Olatunde Akanbi
Member
Investment that will protect your Money Against Nigerian Inflation
Inflation is one of the biggest enemies of your money. If you keep ₦1 million today and the prices of goods and services continue rising, that ₦1 million may buy significantly less in the future. So, you need to preserve your money. Here are some investment types worth considering.
Stocks:
Stocks can provide long-term protection against inflation because you are investing in businesses that can potentially increase their revenues, profits and prices as the economy changes. You can potentially make money through: Capital appreciation + dividends. But stocks can be volatile, and there is no guarantee that every stock will outperform inflation.
Focus on strong businesses, reasonable valuations and long-term investing.
Your Own Business:
Don't overlook this. A profitable business can potentially increase its prices and revenue as the cost of goods and services rises. If you have the right business model, investing in: Equipment, inventory, technology, marketing, etc. can potentially increase your ability to generate income. But a business is not automatically a good investment. It must be profitable and well managed.
Real Estate:
Real estate is another asset many investors consider when dealing with inflation.
Property values and rents can increase over time as construction costs, land values and general prices rise. You can invest directly in: Land. Residential property. Commercial property. But don't assume every property will appreciate. Location, title, infrastructure, demand and development potential matter.
Treasury Bills:
Treasury Bills are short-term government securities. They can be useful for investors who want relatively low-risk exposure and a defined investment period. However, here's the important part: Don't look only at the T-Bill rate. Compare the yield with the prevailing inflation rate. If inflation is higher than your investment return, your real purchasing power may still decline.
Money Market Funds:
Money Market Funds invest in short-term money-market instruments. They can be useful for: Short-term funds, liquidity needs, diversification, earning a return on otherwise idle cash. But returns are not permanently fixed. Rates can change as interest rates and market conditions change.
Fixed Deposits:
Fixed deposits can provide a predictable return for a specified period. They may be suitable for money you don't need immediately. But before locking your money away, compare the offered rate with: Inflation + alternative investment opportunities + applicable fees and taxes. Don't simply choose the highest advertised rate without understanding the terms.
Dollar or Foreign-Currency Assets
For Nigerians concerned about the effect of naira depreciation on their purchasing power, gaining legitimate exposure to foreign-currency assets can provide another form of diversification. Depending on your circumstances and available regulated channels, this could include: Foreign-currency deposits, global equities or ETFs and other legitimate international investments. But remember: The dollar can also fluctuate against the naira. And investing internationally comes with its own risks.
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Abiodun Olusola
Inflation is one of the biggest enemies of your money. If you keep ₦1 million today and the prices of goods and services continue rising, that ₦1 million may buy significantly less in the future. So, you need to preserve your money. Here are some investment types worth considering.
Stocks: Stocks can provide long-term protection against inflation because you are investing in businesses that can potentially increase their revenues, profits and prices as the economy changes. You can potentially make money through: Capital appreciation + dividends. But stocks can be volatile, and there is no guarantee that every stock will outperform inflation.
Focus on strong businesses, reasonable valuations and long-term investing.
Your Own Business:Don't overlook this. A profitable business can potentially increase its prices and revenue as the cost of goods and services rises. If you have the right business model, investing in: Equipment, inventory, technology, marketing, etc. can potentially increase your ability to generate income. But a business is not automatically a good investment. It must be profitable and well managed.
Real Estate: Real estate is another asset many investors consider when dealing with inflation.
Property values and rents can increase over time as construction costs, land values and general prices rise. You can invest directly in: Land. Residential property. Commercial property. But don't assume every property will appreciate. Location, title, infrastructure, demand and development potential matter.
Treasury Bills: Treasury Bills are short-term government securities. They can be useful for investors who want relatively low-risk exposure and a defined investment period. However, here's the important part: Don't look only at the T-Bill rate. Compare the yield with the prevailing inflation rate. If inflation is higher than your investment return, your real purchasing power may still decline.
Money Market Funds:Money Market Funds invest in short-term money-market instruments. They can be useful for: Short-term funds, liquidity needs, diversification, earning a return on otherwise idle cash. But returns are not permanently fixed. Rates can change as interest rates and market conditions change.
Fixed Deposits: Fixed deposits can provide a predictable return for a specified period. They may be suitable for money you don't need immediately. But before locking your money away, compare the offered rate with: Inflation + alternative investment opportunities + applicable fees and taxes. Don't simply choose the highest advertised rate without understanding the terms.
Dollar or Foreign-Currency AssetsFor Nigerians concerned about the effect of naira depreciation on their purchasing power, gaining legitimate exposure to foreign-currency assets can provide another form of diversification. Depending on your circumstances and available regulated channels, this could include: Foreign-currency deposits, global equities or ETFs and other legitimate international investments. But remember: The dollar can also fluctuate against the naira. And investing internationally comes with its own risks.
LIKE and SHARE this with your friends. Abiodun Olusola