"How, then, can they call on the one they have not believed in? And how can they believe in the one of whom they have not heard? And how can they hear without someone preaching to them?" ...this is an extract from one of the Holy books. Rephrasing/Adapting it with respect to investments, it would read as "How, then, can they make good investments? and how can they invest right if they have not heard? And how can they hear without someone telling them?"
That is why you have Cowryvest, a platform born out of our desire to simplify, demystify, and democratize personal finance and investment knowledge in Nigeria and across Africa. We believe the first step to successful investing is acquiring the right knowledge, and Cowryvest is our contribution to that journey for you.
Here are some of our previous articles where we outlined several passive income investment vehicles available for investors to take advantage of. Click on the links below to read.
- Passive Income Investment Options- Real Estate Investment Trusts (REITs)
- Passive Income Investment Options- Dividend Paying Equity (Stocks)
- Passive Investing Options- Commercial Papers
- Passive Investing Options- Money Market Fund
More importantly, beyond reading be sure to take action... DOing is actually what generates results. Read, speak to your investment adviser, then take action.
In this article, we want to delve into another passive investment vehicle known as Government Bonds. Of course, they are passive in that after making the investment you do not require any further activity or work for them to yield interest or dividends for you. Essentially, your money works for you while you sleep or pursue other endeavours.
There is a certain bias in the way many African investors think about investing. If it is not fast-growing, market-moving, or “undervalued,” it is often ignored. If it does not have the potential to double in a short period, it is considered… "boring". Reason why Africans tend to favour Ponzi schemes, Forex trading, Cryptocurrency investments and the likes. But investing is not just about upside. It is also about stability, predictability, and, in many cases, survival — especially in an environment like ours. As Warren Buffett would say, the two rules of investing are
- "Never lose money",
- "Never forget Rule 1".
Capital preservation is more important than any risk you can take or gain you can make. Compounding works best when you minimize or completely eradicate loss of your capital. Government bonds sit at that intersection — Quiet, predictable, often overlooked—but fundamentally important.
They are not flashy. They won’t double your money overnight. But for investors looking to preserve capital, earn predictable income, and sleep well at night, they remain one of the most underappreciated tools in the Nigerian investment landscape.
When we talk about Government bonds, in simple terms, you are lending money to the government, and in return, the government commits to pay you interest at agreed intervals and to return your principal at maturity. That distinction matters. You are not taking corporate risk. You are taking sovereign risk. Government bonds, particularly sovereign bonds, are indeed backed by the "full faith and credit" of the issuing country, representing the highest level of commitment a government can make to repay its debt. This means the government pledges its entire financial capacity—including its power to tax, borrow, and print money—to ensure the payment of principal and interest to bondholders.
In Nigeria, government bond instruments are issued by the Federal Government through the Debt Management Office (DMO).
For most local investors, that is about as close as it gets to a “risk-free” asset. In essence, this is one of the passive investment vehicles considered to have the lowest risk profile.
It is easy to dismiss bonds in a high-inflation environment like Nigeria. “Why lock in 15–18% when inflation is higher?”
Fair question. But it misses the point.
Not every part of your portfolio is meant to beat inflation aggressively. Some parts are meant to:
- Preserve capital
- Provide visibility on returns
- Reduce overall portfolio volatility
Government bonds do all three, and they do it consistently. In a market where earnings can disappoint, policies can shift overnight, and currencies can weaken sharply, that consistency is not trivial. They give investors a way to stay invested without taking on excessive uncertainty, and by so doing, play a stabilizing role in your portfolio.
There are various types of bonds in Nigeria and by extension across various other African countries.
FGN Bonds (Federal Government of Nigeria Bonds): These are the standard long-term instruments, with tenors running from a few years to as long as 20–30 years. They typically offer higher yields and can be traded in the secondary market, which means that if an investor wants their money before the maturity date, they can trade their bond on the stock exchange at a prevailing discount. Entry threshold is usually high especially at the primary auction, and can be as high as ₦50 million. Interest (coupon) is paid twice a year. For investors with a longer horizon, this is usually where the conversation starts.
FGN (Federal Government of Nigeria) Savings Bonds: These were introduced to bring retail investors into the market. They have lower entry threshold (minimum investment requirement as low as ₦5,000), simpler structure, and Regular (quarterly) income. Tenor is usually 2 to 3 years and interest income is tax-free. They are open to all individuals, issued monthly, and available through designated stockbroking firms. This is arguably one of the most democratized investment products in Nigeria today. For many first-time investors, this is the easiest entry point into fixed income, and they are currently issued by the Federal Government monthly.
Treasury Bills: These are short-term, discount instruments, usually maturing in 91, 182, or 364 days. Sold at a discount, they pay interest upfront, with principal paid at maturity, offering a secure, tax-exempt investment. For example, if you buy a ₦100,000 bill at ₦90,000, you get ₦100,000 at maturity, with the interest paid immediately. No periodic coupons—your return is embedded in the purchase price and the discount rate is paid upfront, while principal is paid at maturity. They are often used for liquidity management rather than long-term wealth building.
If your approach to investing is largely passive (hands-off), government bonds fit naturally into that framework. There is no need to track earnings releases or management guidance, interpret quarterly results or anticipate market sentiment. You clearly know what you will earn (barring extreme scenarios), and you know when you will earn it. That clarity is valuable.
However, bonds are not perfect. They have their drawbacks too.
Inflation is the most obvious risk of investing in government bonds, as with any other investment as well as cash. If inflation runs ahead of your yield, your real return is negative.
Interest Rate Movements is another drawback. If rates rise after you have invested, newer instruments may offer better yields. An example was when the Nigerian Federal Government Sukuk bonds were issued during the Buhari regime, prior to the devaluation of the Naira and deregulation of fuel, and the resulting inflation. The rates on those earlier Sukuk bonds looked like pittance in the face of the steep inflation enveloping the economy, and the government had to respond with much more juicy rates on newer bonds, making older bonds rates very unattractive.
Exit discount- if you need to exit early, the price you get in the secondary market may reflect that shift, as you might have to sell at a discount.
Currency Considerations- For investors benchmarking in dollars, naira-denominated bonds or bonds in most other African countries carry obvious FX risk. However, for most citizens of such countries who spend in local currencies, this would be less of a bother.
So Where Do Bonds Fit in an Investor's portfolio?
The more useful question is not “Should I invest in bonds?” Rather, it should be “What role should bonds play in my portfolio, and what percentage of my portfolio should I dedicate to bonds?”
For most investors, the answer is straightforward:
- They are the stabiliser.
- The predictable component.
- The part of the portfolio that does not require constant attention.
In practical terms, that often translates to a meaningful allocation—especially for investors who prioritise capital preservation or regular income.
There is a tendency to view investing through extremes—either aggressive growth or complete safety. However, the reality is usually somewhere in between. Government bonds are not designed to make you wealthy overnight. They are designed to ensure that, while you pursue growth elsewhere, a portion of your capital remains intact and productive. That balance is what sustains portfolios over time.
- 20–30% in fixed income (including government bonds)
- 20–30% in real estate
- 20–40% in equities
- 0–10% in alternative assets
- Risk appetite
- Age and stage of investing
- Investment horizon
- Income needs
In an era where everyone is chasing the next big thing—crypto rallies, speculative stocks, quick flips—government bonds remain quietly relevant. In many ways, they reflect a broader truth about investing: Not everything that works needs to be exciting. In fact, the parts of a portfolio that feel the most uneventful are often the ones doing the most important work—quietly compounding, providing stability, and allowing the rest of the portfolio to take measured risk. And all of these while not requiring daily activity from you, just quiet compounding of your investment.
If you’re building for the long term—whether for financial independence, business expansion, or generational wealth—don’t overlook the power of getting the “boring” parts right.
By the way, when you hear that Warren Buffett's Berkshire Hathaway has a huge pile of cash, it is not just sitting in a bank account. As of late 2025/early 2026, Berkshire Hathaway's record cash pile—exceeding $350 billion—is almost entirely invested in short-term U.S. Treasury bills. These investments act as cash equivalents, offering high safety and generating substantial interest income (approx. $12B–$14B annually) while Warren Buffett waits for "elephant-sized" acquisitions or better market bargains.
Reach out to your investment advisor or stockbroker to get more information and begin investing in Government bonds if you have not started.
Wishing you the best in your investment journey. Happy Investing! Feel free to share this article within your network.
You may check out other interesting articles here.
DISCLAIMER: All contents on this website are for informational purposes only and should not be taken as any form of investment advice. Do your own research and contact your financial advisor before making any investment decision. All contents may not be reproduced, distributed, or used without prior written permission.
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