Nigerians have always been fascinated by thoughts of being millionaires.
Never mind that your one million naira (NGN) is today worth 30 percent less than they were last week as the USD/NGN fell to N280 from N199 yesterday when the Central Bank finally floated the local currency.
You are not alone though as Africa’s richest man Aliko Dangote’s fortune fell $3.7 billion, on the Bloomberg Billionaires Index on Monday after the naira tumbled, knocking him to No. 71 on the Bloomberg ranking, down from No. 46 on Friday.
So if one had $1 million ($3,571), to invest right now what’s the best assets class or portfolio should one put his/her money into to work.
Diversified basket of NSE blue-chips
It’s always best to buy at the bottom and sell at the top. If you believe that Nigeria’s economic slump has hit a trough following reforms to the foreign exchange markets and downstream oil sector, it means company profits should begin to rebound as soon as the 3rd quarter and show up in higher stock prices.
The best place to invest N1m now would then be a 5 stock diversified portfolio consisting of Seplat (oil), Nestle (Consumer), Dangote Cement (Industrial), UBA, Access Bank or GTB (Financial) and Nigerian Breweries (Brewers).
Nigerian assets are cheap right now and stocks should attract inflow of capital from foreign investors going forward.
More importantly equities are a natural hedge against inflation.
With CPI reading at 15.6 percent for May, there are very few asset classes in Nigeria right now where one can get positive inflation adjusted returns.
With these stocks sporting dividend yields in the 3 – 12 percent range it is an additional incentive to own them.
Caveat: For these investments to score big it will depend on timing of entry and how long the investor holds. For example while the NSE all share index is up just 2percent, a stock like UBA is up 47 percent this year.