are corporate bonds in Nigeria and how to invest in corporate bonds in Nigeria. Corporate bonds are long-term investment options that are low-risk with high-interest rate.
What are Corporate Bonds in Nigeria? How to Invest and Make Money in Corporate Bonds in Nigeria
In this section of this post, you’ll get vital details about these bonds, and how you can make money from it.
What are Corporate Bonds in Nigeria?
Corporate bonds are bonds or terms of bills of loans handed over by a company to members of the public for repayment at a future time, and with interest.
In a simpler term, corporate bonds in Nigeria is a situation where a company looking for funds to run its business pushes out bonds and certificate in lieu of loans from the public to run its operations on a long-term basis. What this means is that they offer you a certificate or documents as proof of the loans they are collecting from you to run their business.
Let’s say this loan is a mixture of loan and shares. This is because as the value of the company increases, the value of the corporate bonds increase, and you earn profits from the bonds as well. The maturity of this bond or loan or shares, whichever one you might see it as, takes up to 30 years.
Therefore, it is more less a long-term means of investment that can be very profitable for you if the company in questions grows astronomically in size and profit. In addition, you don’t put in much work in the investment, you just sit and reap the dividends of your investment.
However, you should note that the investment is not as straightforward as you think. There are little complications. Nonetheless, before we move into these complications, we’ll take a look at some of the characteristics of these corporate bonds in Nigeria.
Characteristics of Corporate Bonds in Nigeria
1. Wide Range of Credit Ratings
Corporate Bonds aren’t so well regulated. Thus, any corporate body or company with a low or high credit rating can seek for corporate bonds from the public. It is not like commercial papers or loans or other fund-raising options that are highly restricted.
2. Long-term Maturity Range
Corporate bonds have lomh term maturity range. It is sort of loan and investment that takes years to mature for withdrawal. It takes an average of 30 years for corporate bonds to mature. However, for those 30 years, you’ll be reaping the profits and increase in the value of the bonds purchased.
3. Middle-Level Risk
For these corporate bonds, the risk in the investment is not high; however, it is not so low either. Thus, you still have to be conscious when investing. It is a middle-level that you don’t have to over worry yourself about the outcome anyway.
4. SEC Registered
When investing in a corporate bond, you should ensure that it is registered with SEC. This is the only way you know that your money and investment is safe. Due to a mid-level risk of this investment, SEC has to be heavily involved and approves a company before you investing. Thus, you should check out this detail of the company or bond yourself before investing.
5. High Interest Rate
Nigeria corporate bonds and even the corporate bonds of all other countries offer high interest rate than most low-risk and mid-level risk investments. For your corporate bonds, you are sure of around 10% profit annually, or more, on any amount investment.
The payment of this profit is annually while the value of your bonds keep increasing.
6. No Collateral
You should know that there are no collaterals to accompany these bonds. This is why it is considered a mid-level risk investment to be secured and regusted by SEC.
7. Less in Popularity and Use
Corporate bonds are one of the least investment options a Nigerian will know about in Nigeria. Only 1 out of 100 Nigerians must have heard about corporate bonds. This is why most companies don’t use it, and since it is a long-term investment option, it isn’t that lucrative.
Corporate bonds are mostly utilized and traded by larger companies and corporations or even smaller companies with strong financial footing.
Next, we go to the issue of how you can secure corporate bonds and make money from it in Nigeria.
How to Get Corporate Bonds in Nigeria, and Make Money from these Bonds
There are steps and processes you can use to get corporate bonds in Nigeria and make money from these bonds. These steps and processes are:
1. The safest process or option to get corporate bonds of any profitable company is trade directly with them. Get to know the companies who have valuable and profitable bonds for sale, and buy them from the corporate or head office.
2. The other option is to use the services of commercial or investment banks. These institutions easily know the bonds for sale, and the most profitable ones.
3. The third option is use the services of a financial advisor and broker. These people sell these bonds on behalf of the companies. They are like marketers.
However, it should be the least option in your mind for securing corporate bonds. First, it will make securing bond more expensive; and secondly, getting the bond from them might not be hitch-free as expected.
In all, corporate bonds are good financial assets to get if you do it right. It is investment option you should be considering. This is it on What are Corporate Bonds in Nigeria? How to Invest and Make Money in Corporate Bonds in Nigeria.