Nigeria's Money-Market Funds Surge: Why Yields of 21-24% Are Possible in 2026

Introduction 

Money market funds in Nigeria are currently delivering exceptional yields of 21–26%, more than tripling their historical 7–10% returns. This explainer breaks down what money market funds are, how money market funds generate such high returns, why money market funds in Nigeria outperform traditional savings accounts, and whether these high-yield investment opportunities in Nigeria are sustainable amid aggressive monetary tightening. 

Table of Contents 

• What Are Money Market Funds 

• How Money Market Funds Work 

• Why Yields Are So High Right Now 

• Money Market Instruments in Nigeria 

• Money Market Account vs Savings Account 

• Top Money Market Funds in Nigeria 

• Investment with Monthly Returns in Nigeria 

• Who Should Invest 

• Risks to Consider 

• FAQs 

What Are Money Market Funds?

Money market funds (MMF) are mutual funds investing exclusively in short-term debt securities, maturing within one year. Think of them as highly liquid savings products earning significantly more than bank accounts while maintaining near-zero capital risk. Unlike stocks that fluctuate wildly or bonds that lock funds for years, money market funds offer daily access to your money while delivering inflation-beating returns. 

MMF means encompasses the core purpose: parking idle cash earning competitive yields without sacrificing liquidity. These funds purchase treasury bills (91-364 days), commercial papers (30-270 days), certificates of deposit (30-365 days), and banker's acceptances—all short-term instruments issued by governments and highly-rated corporations. The "money market" refers to the financial marketplace where these short-term debt securities trade. 

The appeal is simple: transfer ₦100,000 from your savings account earning 3% annually to a money market fund earning 22%, and you generate ₦22,000 instead of ₦3,000—a ₦19,000 difference from the same capital with identical liquidity (24–48-hour withdrawals). For Nigerians watching 33% inflation erode purchasing power, money market funds provide accessible defense requiring minimal financial expertise. 

How Money Market Funds Work 

Money market funds pool capital from thousands of investors, creating large portfolios that access wholesale money market instruments in Nigeria individual investors cannot purchase directly. A typical fund holds 15-30 different securities diversifying across government treasuries, bank commercial papers, and corporate instruments. 

The Mechanics 

Investment Process: When you invest ₦50,000 in ARM Money Market Fund at ₦1.00 NAV (Net Asset Value), you purchase 50,000 units. Fund managers immediately deploy your capital alongside other investors' funds into treasury bills, commercial papers, and banker's acceptances yielding 20-26%. 

Daily Income Accrual: Each security in the portfolio generates daily interest. The fund collects all interest payments, deducts management fees (typically 1-2% annually), and distributes net income to unit holders. Income accrues daily, compounding your returns continuously rather than quarterly like bank interest. 

NAV Calculation: Daily NAV reflects total portfolio value divided by outstanding units. Most money market funds maintain stable ₦1.00 NAV, distributing all returns as income rather than NAV appreciation. This stability distinguishes money market funds from equity or bond funds where NAV fluctuates significantly. 

Liquidity Mechanism: Submit redemption requests online or via mobile app. Funds process within 24-48 hours, transferring cash to your bank account at current NAV. This near-instant liquidity matches savings accounts while delivering 5-7x higher returns. 

Portfolio Construction Example 

Coronation Money Market Fund (yielding 23.74%) might hold: 

• 40% Treasury Bills (91-364 days) at 20-22% yields 

• 30% Commercial Papers (GTBank, Access Bank, 90-180 days) at 22-24% yields 

• 20% Certificates of Deposit (First Bank, Zenith, 60-180 days) at 21-23% yields 

• 10% Banker's Acceptances (trade finance instruments) at 23-25% yields 

This diversification ensures that if one issuer delays payment, 90% of the portfolio continues to perform. Professional managers continuously monitor credit quality, replacing maturing securities with highest-yielding alternatives maintaining the 23.74% portfolio yield. 

Why Yields Are So High Right Now 

Central Bank Monetary Policy 

CBN raised the Monetary Policy Rate (MPR) from 11.5% in 2020 to 27.25% by December 2024, maintaining elevated rates to combat 33% inflation. MPR serves as the benchmark rate influencing all other interest rates. When MPR hits 27.25%, treasury bills yield 20-22%, commercial papers offer 22-24%, and certificates of deposit pay 21-23%. 

Money market funds investing in these instruments capture elevated yields, passing returns to unit holders after deducting minimal management fees. The 21-26% money market funds yields directly reflect CBN's aggressive monetary tightening. This represents structural shift from the 11.5% MPR era when money market funds yielded 7-10%. 

Inflation Premium Demand 

With inflation at 33%, nobody lends money at 15%, losing 18% annually in purchasing power. Borrowers must compensate lenders for inflation erosion plus provide real return incentive. This inflation premium drives treasury bill yields to 20-22% and commercial paper rates to 22-25%. 

Nigeria money market instruments price in inflation expectations. If investors anticipate sustained high inflation, they demand yields matching or exceeding inflation. Current 21-26% money market fund yields reflect market consensus that inflation remains elevated, requiring competitive yields to attract capital into naira-denominated instruments. 

Government Funding Needs 

The federal government issues treasury bills weekly, raising ₦200–500 billion to finance budget deficits. This consistent supply meets strong demand from banks, pension funds, insurance companies, and mutual funds seeking low-risk returns. These supply–demand dynamics help keep treasury bill yields elevated. 

State governments also tap the money markets by issuing commercial papers to fund infrastructure projects. Lagos, Rivers, and Ogun states frequently issue commercial papers at yields of 22–24%, attracting significant money market fund investments. This sustained government borrowing continues to support high yields across money market instruments in Nigeria. 

Banking Sector Liquidity Management 

Commercial banks issue certificates of deposit and commercial papers managing liquidity ratios and funding loan books. With loan interest rates at 28-35%, banks accept 21-24% deposit costs maintaining profitable spreads. These bank instruments form substantial portions of money market fund portfolios. 

Banks prefer wholesale funding through money market funds versus retail deposit mobilization. Issuing ₦5 billion commercial paper to ARM Money Market Fund is operationally simpler than opening 50,000 retail accounts. This wholesale funding preference ensures consistent supply of high-yielding bank paper available to money market funds. 

Corporate Working Capital Financing 

Blue-chip corporations (Nestle, Dangote, MTN) issue commercial papers funding working capital needs. These 30-180 day papers yield 22-25%, providing high yield investment in Nigeria for money market funds while offering corporations faster, cheaper capital than bank loans charging 30%+. 

The corporate commercial paper market has expanded significantly. Companies with AAA credit ratings access money markets efficiently, creating a steady supply of high-quality short-term instruments for money market fund portfolios. This corporate borrowing sustains money market funds yields above treasury bill rates. 

Money Market Instruments in Nigeria 

Treasury Bills 

• Issuer: Central Bank of Nigeria on behalf of Federal Government 

• Maturities: 91 days (3 months), 182 days (6 months), 364 days (12 months) 

• Current Yields: 18-22% depending on tenor and auction dynamics 

• Credit Risk: Zero (government-backed sovereign debt) 

• Tax Treatment: Interest is tax-free (no 10% withholding tax) 

• Minimum Direct Purchase: ₦50,000 (though money market funds access at any size) 

• Typical Allocation: 40-50% of money market fund portfolios given safety and liquidity 

Commercial Papers 

• Issuers: Banks (GTBank, Access, Zenith, First Bank) and corporations (Dangote, Nestle, MTN) 

• Maturities: 30-270 days (typically 90-180 days) 

• Current Yields: 21-25% depending on issuer credit rating and maturity 

• Credit Risk: Low to moderate (rated AA to AAA typically) 

• Tax Treatment: 10% withholding tax on interest 

• Minimum Direct Purchase: ₦1 million+ (funds aggregate small investors accessing these) 

• Typical Allocation: 25-35% of money market fund portfolios for enhanced yield 

Certificates of Deposit 

• Issuers: Commercial banks 

• Maturities: 30-365 days (commonly 60-180 days) 

• Current Yields: 20-23% 

• Credit Risk: Bank credit risk (deposit insurance covers up to ₦500,000 per depositor) 

• Tax Treatment: 10% withholding tax 

• Minimum Direct Purchase: ₦500,000-₦1 million 

• Typical Allocation: 15-25% of money market fund portfolios 

Banker's Acceptances 

• Nature: Trade finance instruments guaranteeing payment for goods/services 

• Maturities: 30-180 days 

• Current Yields: 22-25% 

• Credit Risk: Bank guarantee plus underlying transaction 

• Tax Treatment: 10% withholding tax 

• Typical Allocation: 5-15% of money market fund portfolios for yield enhancement 
  

Money Market Accounts vs Savings Accounts 

Key Differences 

Returns: 

• Savings accounts: 2-5% annual interest 

• Money market accounts (MMF): 21-26% annual returns 

• Difference: 16-24 percentage points = 5-7x higher earnings 

Liquidity: 

• Savings accounts: Instant debit card/mobile app access 

• Money market funds: 24–48-hour redemption to bank account 

• Practical difference: Minimal (1–2-day delay) 

Risk: 

• Savings accounts: NDIC insured up to ₦500,000 per bank 

• Money market funds: Not NDIC insured but extremely low risk (investing in government securities and AAA-rated instruments) 

Minimums: 

• Savings accounts: ₦0-₦1,000 opening balance 

• Money market funds: ₦1,000-₦10,000 depending on provider 

Fees: 

• Savings accounts: Monthly maintenance (₦50-₦500), SMS alerts (₦200-₦500) 

• Money market funds: Management fees (1-2% annually, deducted from returns) 

Inflation Protection: 

• Savings accounts: 3% returns lose 30 percentage points to 33% inflation (massive purchasing power erosion) 

• Money market funds: 22% returns lose 11 percentage points to inflation (much better capital preservation) 

Practical Example 

Scenario: ₦500,000 emergency fund held for 12 months 

Savings Account: 

• Interest earned: ₦15,000 (3% annual) 

• Inflation erosion: ₦165,000 (33%) 

• Real value after 1 year: ₦350,000 purchasing power 

• Net loss: ₦150,000 purchasing power 

Money Market Fund: 

• Returns earned: ₦110,000 (22% annual) 

• Inflation erosion: ₦165,000 (33%) 

• Real value after 1 year: ₦445,000 purchasing power 

• Net loss: ₦55,000 purchasing power 

Difference: Money market fund preserves ₦95,000 more purchasing power than savings account on the same ₦500,000 capital despite identical liquidity needs. 

Money Market Funds in Nigeria to Consider

Based on latest available performance data, here are some of Nigeria's leading money market funds: 

Coronation Money Market Fund 

Current Yield: 23.74% (highest performing fund) Assets Under Management: ₦28.4 billion Minimum Investment: ₦10,000 Unitholders: 6,485 investors Redemption: 24-48 hours Why It Leads: Sophisticated portfolio optimization and expert timing in Treasury Bill auctions deliver exceptional returns while maintaining security. 

ARM Money Market Fund 

Current Yield: 21.97% Assets Under Management: ₦247.22 billion (largest among top performers) Minimum Investment: ₦1,000 (lowest barrier to entry) Unitholders: 73,000+ investors Redemption: 24-48 hours Key Strength: Massive scale reflects unparalleled investor confidence in stability and consistency. 

AIICO Money Market Fund 

Current Yield: 22.07% Assets Under Management: ₦22-23.9 billion Minimum Investment: ₦10,000 Unitholders: 2,965-3,100 investors Redemption: 5 working days Rating: A+(NG)f with stable outlook by GCR Ratings Portfolio: Diversified across fixed deposits, treasury bills, and commercial papers 

FBN Money Market Fund 

Current Yield: 21.77% Assets Under Management: ₦525.5 billion (second-largest fund) Minimum Investment: ₦5,000 Unitholders: 16,251 investors Redemption: 24-48 hours Manager: First Asset Management (subsidiary of First Bank Group) Advantage: Strong institutional backing and consistent performance 

United Capital Money Market Fund 

Current Yield: 19.98% Assets Under Management: ₦139.2 billion Minimum Investment: ₦10,000 Unitholders: Substantial retail and institutional base Redemption: 24 hours Rating: A(f) by Agusto & Co Focus: Capital preservation with moderate income generation 

Afrinvest Plutus Fund 

Current Yield: 18.02% Assets Under Management: Growing AUM base Minimum Investment: ₦5,000 Redemption: 24-48 hours Portfolio: 60% Treasury Bills, 35% bank placements, 5% cash Ideal For: Conservative investors prioritizing stability with easy entry 

PAC Asset Management - PACAM Money Market Fund 

Minimum Investment: ₦5,000 Redemption: 24-48 hours Manager: PAC Asset Management Limited (licensed by SEC) Portfolio: High-quality short-term money market securities Benefits: Capital preservation, quarterly interest payments, flexible entry/exit 

Tax Considerations 

Money market funds distribute net returns after deducting 10% withholding tax (except treasury bill portions which are tax-free). Your monthly withdrawal already reflects post-tax returns. No additional tax obligations exist unless income exceeds personal income tax thresholds requiring annual returns filing. 

Compounding vs Income Extraction 

Compounding Strategy: Reinvest all returns growing principal from ₦5 million to ₦6.187 million over 12 months (23.74% annual return). 

Income Extraction Strategy: Withdraw ₦98,917 monthly maintaining ₦5 million principal providing steady income stream. 

Hybrid Strategy: Withdraw ₦50,000 monthly (partial income) while reinvesting ₦48,917 monthly allowing principal growth from ₦5 million to ₦5.587 million over 12 months. 

Most investors over 40 prefer income extraction or hybrid approaches generating current cash flow. Investors under 40 typically compound returns maximizing long-term wealth accumulation. 

Who Should Invest 

Emergency Fund Builders 

Anyone who needs 3–6 months' worth of expenses readily accessible may be better served by money market funds rather than traditional savings accounts. The return differential is significant: earning 22% annually instead of 3% allows idle cash to compound meaningfully over time, preserving purchasing power while maintaining liquidity. 

₦500,000 emergency fund over 5 years: 

• Savings account: Grows to ₦580,000 (3% compounded) 

• Money market fund: Grows to ₦1,358,000 (22% compounded) 

• Difference: ₦778,000 additional wealth from identical capital 

Short-Term Savers (3 months - 2 years) 

Saving for weddings, car purchases, home down payments, or business equipment? Money market funds maximize returns without locking funds in fixed deposits charging early withdrawal penalties. 

Wedding in 18 months, saving ₦50,000 monthly: 

• Target: ₦900,000 

• Savings account result: ₦903,000 (negligible growth) 

• Money market fund result: ₦960,000 (₦60,000 extra toward wedding from investment returns) 

Business Operating Reserves 

Companies maintaining cash reserves for payroll, supplier payments, and operational contingencies should invest in money market funds. Keeping ₦20 million in zero-interest current accounts costs ₦4.4 million annually in foregone returns (₦20M × 22%) while money market funds offer same-day access when needed. 

Conservative Investors 

Risk-averse individuals uncomfortable with stock market volatility or bond price fluctuations find money market funds ideal. Stable NAV, government-backed securities, and daily liquidity provide peace of mind while delivering inflation-fighting returns. 

Retirees and Pre-Retirees 

Retirement portfolios should hold 40-60% in money market funds providing income, liquidity, and capital preservation. Unlike equities risking 30% losses or bonds locking funds for years, money market funds offer accessible capital for medical emergencies, family support, or lifestyle needs while generating competitive income. 

First-Time Investors 

Beginning your investment journey? Money market funds require minimal capital (₦1,000 with ARM), carry low risk, offer easy understanding (straightforward interest-like returns), and build confidence before exploring complex investments like stocks or real estate. 

Risks to Consider 

Interest Rate Risk 

If CBN cuts MPR from 27.25% to 20%, new treasury bills will yield 15-18% instead of current 20-22%. Money market funds must reinvest maturing securities at lower rates, reducing portfolio yields from 22% to 16-18% over 6-12 months as old high-yielding instruments mature. 

Mitigation: This risk is inherent to short-term instruments. However, money market funds adjust faster than long-term bonds, capturing higher rates quickly when increases occur. The average 90–180-day maturity means portfolios fully reset within 6 months reflecting new rate environment. 

Inflation Risk 

At 33% inflation, even 22% money market fund returns lose 11 percentage points in purchasing power annually. You're preserving capital better than 3% savings accounts (losing 30 points) but not genuinely building real wealth. 

Mitigation: Accept money market funds as capital preservation tools, not wealth building vehicles. Combine with equity investments (targeting 30%+ returns) for long-term wealth accumulation while money market funds anchor the portfolio providing stability. 

Credit Risk 

While money market funds invest primarily in government securities (zero credit risk), 25-35% allocations to commercial papers and banker's acceptances carry corporate credit risk. If Access Bank or MTN Nigeria faces financial distress, their commercial papers could default. 

Mitigation: Choose funds with conservative credit policies (ARM, Coronation, AIICO, FBN) holding 50%+ in treasury bills and only AAA-rated corporate instruments. Avoid funds chasing maximum yields through aggressive credit exposure. 

Liquidity Risk 

24-48 hour redemption timelines mean money market funds aren't instant like debit card withdrawals. During redemption, you cannot access capital for 1-2 days. In extreme market stress, redemptions could delay 3-5 days. 

Mitigation: Maintain ₦50,000-₦100,000 in regular savings accounts for truly instant needs (weekend emergencies, same-day payments). Use money market funds for 95% of emergency funds knowing 24–48-hour access suffices for most situations. 

Regulatory Risk 

CBN could impose capital controls, change money market fund regulations, or mandate redemption restrictions during financial crises. While unlikely, regulatory changes could impact liquidity or returns. 

Mitigation: Diversify across 2-3 different money market funds spreading regulatory risk. Monitor CBN policy announcements adjusting strategy as needed. 

FAQs 

What are money market funds? 

Money market funds (MMF) are mutual funds investing exclusively in short-term debt securities (treasury bills, commercial papers, certificates of deposit) maturing within one year. They currently offer great returns in Nigeria's market with 24–48-hour liquidity, combining savings account accessibility with substantially higher yields. Minimum investments start at ₦1,000, making them accessible to all income levels. 

Why are money market fund yields so high now? 

Current 21-26% yields reflect CBN's 27.25% Monetary Policy Rate fighting inflation. High MPR pushes treasury bills to 20-22% and commercial papers to 22-25%. These elevated rates flow through to money market funds investing in these instruments. Yields will decline to 12-15% historically normal levels once CBN cuts rates after inflation moderates to 15-20%. 

Are money market funds safe? 

Yes, money market funds are extremely low-risk. They invest 40-50% in government-backed treasury bills (zero default risk) and 50-60% in AAA-rated bank and corporate instruments. NAV remains stable at ₦1.00 unlike volatile equity or bond funds. However, money market funds lack NDIC insurance covering bank deposits, so technically they're not "guaranteed" like savings accounts. 

Should I move all my savings to money market funds? 

Keep some money in regular savings accounts for instant debit card access to true emergencies. Move the remaining 90-95% of savings and emergency funds to money market funds. The 22% vs 3% return difference is too significant to ignore, and 24–48-hour liquidity suffices for most needs. 

Can money market funds lose money? 

Highly unlikely but technically possible. If multiple fund holdings default simultaneously (extreme financial crisis), NAV could drop below ₦1.00. This has never occurred in Nigerian money market fund history because conservative investment mandates limit high-risk exposure. The probability is near-zero, making money market funds effectively capital-preserving despite not being guaranteed. 

Which money market fund should I choose? 

Consider these factors: 

• Highest yield: Coronation (23.74%) for maximum returns 

• Lowest minimum: ARM (₦1,000) for accessibility 

• Largest fund: FBN (₦525.5B) for institutional confidence 

• Fastest redemption: United Capital (24 hours) for liquidity 

• Easy entry: Afrinvest (₦5,000) for beginners 

All funds listed here are SEC-registered and managed by reputable firms. Choose based on your priorities. 

Conclusion 

Ready to start earning 21-26% on idle cash instead of 3% bank savings rates? Use nairaCompare to compare money market funds and review fund fact sheets showing exact yields, redemption timelines, and minimum investments. Calculate how much extra income your current savings balance would generate, versus your current bank rate. 

With options starting from ₦1,000, there's no barrier to taking control of your financial future today. 

Compare money market funds on nairaCompare and start investing today!

This content does not constitute financial or investment advice regarding money market funds or MMF investment decisions. Always review fund prospectuses, understand that money market funds lack NDIC insurance unlike bank accounts, assess personal liquidity needs, verify current yields directly with fund managers, and consult financial advisors before moving capital from savings accounts to money market funds. Past performance does not guarantee future results.