I think you need to watch the investment plan well and recheck, i invest quite alright this year before i withdraw when i needed money , when you invest in investnaija mmf , you get the earnings everyday... i.e a certain percentage. Try to check the money mutual funds everyday, and see if there is cRead more
I think you need to watch the investment plan well and recheck, i invest quite alright this year before i withdraw when i needed money ,
when you invest in investnaija mmf , you get the earnings everyday… i.e a certain percentage.
Try to check the money mutual funds everyday, and see if there is changes.
I dont know if they have change the way the earnings comes.
MPR means Monetary Policy Rate. It is the benchmark interest rate set by the Central Bank of Nigeria (CBN). Think of it as a reference price for borrowing and lending money in the economy. Recently, at its September 21–22, 2026 meeting, the CBN reset the MPR from 26.5% to 23%, a reduction of 3.5 perRead more
MPR means Monetary Policy Rate. It is the benchmark interest rate set by the Central Bank of Nigeria (CBN). Think of it as a reference price for borrowing and lending money in the economy.
Recently, at its September 21–22, 2026 meeting, the CBN reset the MPR from 26.5% to 23%, a reduction of 3.5 percentage points (350 basis points). The CBN described the move as an operational realignment intended to improve how monetary policy is transmitted through the financial system.
So, how does this affect your money?
Think of the chain like this:
CBN lowers MPR – market interest rates may fall – returns on some interest-bearing investments may fall – borrowing may become cheaper – investors may reassess other investments such as equities.
But MPR is not the interest rate you personally receive from your bank or investment fund. A bank doesn’t suddenly have to pay you 23% on your savings account.
1. Savings accounts
If interest rates in the wider market decline, banks may eventually reduce the rates they offer on some savings products.
For example, imagine a bank was paying:
Before: 12%
After some time: 9%
That doesn’t happen automatically just because MPR moved from 26.5% to 23%; the actual rate depends on the bank and market conditions.
2. Money Market Funds
This is where the MPR cut can become particularly relevant to investors.
Money-market funds invest in short-term interest-bearing instruments. If market interest rates decline, the yields available on new investments can also decline over time.
So you might see something like:
MMF yield: 20% → potentially lower later
That doesn’t mean every MMF will immediately drop, because it depends on the securities already held by the fund and when they mature.
3. Equity investments
Equities work differently.
When interest rates decline, investors may find fixed-income investments relatively less attractive and some money can potentially move toward equities. Lower borrowing costs can also potentially support companies that rely on financing.
However, a lower MPR does not guarantee that stock prices will rise. Company earnings, valuations, inflation, exchange rates and investor expectations still matter.
That is a good question you know, Here is my opinion: The important thing is not to automatically move everything just because the MPR was cut. The CBN did reduce the MPR by 350 basis points, from 26.5% to 23%, at its 307th MPC meeting on September 22, 2026. Think of it like this brother, Before theRead more
That is a good question you know,
Here is my opinion:
The important thing is not to automatically move everything just because the MPR was cut.
The CBN did reduce the MPR by 350 basis points, from 26.5% to 23%, at its 307th MPC meeting on September 22, 2026.
Think of it like this brother,
Before the rate cut:
High interest rates – money-market investments can offer attractive yields – investors have less reason to take stock-market risk.
After the rate cut:
Lower interest rates – money-market/fixed-income yields may gradually decline – some investors may look toward equities for potentially higher long-term returns.
Market analysts have specifically discussed the possibility of investors rotating from fixed income toward equities following the cut.
So I wouldn’t think:
“MPR dropped → sell MMF → buy equities.”
Instead think:
MPR dropped – reassess whether my current allocation still matches my goals, time horizon and risk tolerance by doing self profiling.
Also, don’t assume every MMF yield will immediately fall. Fund yields depend on what the fund actually holds and the rates available in the market. For example, reported Nigerian MMF yields were already varying substantially across funds before this latest decision.
Let me give you a simple example so that you will understand,
Suppose you have ₦100,000.
You could conceptually have:
Option A — Conservative
₦80,000 MMF
₦20,000 equity fund
Option B — Balanced
₦60,000 MMF
₦40,000 equity fund
Option C — Growth-oriented
₦30,000 MMF
₦70,000 equity fund
The appropriate mix depends on when you’ll need the money and how much fluctuation you can tolerate, not simply on today’s MPR.
And remember: Nigerian equities have already had a very strong 2026 so far; the NGX All-Share Index was reported up about 61% year-to-date as of September 22. That means the rate cut is not happening in a market that is starting from zero
you also have to consider the prices of the investments you’re buying.
The main lesson: An MPR cut is a reason to review your portfolio, not automatically a reason to chase equities.
First, What is a Mutual Fund? because i also invest in it Think of a Mutual Fund as a big basket where thousands of people bring their money together. The fund manager (licensed professionals) now takes all that money and invests in things like Treasury Bills, Commercial Papers, Bonds, etc. So, instRead more
First, What is a Mutual Fund? because i also invest in it
Think of a Mutual Fund as a big basket where thousands of people bring their money together. The fund manager (licensed professionals) now takes all that money and invests in things like Treasury Bills, Commercial Papers, Bonds, etc.
So, instead of you struggling alone with ₦50k or ₦200k, your money joins others to play in the big leagues.
Back to your Daily Interest question (Money Market Mutual Funds)
Let’s use a real-life example: Money Market Mutual Fund on InvestNaija by Chapel Hill Denham.
If you put ₦1,000,000 today, the fund begins to accrue interest daily.
Let’s say your share of daily interest is ₦2,000.
Every single day, ₦2,000 is quietly recorded for you.
You won’t get an alert every morning like salary o. Instead, it shows as “Accrued Interest” on your dashboard.
After 3 months, your accrued interest might be around ₦180,000. At that point, the fund manager “pays” it into your wallet as units of the fund.
You can now:
Reinvest it (compound your money).
Or Redeem it (withdraw to your bank).
That’s how “daily interest” works, not cash-out daily, but your money grows silently every day.
Quarterly or Yearly Dividends (Other Types of Funds)
Not all mutual funds show daily growth. Some are designed to collect profits for 3 or 6 months, then share dividends at once.
This one is like farming: you don’t harvest tomatoes daily, you wait until harvest season.
But here’s where many people get it wrong.
In your bank savings account, if you need your money, you walk in and collect it immediately.
Why?
Because by CBN policy, banks don’t invest 100% of your deposits. They keep about 50% in reserve so that when customers rush in, they can always pay out.
But in a Mutual Fund, the fund manager invests the full money. They don’t keep “reserve” like banks.
That’s why if you request withdrawal today, it may take 24 hours or 48 hours before you get it, because they need to unwind or rebalance investments to release your cash.
So please don’t shout at your fund manager as if it’s a bank cashier. That’s how the system works.
in short: Daily Interest = Money Market Funds grow silently every day, you can redeem when you like.
Quarterly/Yearly Dividends = Other types of funds share profits in bulk, not daily.
Banks is not Mutual Funds. Banks keep reserves, funds don’t. That’s why withdrawals take longer.
Your capital in Money Market Funds is very safe, but the interest you earn depends on market conditions. sometimes it can pay 17%, 18% depending on the market
Think of debt leverage like borrowing money to make more money. For example, Mama Ridwon sells ponmo and has ₦100,000. She borrows another ₦50,000 to buy more ponmo because she knows she can sell it and make more profit. If that ₦50,000 helps her make ₦20,000 extra profit, while the loan costs her oRead more
Think of debt leverage like borrowing money to make more money.
For example, Mama Ridwon sells ponmo and has ₦100,000. She borrows another ₦50,000 to buy more ponmo because she knows she can sell it and make more profit.
If that ₦50,000 helps her make ₦20,000 extra profit, while the loan costs her only ₦5,000, the borrowing helped her business grow.
But if she borrows ₦50,000 and the business doesn’t make enough money, she still has to repay the ₦50,000 plus interest. That’s the danger.
So, simply:
Borrow money → use it to make more money → pay back the loan → keep the extra profit.
And about equity:
Borrowing money itself doesn’t increase your equity. The profit you make from using the borrowed money can increase your equity.
Note: Don’t borrow just because you can. Borrow when the money can reasonably make more money than it costs you.
If an IPO (Initial Public Offering) is undersubscribed and there is no underwriter, the main issue is simple: There aren't enough investors willing to buy all the shares the company planned to sell. Simple example to make you understand. Imagine a company wants to sell 10 million shares at ₦100 eachRead more
If an IPO (Initial Public Offering) is undersubscribed and there is no underwriter, the main issue is simple:
There aren’t enough investors willing to buy all the shares the company planned to sell.
Simple example to make you understand.
Imagine a company wants to sell 10 million shares at ₦100 each.
That means it wants to raise:
10 million × ₦100 = ₦1 billion
But investors only apply for 6 million shares.
So:
Shares offered = 10 million
Shares investors want = 6 million
Shortfall = 4 million shares
The IPO is undersubscribed by 40%.
What happens without an underwriter?
An underwriter is normally a financial institution that agrees, under the offering arrangement, to purchase some or all of the shares that investors don’t take up (subject to the specific underwriting agreement).
So if there is no underwriter, there is no party automatically obligated to take the remaining shares.
The company may therefore have several possible outcomes, depending on the offering rules and securities regulations:
The company raises less money than planned.
If only 6 million shares are sold, it receives ₦600 million rather than ₦1 billion.
The company may reduce the size of the offering.
It could accept the subscriptions received rather than issuing the full 10 million shares.
The IPO may be withdrawn or cancelled if the offering has a minimum-subscription condition that isn’t met.
The company may try again later, potentially with different pricing or offering terms.
Why is the underwriter important?
Think of it like this:
Company:
“I want to sell 10 million shares.”
Investors:
“We’ll only buy 6 million.”
With an underwriter:
“I’ll take responsibility for the remaining 4 million, according to our agreement.”
Without an underwriter:
“Nobody has automatically agreed to take those 4 million.”
So the company bears much more of the fund-raising risk.
Please Note that: An undersubscribed IPO doesn’t necessarily mean the company is failing. It simply means the demand during that offering was below the number of shares offered. The actual consequences depend on the IPO’s terms and applicable regulations made my exchanged body
Between a one time lump sum investment and monthly automated contribution which one is better From my own perspective. For instance you are to invest in money mutual funds and you want to invest at once with 100 million is a very good thing but let be realistic only few can do that but there is someRead more
Between a one time lump sum investment and monthly automated contribution which one is better
From my own perspective. For instance you are to invest in money mutual funds and you want to invest at once with 100 million is a very good thing but let be realistic only few can do that but there is something interesting in finance
it is called DCA, Dollar cost averaging. nvesting the same amount of money at regular intervals, regardless of whether the investment price is high or low.
DCA is not necessarily about having a better investment return. It’s a method for managing the timing and behavior of your investing.
Note: DCA doesn’t guarantee profit, and it doesn’t magically make an investment good. The investment itself still matters.
Also, if you already have a large lump sum available, putting all of it in immediately and spreading it out over time are two different strategies. DCA is particularly natural when you’re investing money that you earn month by month.
Inconclusion, Neither strategy is always better; it depends on where the money is coming from.
If you already have a large amount of money available: a lump-sum investment puts all the money to work immediately, giving it more time in the market.
If you are earning or saving money gradually: monthly automated contributions (DCA) are practical because you invest consistently without trying to predict the best time to buy.
Let me explain this better for you Imagine a company wants to raise ₦100 billion from investors. It may approach an investment bank or other financial institution and say: “Help us sell these shares.” The underwriter may agree that if the public does not buy all the shares, the underwriter will purcRead more
Let me explain this better for you
Imagine a company wants to raise ₦100 billion from investors.
It may approach an investment bank or other financial institution and say:
“Help us sell these shares.”
The underwriter may agree that if the public does not buy all the shares, the underwriter will purchase the remaining portion, subject to the terms of the underwriting agreement.
So the underwriter is basically helping the company guarantee that it can raise the targeted amount.
Example
Company offers:
₦100 billion of shares
Investors subscribe for:
₦80 billion
If there is a firm underwriting commitment covering the remaining ₦20 billion, the underwriter may have to take up that ₦20 billion, according to the agreement.
So:
Company → offers shares → Investors
and the underwriter stands behind the offer.
Why does the company need an underwriter?
Because it reduces the risk that the company will raise much less money than it planned.
But remember:
Underwriting does NOT mean the investment itself is guaranteed to make money.
It generally means there is a commitment concerning the sale/purchase of the securities being offered, according to the specific underwriting terms.
Do money market mutual funds pay returns every quarter in Nigeria?
I think you need to watch the investment plan well and recheck, i invest quite alright this year before i withdraw when i needed money , when you invest in investnaija mmf , you get the earnings everyday... i.e a certain percentage. Try to check the money mutual funds everyday, and see if there is cRead more
I think you need to watch the investment plan well and recheck, i invest quite alright this year before i withdraw when i needed money ,
when you invest in investnaija mmf , you get the earnings everyday… i.e a certain percentage.
Try to check the money mutual funds everyday, and see if there is changes.
See lessI dont know if they have change the way the earnings comes.
What is MPR and how does it affect returns on savings or investment generally?
MPR means Monetary Policy Rate. It is the benchmark interest rate set by the Central Bank of Nigeria (CBN). Think of it as a reference price for borrowing and lending money in the economy. Recently, at its September 21–22, 2026 meeting, the CBN reset the MPR from 26.5% to 23%, a reduction of 3.5 perRead more
MPR means Monetary Policy Rate. It is the benchmark interest rate set by the Central Bank of Nigeria (CBN). Think of it as a reference price for borrowing and lending money in the economy.
Recently, at its September 21–22, 2026 meeting, the CBN reset the MPR from 26.5% to 23%, a reduction of 3.5 percentage points (350 basis points). The CBN described the move as an operational realignment intended to improve how monetary policy is transmitted through the financial system.
So, how does this affect your money?
Think of the chain like this:
CBN lowers MPR – market interest rates may fall – returns on some interest-bearing investments may fall – borrowing may become cheaper – investors may reassess other investments such as equities.
But MPR is not the interest rate you personally receive from your bank or investment fund. A bank doesn’t suddenly have to pay you 23% on your savings account.
1. Savings accounts
If interest rates in the wider market decline, banks may eventually reduce the rates they offer on some savings products.
For example, imagine a bank was paying:
Before: 12%
After some time: 9%
That doesn’t happen automatically just because MPR moved from 26.5% to 23%; the actual rate depends on the bank and market conditions.
2. Money Market Funds
This is where the MPR cut can become particularly relevant to investors.
Money-market funds invest in short-term interest-bearing instruments. If market interest rates decline, the yields available on new investments can also decline over time.
So you might see something like:
MMF yield: 20% → potentially lower later
That doesn’t mean every MMF will immediately drop, because it depends on the securities already held by the fund and when they mature.
3. Equity investments
Equities work differently.
When interest rates decline, investors may find fixed-income investments relatively less attractive and some money can potentially move toward equities. Lower borrowing costs can also potentially support companies that rely on financing.
However, a lower MPR does not guarantee that stock prices will rise. Company earnings, valuations, inflation, exchange rates and investor expectations still matter.
See lessShould I rebalance my portfolio from money market funds to equity funds after an MPR cut?
That is a good question you know, Here is my opinion: The important thing is not to automatically move everything just because the MPR was cut. The CBN did reduce the MPR by 350 basis points, from 26.5% to 23%, at its 307th MPC meeting on September 22, 2026. Think of it like this brother, Before theRead more
That is a good question you know,
Here is my opinion:
The important thing is not to automatically move everything just because the MPR was cut.
The CBN did reduce the MPR by 350 basis points, from 26.5% to 23%, at its 307th MPC meeting on September 22, 2026.
Think of it like this brother,
Before the rate cut:
High interest rates – money-market investments can offer attractive yields – investors have less reason to take stock-market risk.
After the rate cut:
Lower interest rates – money-market/fixed-income yields may gradually decline – some investors may look toward equities for potentially higher long-term returns.
Market analysts have specifically discussed the possibility of investors rotating from fixed income toward equities following the cut.
So I wouldn’t think:
“MPR dropped → sell MMF → buy equities.”
Instead think:
MPR dropped – reassess whether my current allocation still matches my goals, time horizon and risk tolerance by doing self profiling.
Also, don’t assume every MMF yield will immediately fall. Fund yields depend on what the fund actually holds and the rates available in the market. For example, reported Nigerian MMF yields were already varying substantially across funds before this latest decision.
Let me give you a simple example so that you will understand,
Suppose you have ₦100,000.
You could conceptually have:
Option A — Conservative
₦80,000 MMF
₦20,000 equity fund
Option B — Balanced
₦60,000 MMF
₦40,000 equity fund
Option C — Growth-oriented
₦30,000 MMF
₦70,000 equity fund
The appropriate mix depends on when you’ll need the money and how much fluctuation you can tolerate, not simply on today’s MPR.
And remember: Nigerian equities have already had a very strong 2026 so far; the NGX All-Share Index was reported up about 61% year-to-date as of September 22. That means the rate cut is not happening in a market that is starting from zero
you also have to consider the prices of the investments you’re buying.
The main lesson: An MPR cut is a reason to review your portfolio, not automatically a reason to chase equities.
See lessDoes the NGX have an App?
Yeah i agree with you
Yeah i agree with you
See lessHow can I tell if my money market mutual fund investment is at a gain or loss?
First, What is a Mutual Fund? because i also invest in it Think of a Mutual Fund as a big basket where thousands of people bring their money together. The fund manager (licensed professionals) now takes all that money and invests in things like Treasury Bills, Commercial Papers, Bonds, etc. So, instRead more
First, What is a Mutual Fund? because i also invest in it
Think of a Mutual Fund as a big basket where thousands of people bring their money together. The fund manager (licensed professionals) now takes all that money and invests in things like Treasury Bills, Commercial Papers, Bonds, etc.
So, instead of you struggling alone with ₦50k or ₦200k, your money joins others to play in the big leagues.
Back to your Daily Interest question (Money Market Mutual Funds)
Let’s use a real-life example: Money Market Mutual Fund on InvestNaija by Chapel Hill Denham.
If you put ₦1,000,000 today, the fund begins to accrue interest daily.
Let’s say your share of daily interest is ₦2,000.
Every single day, ₦2,000 is quietly recorded for you.
You won’t get an alert every morning like salary o. Instead, it shows as “Accrued Interest” on your dashboard.
After 3 months, your accrued interest might be around ₦180,000. At that point, the fund manager “pays” it into your wallet as units of the fund.
You can now:
Reinvest it (compound your money).
Or Redeem it (withdraw to your bank).
See lessThat’s how “daily interest” works, not cash-out daily, but your money grows silently every day.
Quarterly or Yearly Dividends (Other Types of Funds)
Not all mutual funds show daily growth. Some are designed to collect profits for 3 or 6 months, then share dividends at once.
This one is like farming: you don’t harvest tomatoes daily, you wait until harvest season.
But here’s where many people get it wrong.
In your bank savings account, if you need your money, you walk in and collect it immediately.
Why?
Because by CBN policy, banks don’t invest 100% of your deposits. They keep about 50% in reserve so that when customers rush in, they can always pay out.
But in a Mutual Fund, the fund manager invests the full money. They don’t keep “reserve” like banks.
That’s why if you request withdrawal today, it may take 24 hours or 48 hours before you get it, because they need to unwind or rebalance investments to release your cash.
So please don’t shout at your fund manager as if it’s a bank cashier. That’s how the system works.
in short: Daily Interest = Money Market Funds grow silently every day, you can redeem when you like.
Quarterly/Yearly Dividends = Other types of funds share profits in bulk, not daily.
Banks is not Mutual Funds. Banks keep reserves, funds don’t. That’s why withdrawals take longer.
Your capital in Money Market Funds is very safe, but the interest you earn depends on market conditions. sometimes it can pay 17%, 18% depending on the market
Can debt leverage be used to increase equity in a business?
Think of debt leverage like borrowing money to make more money. For example, Mama Ridwon sells ponmo and has ₦100,000. She borrows another ₦50,000 to buy more ponmo because she knows she can sell it and make more profit. If that ₦50,000 helps her make ₦20,000 extra profit, while the loan costs her oRead more
Think of debt leverage like borrowing money to make more money.
For example, Mama Ridwon sells ponmo and has ₦100,000. She borrows another ₦50,000 to buy more ponmo because she knows she can sell it and make more profit.
If that ₦50,000 helps her make ₦20,000 extra profit, while the loan costs her only ₦5,000, the borrowing helped her business grow.
But if she borrows ₦50,000 and the business doesn’t make enough money, she still has to repay the ₦50,000 plus interest. That’s the danger.
So, simply:
Borrow money → use it to make more money → pay back the loan → keep the extra profit.
And about equity:
Borrowing money itself doesn’t increase your equity. The profit you make from using the borrowed money can increase your equity.
Note: Don’t borrow just because you can. Borrow when the money can reasonably make more money than it costs you.
See lessIs Investing ₦1 Million in Stocks Better Than Starting a Business in Nigeria?
Great Piece
Great Piece
See lessHow does an undersubscribed IPO work when there is no underwriter?
If an IPO (Initial Public Offering) is undersubscribed and there is no underwriter, the main issue is simple: There aren't enough investors willing to buy all the shares the company planned to sell. Simple example to make you understand. Imagine a company wants to sell 10 million shares at ₦100 eachRead more
If an IPO (Initial Public Offering) is undersubscribed and there is no underwriter, the main issue is simple:
There aren’t enough investors willing to buy all the shares the company planned to sell.
Simple example to make you understand.
Imagine a company wants to sell 10 million shares at ₦100 each.
That means it wants to raise:
10 million × ₦100 = ₦1 billion
But investors only apply for 6 million shares.
So:
Shares offered = 10 million
Shares investors want = 6 million
Shortfall = 4 million shares
The IPO is undersubscribed by 40%.
What happens without an underwriter?
An underwriter is normally a financial institution that agrees, under the offering arrangement, to purchase some or all of the shares that investors don’t take up (subject to the specific underwriting agreement).
So if there is no underwriter, there is no party automatically obligated to take the remaining shares.
The company may therefore have several possible outcomes, depending on the offering rules and securities regulations:
The company raises less money than planned.
If only 6 million shares are sold, it receives ₦600 million rather than ₦1 billion.
The company may reduce the size of the offering.
It could accept the subscriptions received rather than issuing the full 10 million shares.
The IPO may be withdrawn or cancelled if the offering has a minimum-subscription condition that isn’t met.
The company may try again later, potentially with different pricing or offering terms.
Why is the underwriter important?
Think of it like this:
Company:
“I want to sell 10 million shares.”
Investors:
“We’ll only buy 6 million.”
With an underwriter:
“I’ll take responsibility for the remaining 4 million, according to our agreement.”
Without an underwriter:
“Nobody has automatically agreed to take those 4 million.”
So the company bears much more of the fund-raising risk.
Please Note that: An undersubscribed IPO doesn’t necessarily mean the company is failing. It simply means the demand during that offering was below the number of shares offered. The actual consequences depend on the IPO’s terms and applicable regulations made my exchanged body
See lessIs a lump sum investment better than monthly automated contributions?
Between a one time lump sum investment and monthly automated contribution which one is better From my own perspective. For instance you are to invest in money mutual funds and you want to invest at once with 100 million is a very good thing but let be realistic only few can do that but there is someRead more
Between a one time lump sum investment and monthly automated contribution which one is better
From my own perspective. For instance you are to invest in money mutual funds and you want to invest at once with 100 million is a very good thing but let be realistic only few can do that but there is something interesting in finance
it is called DCA, Dollar cost averaging. nvesting the same amount of money at regular intervals, regardless of whether the investment price is high or low.
DCA is not necessarily about having a better investment return. It’s a method for managing the timing and behavior of your investing.
Note: DCA doesn’t guarantee profit, and it doesn’t magically make an investment good. The investment itself still matters.
Also, if you already have a large lump sum available, putting all of it in immediately and spreading it out over time are two different strategies. DCA is particularly natural when you’re investing money that you earn month by month.
Inconclusion, Neither strategy is always better; it depends on where the money is coming from.
If you already have a large amount of money available: a lump-sum investment puts all the money to work immediately, giving it more time in the market.
See lessIf you are earning or saving money gradually: monthly automated contributions (DCA) are practical because you invest consistently without trying to predict the best time to buy.
What does “underwritten” mean in relation to an IPO?
Let me explain this better for you Imagine a company wants to raise ₦100 billion from investors. It may approach an investment bank or other financial institution and say: “Help us sell these shares.” The underwriter may agree that if the public does not buy all the shares, the underwriter will purcRead more
Let me explain this better for you
Imagine a company wants to raise ₦100 billion from investors.
It may approach an investment bank or other financial institution and say:
“Help us sell these shares.”
The underwriter may agree that if the public does not buy all the shares, the underwriter will purchase the remaining portion, subject to the terms of the underwriting agreement.
So the underwriter is basically helping the company guarantee that it can raise the targeted amount.
Example
Company offers:
₦100 billion of shares
Investors subscribe for:
₦80 billion
If there is a firm underwriting commitment covering the remaining ₦20 billion, the underwriter may have to take up that ₦20 billion, according to the agreement.
So:
Company → offers shares → Investors
and the underwriter stands behind the offer.
See lessWhy does the company need an underwriter?
Because it reduces the risk that the company will raise much less money than it planned.
But remember:
Underwriting does NOT mean the investment itself is guaranteed to make money.
It generally means there is a commitment concerning the sale/purchase of the securities being offered, according to the specific underwriting terms.