7 ways to start investing on a low income in Nigeria

According to CSL Stockbrokers, the investment arm of FCMB, there are numerous investment options for Nigerians looking to grow wealth, even with limited income. Many Nigerians feel that investing is only viable for those with large sums or high salaries. With the national minimum wage recently raised to N70,000, some may believe that investing is out of reach, especially given the impact of inflation.

Rather than waiting for a high-paying job or a significant income boost, starting small can be more impactful. For those earning less, building wealth through investments becomes essential, as it provides a potential source of passive income over time.

For low-income earners, there are several investment options, including Exchange-Traded Funds (ETFs), Index Funds, Mutual Funds, Money Market Funds like Federal Government Savings Bonds, and carefully selected stocks. Making the most of these options requires developing solid financial habits and adopting a positive investment mindset.

Here are some key steps to help prepare before getting started.

Start saving consistently

For those on a limited budget, setting aside a small, regular amount is the first step toward investing. Even if it is just 10% of your income, putting this aside before other expenses can help develop a steady saving habit, prioritising future growth over immediate spending.

Clear high-interest debts

If you have outstanding debts with high interest, focus on paying them off first. Create a list of your debts and prioritise repaying the ones with the highest rates. This approach helps reduce the burden of debt and allows you to eventually redirect funds toward savings and investments.

Establish an emergency fund

An emergency fund is crucial to manage unforeseen expenses without interrupting your investment journey. Aim to save at least three to six months’ worth of living expenses. This fund acts as a financial cushion, ensuring that you can cover unexpected costs without tapping into your investment accounts.

Research affordable investment options

Look into investment opportunities suited for low income earners. There are low-entry investment options available, such as High-Yield Savings Accounts or Federal Government Savings Bonds, which offer a safe and accessible way to grow your money, even if returns may be moderate.

Create a budget

Budgeting allows you to track and control your spending, helping you save more effectively. A well-planned budget not only makes managing daily expenses easier but also enables you to allocate more towards savings and investment.

Begin investing

Once you have saved consistently, managed debt, and researched options, it is time to start investing. Many low-risk investment products allow for small entry amounts and offer better returns than traditional savings accounts. With open-ended funds, you can add more whenever you are able, and the liquidity allows access to funds when needed.

Diversify your portfolio and income sources

As you progress, consider diversifying across different investments, like stocks, bonds, and mutual funds. Having multiple income streams is a robust way to build financial security, and a diversified portfolio reduces the risk that any one investment’s poor performance will impact your financial goals.

This article was originally published by CSL Stockbrokers, the investment arm of FCMB.