Weak Naira, High Prices: Where are Nigerians Investing?
For the fact that you are a Nigerian, you are poorer than you were a few years ago if you are not earning dollars, making alpha profits or investing in inflation and devaluation covered investment options.
Many people wake up getting poorer without even knowing it – a discussion Nigerians are not having but they should. For now, it is the only political exposed people that are safe – maybe, a bit.
The price level isn’t friendly for the street, wages remain stable except for a few corporates, the naira is weak – down from N197 to N410 per dollar in six years.
Nigeria is in the midst of a local financial economic crisis – unlearned communities are worse off. But, trust the street survival instincts. However, macroeconomic data flatters out condition anytime we slip into a new level.
Few Nigerians are in the equity market, the aftermath of the disappointing financial crisis and Initial Public Offer in 2008.
For obvious reasons, there is no second time to make a first impression; telling a large number of Nigerians there is a massive opportunity in the stock market has turned to a herculean task. As the saying goes: How do you convince someone that a mad man killed his loved one that a seriously dirty mechanic isn’t a madman?
Limited financial products and poor communication apart from the attitudinal disorder for some Nigerians about money limit the size and depth of Nigeria’s financial market.
With all the twists and turns in the space, people are making a kill and covering up exposures to falling naira, and steep inflation.
Eventually, investors almost always have a balanced financial position – this has not been as impressive as 2019 but then it is something to work with toward better earnings days.
Investment is a habit of a selected set of people, and it probably explains why you are rich and I am poor – For many Nigerians, this is a discussion we are not really having.
Where are Nigerians investing their money to cover their exposures to high prices in the local markets? Naira has disappointed, lost appeal other than being a means of exchange – alone.
Gambling, cryptocurrency, stock market, fixed income instruments, real estate and trades are a few options for many people. With 33.3% of the labour force staying jobless, gambling has turned into a lucrative investment option- Here, it is 50-50 for participants.
“Get rich, or die trying”; after persistent losses, a large number of affected Nigerians would probably refuse to die. Survival instincts! Gambling is however thriving in the streets, and it has turned to a large economy but quite crude when compared with what’s available in Las Vegas – not a better comparison for our local dynamics, though.
In essence, there are classes of people that are trying to cover up their exposures to increased foods, housing and other basic needs.
Cryptocurrencies! Fantastic digital assets that still follow the same investing rules: buy low, sell high – not rocket science. The problem for traders is how to know when, where, and why they should buy.
For Nigerians, despite the fact that Nigeria has banned it, cryptoassets trading is ongoing and heavy. Decentralised finance could really be the future as policymakers have failed to keep Nigerians protected.
Imagine you wake up to find out your N1,000 is behaving as N500 when you want to make a certain purchase. Prices shoot!
Large numbers of Nigerians are trading cryptos to ensure they have money to survive in this tough economic condition. It is risky, but not as risky as not doing it – my take.
In the equity market, there have been bloodbaths in recent times. Investors’ fortune dropped off persistently and key movers and shakers are buying back their shares – they are not happy with how their performances are not bearing upon stocks movement.
There is heavy volatility but that’s where stockbrokers come in. Not so many Nigerians are here. The street doesn’t buy shares and wait for them to grow – which is often unpredictable but that’s the risk few wishes to take.
However, the stock market is a beautiful financial platform for Nigerians to make money, plan their long term projects and use it to design the desired future.
But Nigerian stock market at $50 billion capitalisation isn’t deep in dollar terms for an economy with a $400 billion balance sheet.
In the fixed income market, real returns earned by investors have been negative after headline inflation galloped for 19 consecutive months before it started to moderate.
Investment in this space is for those that have large amounts, high net worth individuals and institutional investors. They are okay with whatever is added to their fund, they don’t want to take risks with it.
If you want more, this may be the wrong platform except you are completely risk-averse. In this space, there seems to be financial repression.
The federal government is only willing to pay you a return on the invested funds below the inflation rate. Technically, your naira sum cannot still buy as much as it could buy yesterday. # Weak Naira, High Prices: Where are Nigerians Investing?
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