Rising Inflation, Falling Naira: Where are Nigerians Investing?
To be free from macroeconomic pressures, you must have tripartite avenues for making money – at least. It is the habit of top rich people across the world, and a lot of people continue to ignore it. When a tripod earnings window is not enough to guide against the scorching sun of a financial mess, double up.
Naira is falling without hope, there is no indication that rising inflation will recede and businesses are facing the burden of high borrowing rates while energy costs continue to pop up.
The best people can do is to own businesses. With that, you have an open ticket to participate strongly in the financial markets – buying and selling financial products as a way to manage your company’s working capital. Why should you keep cash? You have no reason to!
For salary earners: how do you hope to improve your net worth if you dwell on monthly income without other sources of inflows? So, the salary is not enough and then what?
As an economic agent, it is either you get paid on monthly basis or you pay yourself by owning a business. Your next move depends on your understanding of how to invest that little cash instead of keeping it for point of sales (POS) withdrawals.
Using money to withdraw your money is the last wonder of the world! As you stare into the future, you might probably need a new thinking process on the need to invest your cash –whenever it comes.
First, why do people invest in the stock market? Is there anything someone knows that you don’t know? You might probably have to delve into the unknown to get insights.
Also, what is going on in the fixed income market? Depending on your investment appetite, debt instruments offer risk-free returns. Here, you don’t expect to alpha profit. Probably, you are taking no risk. The only issue you should watch out for investing in fixed income instruments is how exposed is the totality of your investment to inflation level.
A lot of Nigerians are not in the stock market either – you may probably have no stocks even from a company that you have become their brand ambassador based on your level of consumption.
What is better than owning part of the company that sells goods and services to you on daily basis? The last leg could have been the cryptocurrency market but it is currently illegal in Nigeria. READ: Nigeria’s Public Finance Starts Falling Since 2016 –Moody’s
Though, large numbers of Nigerians are in the crypto space which has become a crazy dark road adventure for late entrants into the market. Investing in naira-denominated assets is the last thing in the mind of a lot of Nigerians who understand how the inflation rate has eroded returns amidst worsening exchange rates.
But then, there is a blackout in the next haven- the cryptocurrency market with the worst performance after a series of market-related issues. Surprisingly, despite a 500 basis points increase in benchmark interest rate which pushed the monetary policy rate to 16.5%, the Nigerian stock market continues to gain traction.
Guess what, the average yield in the fixed income has been declining, though some analysts had hoped to see an upward yield repricing. What is going on? Pension Fund Administrators are pumping funds into Federal Government of Nigeria bonds, owing more than 60% of pension assets worth about N15 trillion.
It also appears that Nigerian banks are in buying mode as the Central Bank of Nigeria’s cash reserve ratio pressures slide, driving bullish momentum. The average yield on Nigerian Treasury bills fell from a peak of 11% to about 9% as investors began to take positions at the short end of the curve, according to traders.
Also, yields on Nigerian government bonds tracked lower, due to buying interest as the government, and corporate began to remit funds to pension administrators, pushing up demand for government instruments.
Overall, the stock market is everyone’s best bet but few Nigerians go to that terrain partly because of the quick return mindset and of course lack of knowledge about the proper functioning and usefulness of the stock market.
The caveat is: You can get burnt. Especially if you go by yourself without stockbrokers’ advice. In the fixed income market, you will be paid interest twice a year but that money is exposed to inflation rate movement.
Cryptocurrency trading is okay if you can monitor the market as executed trades form patterns over time. In sum, don’t keep the cash you don’t need immediately.