What is mutual funds in Nigeria

If you’re looking for the affordable way of investing in the financial market, have you ever thought of mutual funds in Nigeria and how to invest in it.

This may be your very first time of hearing about MF especially if you’re not that much into finance.

You don’t need to think much about it, cause i’ve explained what is mutual funds in Nigeria, how it works, how to invest in it and lastly the best mutual funds in nigeria so far.

I made this post in such a way that you will understand it even though you’re a complete novice.

What is mutual funds

Mutual Funds Definition: This is a type of short term investment, whereby a firm, organization or a financial institution pools cash from different investors for the purpose of investing in the money or capital market

These financial markets services includes stocks, shares, T-bills, certificate of deposit etc.

What this is actually saying that in the mutual funds, the firm, organization or financial institution that operates it, gathers or gets funds (money) from investors, and uses the money to buy shares, stocks, bunds, treasury bills etc.

At maturity, the firm will share or distribute the profits derived from the different types of investment accordingly to the investors based on monthly, quarterly, semi-annually or annually and these distributions can be reinvested if an invenstor wish to do so.

Sharing of the profit is usually based on the duration you agreed with the organisation.

But usually, it comes up every six or one year.

You may be thinking why would you want to invest in the mutual funds since they are buying from the financial market, likewise you can do the same.

The truth here is to invest in the mutual funds in Nigeria is lot cheaper compared to other investment like the T-bills or bonds.

An organization or a corporate body can gather funds from investors and invest in the T-bills which requires a minimum amount of twenty five million naira (from the primary market), and at maturity, pay every investors their profits.

To invest into the mutual funds here in Nigeria can be done with just N5000, which isn’t possible on T-bills.

On the other hand, you can say that a mutual funds is a financial instruments that allow a group of investors to pool their funds (money) with a predetermined investment objective.

It is recommended that if you are investing in MF with any firm or a corporate body here in Nigeria, please try to where they are investing in.

Some financial institutions will let you know the number and type of investment that they are into.

It can be any of the best money market in Nigeria like the Treasury Bills, Commercial Papers, Bankers’ Acceptances and Fixed Deposits.

Some will also invest in the high risk capital market like bonds, stocks etc.

One good advantage of mutual funds is Diversification. It invest across a wide and diverse range of securities to assist in lowering risk.

It is more difficult for individual investors to  gain the same level of diversification that mutual funds offer their clients.

Affordability is one of the best feature and benefit of the mutual fund.

It is very affordable because money is pooled together and larger transactions can be concluded in a more cost-effective manner.

There are two types of the mutual funds, and they are;

  • Open End Mutual fund 
  • Closed End Mutual fund 

Open End Mutual Fund

This is a type of mutual fund which does not have restrictions on the amount of shares that the fund can issue to current and new investors.

If demand for shares of an open-end mutual fund increases, the mutual fund and the company that runs it will continue to issue new shares no matter how many investors there are.

What i’m trying to say here is that firms or corporate bodies allows investors to invest with them.

They can never so no to investors as they are always open to investors.

Financial institutions or firms that operate the mutual funds in Nigeria, adopts and uses this type.

Close End Funds

As the other is always open to investors, the case is different in the close end funds.

In this type of mutual funds, selling of shares, bonds or other financial assets is limited to the number of investors the company wants.

Their shares are sold at the IPO or you can say initial public offering.

For example, if five million shares are issued during an initial public offering (IPO) of a fund, then that amount will be the set amount to be traded back and forth through intermediaries.

Note: IPO or initial public offering is a period a company initially offers shares of stocks to the public.

Apart from the open end and close end MF, other types includes;

Stock/Equity Mutual Fund

Stock or equity mutual fund invests in the shares of companies and organisations.

If you have a higher risk appetite, this is the type of fund for you.

Bond/Fixed Income Mutual Funds

As the name suggests, a bond fund invests mainly in fixed income securities with a higher allocation to bonds, such as government and corporate bonds.

These funds are usually more volatile than money market funds, and usually pay out distributions to investors.

Money Market Mutual Funds

The goal of a money market fund is to uphold a steady net asset value for the fund while making regular distributions to investors.

This is achieved by investing in short-term, interest bearing securities such as treasury bills, certificates of deposit and commercial papers.

Multi-asset Mutual Funds

Multi-asset mutual funds are a combination of bond, stock and money market instruments which means that a diverse spectrum of investment instruments are included in these funds.

These funds are normally focused on medium growth over a longer investment period.

How to invest in mutual funds

What is mutual funds in Nigeria


To invest in the mutual funds in Nigeria is just like any other investment you have been investing in thir country.

Banks are now into the MF and the likes of stanbic ibtc bank seemed to be the best.

You must trust that the firm or the organisation that you’re investing in is very reliable and trusted.

This is high risk investment and you need to first check, examine and conclude that you want to invest with them.

Each organisation has it’s own requirements, for the likes of stanbic ibtc bank mutual fund, what they require from you is;

  • Account Opening form – duly signed by the applicant.
  • 1 passport photograph of each signatory
  • Copy of means of identification for each signatory (e.g. Valid Driver’s License / International Passport/ Residence Permit issued by the Immigration Authorities, National Identity Card, Inland Revenue Tax Clearance Card)
  • Proof of address (e.g. Utility bill (not more than 3 months old), Solicitor’s letter confirming recent house purchase/ search report from the Land Registry, Tenancy Agreement) in lieu of which an address verification can be done.

Stanbic ibtc minimum amount is N5000 and above, and you’ll state the duration you want, which is usually six to one year though the minimum tenor is thirty days.

You can open a mutual fund account online or offline.

However, if you open your account online, you’ll still have to go to the bank to finish it up.

So for those looking for how to invest in mutual funds online.

I will advise you to visit the company you want to invest in other than using online unless it is a non bank organization.

When investing in mutual funds, what comes up to your mind is when to expect returns on interest.

I want you to know that mutual fund earns money when a security receives interest and pays out dividends to the fund.

Also it earns money when a security’s value  increases.

Please note that the return of a mutual fund is dependent on what kind of assets the mutual fund invests in and how long the investor is investing for. 

Best mutual funds in nigeria 2020

Looking for the best mutual funds in nigeria 2020?

Investment interest rates are currently way too low in Nigeria, but in as much of that, i will say that Stanbic ibtc bank has the best mutual funds in nigeria 2020.

Reason is that their interest rates are quite okay and commendable compared to others.

Other good companies are the FBN Money Market Fund raising, Arm Aggressive Growth Fund etc.

With time i will try other non bank institutions to see what the offer to investors.

The interest rates of mutual funds varies, some organizations will give you 4% or 7%, but stanbic ibtc rate is 5

When it comes to tax, i can’t really say that mutual funds is tax free because some firm will tell you no tax, while others will say 5% tax.

So tax or fee on the mutual funds depends on the organization you’re investing in.

Why mutual funds is helpful

When you look and compare the money with which you can invest in the mutual fund in Nigeria, you will see that it is made in such a way that everyone can participate.

It’s not everyone that has up to N25,000,000 or N100,000 to invest in the treasury bills, stock or shares.

But through MF, investors can invest in such money and capital market products and make profits from it.

Some organisations offers a Competitive returns on mutual funds and an automated & stress-free subscription.

Don’t miss

What is equity stock and the rights

Short term finance | Examples and types

The best fixed deposit rates in Nigeria (So Far)

Certificate of deposit advantages and disadvantages

What is compound interest: How to calculate it

Treasury bills rate in Nigeria (CBN)

That’s all have on how mutual funds in Nigeria works or how to invest in the Nigeria mutual funds.

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