net asset value

Here is a mistake many Nigerians make without knowing it. Someone hears that a mutual fund's units are ₦120 each, and they compare that price to a bank stock trading at ₦20, and they calmly conclude the stock is cheaper and therefore the better buy. That comparison means nothing, because a fund's unit price and a company's share price are not measuring the same thing at all.

A share price moves on sentiment, on rumours, on how many people want in or out on a given day. Net Asset Value is calmer than that. It simply asks, if this fund sold everything it owns today, bonds, treasury bills, shares, cash, and paid off every debt and fee it owes, what would be left, and how much of that belongs to each single unit. Divide the fund's total value by the number of units in issue, and that number is the NAV.

Say a fund in Lagos holds ₦500 million in assets across government bonds and blue chip shares, owes ₦20 million in fees and expenses, and has 4 million units held by investors. Subtract the ₦20 million from the ₦500 million, leaving ₦480 million, then divide by 4 million units. Each unit is worth ₦120. That is the price you buy or sell at, not some number pulled from market gossip.

This matters for the aunty in London sending money home into a Nigerian mutual fund for her mother's upkeep. She is not gambling on hype, she is buying a slice of a basket of assets, and NAV tells her honestly what that slice is worth on the day she buys or redeems. It updates daily, usually after the market closes, once the fund manager totals up the day's values.

So the next time someone tells you a fund is cheap because its NAV is low, or expensive because its NAV is high, smile gently and remind them that NAV is not a bargain sign. It is simply an honest mirror of what the fund holds, nothing more.