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The short answer
Nigerian mutual funds charge a yearly management fee and running costs (the TER), which SEC rules cap at 3.5% of NAV excluding incentive fees, and some also charge incentive, entry or early-exit fees. In our worked example, 2 percentage points more in yearly costs reduced a ₦1,000,000 investment by about ₦163,000 over five years.
Every Nigerian mutual fund charges fees, and they come out of your return whether the fund does well or badly. Some are taken quietly inside the fund every day; others are charged when you put money in or take it out early. Knowing which is which, where each is disclosed and what the SEC allows lets you compare funds on what you actually keep.
The main fee types
| Fee | How it is charged | Example from published pages |
|---|---|---|
| Management fee | A yearly percentage of the fund's net asset value (NAV), deducted inside the fund before the price or yield is published | ARM Money Market Fund: 1.5% of NAV (factsheet, Sept 2025); Stanbic IBTC Money Market Fund: 1.5% a year; FBN Money Market Fund: 1.25% a year (nairaCompare profile) |
| Total expense ratio (TER) | Management fee plus trustee, custodian, audit, registrar and other running costs, as a share of NAV | ARM Money Market Fund: 2.05% year to date (factsheet, Sept 2025) |
| Incentive (performance) fee | A share of returns above the fund's benchmark, for actively managed funds only | Capped by SEC rules; see below |
| Entry or processing charge | A percentage of each amount you invest, charged by some platforms | Cowrywise described a 1.5% processing fee on naira mutual fund deposits in a March 2022 help article |
| Early-exit charge | A charge for redeeming within a minimum holding period, often a share of income earned | Stanbic IBTC: 20% of accrued income within a 30-day minimum holding period; FBN: 20% of income if redeemed within 30 days (nairaCompare) |
These figures are as published on the dates shown and can change. Check the current fund documents before you invest.
What the SEC allows
The SEC's December 2019 amendments to its collective investment scheme rules set the main limits:
- Total annual expenses, including the management fee but excluding any incentive fee, must not exceed 3.5% of the fund's NAV a year (the previous cap was 5%).
- An incentive fee may be charged only by actively managed funds that beat their stated benchmark, on returns above the benchmark, up to 20% of the excess, and only once the fund's unit value has passed its previous high (a high-water mark).
- If a fund underperforms its benchmark, its management fee must fall by the same percentage by which it underperformed.
- Funds of funds and feeder funds have a lower cap of 1.5% TER.
The SEC's June 2020 follow-up circular added that incentive fees are not included in the TER calculation and are assessed and paid annually.
Where fees are disclosed
- Prospectus and trust deed: the legal source for every fee the fund may charge. The 2019 rules require the trust deed to state the expense cap and any incentive fee.
- Monthly or quarterly factsheet: usually the management fee, TER and minimum holding period.
- Fund page and app: entry charges, minimums and exit rules, though not always in full.
- Your statement: any charge deducted from your own transactions.
If a fee is not in the documents, ask in writing before investing. If you invest through an app that buys funds on your behalf rather than directly with the manager, there can be two layers of cost: the fund's own TER, taken inside the price, and the app's own charge on deposits or withdrawals. Ask for both, and add them together when comparing.
How fees affect returns: worked examples
These examples use invented returns to show the effect; they are not forecasts for any fund.
Ongoing fees over five years
Two funds hold the same assets, which earn 15% a year before costs. Fund A's yearly costs are 1% and Fund B's are 3%, so they return 14% and 12% a year. On ₦1,000,000 over five years, compounded:
- Fund A at 14% a year
- ₦1,000,000 × 1.14⁵ = about ₦1,925,415
- Fund B at 12% a year
- ₦1,000,000 × 1.12⁵ = about ₦1,762,342
- Cost of the higher fee
- about ₦163,073
Entry charge
At an example 1.5% processing fee, a ₦100,000 deposit costs ₦1,500, so only ₦98,500 starts earning. On regular small deposits this adds up quickly; see regular buying in naira.
Early-exit charge
You put ₦200,000 into a money market fund with a 30-day minimum holding period and need it back after 20 days, by which time ₦4,000 of income has accrued. At a 20% penalty on accrued income, you lose ₦800 and receive ₦3,200 of the income. The capital itself is not reduced under this type of charge, but check your fund's wording.
What to check first
- The TER, not just the management fee.
- Whether the fund charges an incentive fee, and against what benchmark.
- Any entry, processing or switching charge on your platform.
- The minimum holding period and the exact exit penalty.
- Performance after fees against the benchmark over several years.
For how the price you see already reflects fees, see mutual fund NAV explained, and for timing of withdrawals, how long redemption takes. The basics of fund types are in how money market funds work.
Questions people ask
What fees do mutual funds charge in Nigeria?
A yearly management fee and other running costs (together the TER), sometimes an incentive fee for beating the benchmark, and on some platforms entry or processing charges and early-exit penalties.
What is the maximum fee a Nigerian mutual fund can charge?
Under the SEC's December 2019 amendments, total yearly expenses excluding incentive fees must not exceed 3.5% of NAV. Incentive fees are capped at 20% of returns above the benchmark.
Is there a penalty for withdrawing from a money market fund early?
Often, within a minimum holding period. Stanbic IBTC describes 20% of accrued income within 30 days; check your fund's terms.
Where can I see a fund's fees?
In the prospectus and trust deed, and usually on the monthly factsheet. Platform charges appear on the app or website and on your statement.
Sources
- SEC Nigeria: New Rules and Amendments, collective investment schemes (23 December 2019) · accessed Oct 2026
- SEC Nigeria: New Rules on Collective Investment Schemes, circular (22 June 2020) · accessed Oct 2026
- ARM Investment Managers: ARM Money Market Fund factsheet (September 2025) · accessed Oct 2026
- Stanbic IBTC Asset Management: Stanbic IBTC Money Market Fund · accessed Oct 2026
- nairaCompare: FBN Money Market Fund profile · accessed Oct 2026
- Cowrywise Help: How referral bonuses work (17 March 2022) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.