We all work very hard for little pay and still make conscious efforts to save up money for rainy days; a wise thing to do by the way. However, for those who think saving is all there is to financial management, you couldn’t be farther from the truth. What if I told you that something is “stealing” your savings right now? Indeed, your savings are being stolen! And not only should this worry you, it should also spur you to start investing today.
Imagine this Scenario: 24-year-old Tunde had recently landed a job with one of Nigeria’s tier-one banks. With his N200,000 per month salary, he is regarded as the latest big boy in town by his yet-to-be-employed friends. But Tunde will soon realise that his salary is nothing after all. He has expenses to take care of and this makes saving very difficult.
Let’s assume he manages to consistently save up N42, 000 from his salary every month, in two years, he’d have about N1 million in his savings account. Normally, this amount should accord the young man some level of financial security. After all, a million naira can accomplish quite a lot when it’s handy. But not in Nigeria though, because like I mentioned earlier, there’s this thing that specialises in “stealing” people’s savings and rendering them worthless overtime.
Something is stealing your money!
Indeed, something is stealing your savings and it is called inflation. That is one word nobody wants to hear, especially those who understand the real damage it can cause. One of those people is financial expert, Damilola Alonge, who recently lamented how “inflation is your big enemy.” Writing on LinkedIn, Alonge painted a really grim picture of how disastrous inflation can be with the following words:
“If you had N1 million in 2008 and it wasn’t invested, and the average inflation rate was 12% over the ten year period, your N1 million has now become N321, 973.24 in value. Meaning, your N1 million is now worth about N321k today.”
The unseen robber: You probably never saw that coming! Little wonder Margaret Thatcher defined inflation as “the unseen robber” which devalues our savings and our lives.
In Nigeria where the inflation rate is “stubbornly high” as Alonge puts it, it becomes especially difficult to make any meaningful financial planning dependent entirely on savings. Nothing else could ever be more frustrating for savers. It is even more frustrating than your bank folding up.
Let’s briefly go back to Tunde for a second. Imagine he was planning to use his savings for a project only to discover that it’s worthless, can you imagine how bad he’d feel? Imagine all the times he denied himself of immediate gratification just to save up, only for inflation to erode the value of his savings!
But there’s a way out
This is where investing becomes important. According to Alonge, a careful mix of assets in your investment portfolio could help you mitigate the unforeseen impact of Nigeria’s inflation. Now, depending on how deep your pockets are, the following investment plans can be considered:
Real Estate Investment Trusts: According to Investopedia, real estate equity can hedge against inflation by as much 69%. This is not surprising. After all, real estate assets are known to keep appreciating in value overtime, the same time inflation could very easily erode the value of all that money you are accumulating in a bank account.
Note that Real Estate Investment Trusts (REITs) are trusts or corporations that specialise in pooling capital from different investors for the purpose of purchasing and managing properties/mortgage loans. Look out for the company that offers the best REITs and start your investment today.
Select high-yield mutual funds: Investment experts will always advise that mutual funds make for a good investment plan that can withstand inflation. Not only are they diversified in nature (in that they are a combination of funds from different sectors of the economy), they also come with the advantage of professional management. You can rest assured that your investment will be professionally managed by qualified individuals.
Invest in Stocks and Bonds: A stock/bond portfolio can beat inflation by 69%. So, invest in high-yield bonds, high coupon bonds, and even floating rate bonds, if such are available. Also, invest in stocks that are known for paying high dividends. There are a couple of such that are listed on the Nigerian Stock Exchange.
Buy Gold and other commodities: Gold is also known for beating inflation. So, buy some of it if you can afford to. You can also consider buying a broad range of other commodities through ETFs. Vetiva Asset Management Company can help you in this regard.
In conclusion, never allow inflation to erode your hard-earned money. Savings are good, but you must save strategically and invest wisely. Let this serve as your eye-opener, just in case you didn’t already know.
Naira gains against the dollar at I&E window, as forex liquidity goes up by 358%
The performance of the naira at the I&E window, however, seems to contrast with that at the parallel market where the local currency lost N3 to a dollar as it depreciated to N450 to a dollar on Friday.
The naira has appreciated to N386.50 to a dollar at the Investors and Exporters (I&E) window, despite the uncertainty of the foreign exchange market. The local currency was strengthened by N0.20 against the dollar, when compared to the N386.70 to a dollar that it traded on Thursday, June 4, 2020.
The exchange rate at the I&E window is different from the Central Bank of Nigeria’s published exchange rate, which currently stands at N360/$1. This is also different from the exchange rate at the parallel market, which depreciated to N450 to a dollar, according to information on AbokiFX as of Friday, June 5, 2020.
Available information from the daily trading at FMDQ (where FX is traded by importers and investors) shows that the naira improved against the dollar by N1.25, closing at N386.50 to a dollar, as against the indicative rate of N387.75 to a dollar that it opened with on Friday.
A cursory look at the data from the FMDQ shows that the turnover for the day went up by about 358% at $112.89 million. This is against the $24.64 million turnovers that was recorded on Wednesday, June 3.
The performance of the naira at the I&E window, however, seems to contrast with that at the parallel market where the local currency lost N3 to a dollar as it depreciated to N450 to a dollar on Friday as against the previous day’s rate of N447 to a dollar.
The Central Bank of Nigeria had promised to provide more liquidity in the foreign exchange market, especially for genuine users while also discouraging currency speculators from heating up the market.
The apex bank yesterday debited the accounts of 25 commercial banks with the sum of N460 billion naira ($1.2 billion) as additional cash reserves for missing cash reserve ratio (CRR). Apart from serving as penalty to the banks, this also reduces the excess cash in the money market which might be used to put further pressure on the foreign exchange market.
Satoshi Nakamoto highly unlikely to spend his 1.1 million BTC
Bitcoin’s creator is highly unlikely to use his BTC, which has remained dormant since 2009, since the start of the flagship cryptocurrency.
The Patoshi Pattern exposes the privacy flaws of an earlier protocol, v.01, to show evidence of blocks designed by Satoshi Nakamoto.
According to Patoshi Pattern researcher, Sergio Demian Lerner, Bitcoin’s creator is highly unlikely to use his BTC, which has remained dormant since 2009, since the start of the flagship cryptocurrency.
Sergio Demian said:
“Assuming Satoshi is Patoshi, I believe, based on the history of Satoshi coins, that Satoshi won’t use his coins ever. Therefore, I think that there couldn’t be a fairer and a more philanthropic way for Bitcoin to be born.”
READ MORE: The odds against Bitcoin- Goldman Sachs
What you need to know about Satoshi Nakamoto: Bitcoin was created in 2008 by an unidentified individual or group using the name Satoshi Nakamoto, in 2009. The source code was released as an open-source code. The digital coin (BTC) is created as a reward for a process known as mining.
Last month, Bitcoin investors and traders invoked the Patoshi Pattern concept, to attribute 50 BTC mined during the early days of Bitcoin which suddenly moved last month, to the anonymous founder of the cryptocurrency.
Sergio Demian Lerner downplayed such a hypothesis, explaining that the block responsible for the 50 BTC fell outside blocks mined using the Patoshi Pattern.
The Patoshi Pattern depends on the assumption that Satoshi Nakamoto mined during the start of Bitcoin to confirm his concepts, and that he mined using v.01 of the Bitcoin Code.
Naira falls at the black market despite growing Nigerian foreign exchange reserves
According to the latest data obtained from the Central Bank of Nigeria (CBN), Nigeria’s foreign exchange reserves now stand at $36.57 billion.
The naira depreciated on Friday at the parallel segment of the foreign exchange market against the United States dollar. It sold at N450 to $1, compared to N447 against the dollar, which was recorded on Thursday as some importers rushed to meet their foreign exchange payment obligations before the close of the week.
In addition, it should be noted that just recently, Nigeria’s central bank had paused the selling of U.S dollars to foreign investors and manufacturers seeking to retrieve their funds at the height of the oil crisis. This was done in a bid to protect the value of the naira, according to reports credited to Bloomberg news.
“Remedial policy action was taken by the central bank and increased government borrowing will help contain liquidity pressures,” said Mahmoud Harb, a director at Fitch Ratings.
Meanwhile, according to the latest data obtained from the Central Bank of Nigeria (CBN), Nigeria’s foreign exchange reserves now stand at $36.57 billion, having increased sharply from $33.42 billion as of April 29, 2020. This shows a gain of $3.15 billion dollars in 36 days.
The macro fundamentals surrounding Nigeria’s major export, including the recent surge in crude oil prices to about $41, seem to have helped Nigeria’s foreign reserve to rise at such a steady pace.
However, according to data recently obtained from Bloomberg news, twelve-month naira forwards traded at N454.50 per dollar at 11.43 a.m. on Wednesday, down from a high N522.56 to the dollar on April 20. This shows that currency traders are bullish on the naira at the mid-term macro level.
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