Twenty-four million Nigerians were pushed below the national poverty line in 2023, due to sluggish growth and rising inflation, according to the World Bank. The National Bureau of Statistics (NBS) reported an inflation rate of 28.92 percent as of December 2023.
The persistent slide in the country’s currency contributes to its rising inflation which has caused a decline in the people’s standard of living. For example, some food items one could buy with N100,000 as of June last year now require a minimum of N168,000 in January 2024, report shows.
Financial experts we spoke to suggested a few ways to inflation-proof your finances as a Nigerian. For instance, here are five best ways to grow your wealth while inflation-proofing your finances.
Educate yourself
Analysts and experts have decried that financial literacy is scarce among Nigerians.
In a survey carried out by BusinessDay, many people said they don’t invest because they have zero or little knowledge on how to deal with inflation or even investing.
“A vast majority of Nigerians knows little or nothing about capital markets, let alone intricacies like interest rate or inflation and how it affects their finances.
“That’s why a lot of Nigerians will buy an iPhone 15 right now when the dollar is at its peak, without considering how less they could have paid if FX rates were lower,” an investment expert who preferred to be identified as Opeyemi said.
Thus, it is important to “stay informed about financial markets to make well-informed decisions aligned with your goals and risk tolerance,” Olawale Osowo, an associate of Chartered Accountants told BusinessDay.
Review your Budget and track your expenses
While reviewing one’s budget and tracking expenses may not have a direct impact on purchasing power, experts think it’s necessary to hedge against inflation.
Osowo said that “prioritizing essentials over non-essentials in your budget helps you adapt to rising costs and make plans for investments.”
Invest in high-yield returns
Inflation diminishes the buying power of the currency which makes it important to keep one’s buying power up.
“A good way to protect your finances is to invest in high-yield securities activities. It could be a business that gives you higher returns than the inflation rate, or within the same margin.
“You could also invest in already established businesses to help reduce the impact of inflation on your finances,” an investment expert said.
Osowo also encouraged investing in Stable Stocks as a means to preserve one’s purchasing power.
“Companies in FMCG and utilities are essential and often have an upside value that can withstand inflation. One thing to also look out for is the ones that are also dividend-paying,” he said.
Diversify your investment
Fadeelah Abiru, a financial expert at Marble Capital said, “diversification is a good way to inflation-proof your finances. Avoid putting your money in one class of investment.”
She also advised that Nigerians should think of investment as a long-term game. Rather than a quick money scheme, she says it is a means to “build wealth that grows over time”.
Osowo also advised that one should engage in real estate investment which appreciates over time, and protect one from inflation.
“Nigerians should also consider real asset investments like real estate or similar assets which tend to appreciate better than inflation,” he said.
Earn in a foreign currency
Abu Goodness, an investment expert, told BusinessDay that “there is hardly any Nigerian stock or bonds that can hedge you against the inflation rate at the moment.
“The easiest way to inflation-proof your finances is to preserve your money in dollars. Either save in dollars or invest in dollar mutual funds. Although, dollar stocks may be volatile,” he said.
“Given Nigeria’s economic uncertainties, investing in foreign currencies, like the US Dollar, can offer a way to safeguard your money.
“A good validation is that people who exchanged Naira for dollars in the last 9 months are almost 100 percent up on currency gain,” Osowo said.
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