Let’s face it, Nigeria’s rising inflation plus lower options for high yielding investments are already driving a significant number of investors away from Africa’s leading frontier market. This is coming at a time when Nigeria’s top performing investment asset class for 2020 is currently having a year-to-date return of around -3.30%.
Recent data published by the National Bureau of Statistics (NBS) reveals Nigerian inflation rate surged to a 33-month high, as it rose further to 16.47% in January 2021 from 15.75% in December 2020. This is marks 17th consecutive month of rising inflation in the country.
Consequently, Nairametrics interviewed selected financial experts on the investment options best suitable for such macro.
That being said, it’s important to note that there are no guarantees when it comes to investing during high inflation. At best, such investments may be inflation-safe, but returns can never be guaranteed.
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Debo Adejana, MD/CEO, Realty Point Limited, Chairman, REDAN South West Zone.
At 16.5% inflation rate as of January 2021, the obvious is that there are very little short-term investments that can outperform that especially in the short term. So, that being said, my traditional conservative disposition of the fact that the best investment term is the long-term.
To make returns that will consistently be higher than 16.5% in short term investments will require very good knowledge of the asset class and share dedication.
If that is clear, then by my own understanding, the following are some of the possible investment areas or strategies to adopt with real estate being my most preferred asset class anytime:
- Financial player in a JV Property Development Scheme. This helps to save time and gives faster turnover of investment fund.
- Buying distressed property now, renovate, rent-out for 2years of more just to hold if necessary and sell after.
- Crowd owning/funding property deals
- Guaranteed rent discounting
- International property investment for positive cash flow and to enjoy foreign exchange appreciation
All the above can be done as a large ticket investor or little fractional holder using a well-structured and regulated vehicle.
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Darlington-Morsi Onyemaka, Co-founder, Quba Exchange
Inflation means that prices for things are rising, and as such the same amount of money buys less over a certain period of time. This in itself is especially not good for cash savings as the best way to manage inflation is by investing in instruments that give you a return higher than the current rate of inflation or at least one that keeps up with it.
The best kinds of assets to invest in during inflation are tangible assets that have fundamental values and as such, their worth measures up together with inflation. These assets include real estate, growth stocks, and commodities like food, crude oil, and gold (especially gold).
On the flip side, one should avoid long-term fixed-income investments. This is because the value of the underlying security falls as investors tend to focus on higher-yielding alternatives when the interest rates of that instrument start rising.
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Thelma Ugonna Ohiri-Anyanwu, CFA
Inflation is the increase in prices of goods over a period of time, where a specific amount of currency will be able to buy less than before.
In as much as inflation erodes the value of funds, this should not deter one from investing as some investment’s types are great hedge against inflation and helps to preserve capital. Some of such investments are Gold, REITs, real estate, commodities and a well-balanced stock portfolio.
Silas OZOYA, Founder/CEO SUBA Capital
Inflation in many ways affect the general health of a countries economy and her citizens literally and the only way out of inflation is continuous and increased investments in local production, expansion of existing local businesses and enacting fiscal policies that would strengthen the currency of such country.
To mitigate this, increased and persistent investment from all angles in Agriculture, local processing, and increased export would do a positive dent on our inflation rate and keep us far away from recession through job creation, wealth growth, food, and cash crop production at scale.
Nigerian’s home and abroad should consider investments that support economic growth through investments in Agriculture and agro-allied ventures.
Agriculture from my experience is one of the very few sectors that puts food on the table, employs people, and grows the value of your money against inflation all in one value chain.
The general public, high net worth individuals, and Nigerians abroad should consider holding at least 20% of their asset portfolio in Agriculture and agro-allied investments.
Angela Aya, Head, Institutional Sales at Alonati
There are a lot of investment opportunities for both the wealthy and not so rich investors in Nigeria, investors desiring to get an income or return on investment. Some are the FGN Savings Bonds, Stocks, Real Estate, Gold, Cryptocurrency, Agriculture etc. However, below are some investments that offer inflation protection:
Real Estate
Investment in real estate has been profitable and remains lucrative especially in Nigerian urban cities.
This investment however requires medium to high capital. Nigeria is still a developing Country in the world and the need for housing to match the Country’s increasing population size remains critical, as urban-rural migration continues to increase due to the neglect of development of the rural areas by the States and Federal Government.
The value of land and property has continued to rise and will continue to appreciate due to the margin between demand and supply as the need for residential and commercial buildings in major cities remains high.
Gold
Investing in gold has remained an agelong golden income space. The value of gold has continued to appreciate over the years because of the importance attached to it all around the world.
Gold remains an important symbol of wealth and affluence, and can be purchased as bars, coins or jewelries and resold at a higher price over time.
Bottom line
A disciplined investor can hedge against inflation risks by investing in the following asset classes that often outperform during high inflationary climates.
- Debo Adejina – Real Estate,
- Darlington-Morsi Onyemaka – real estate, growth stocks, and commodities like food, crude oil, and gold (especially gold).
- Thelma Ugonna Ohiri-Anyanwu, CFA – Gold, REITs, real estate, commodities and a well-balanced stock portfolio.
- Silas OZOYA – Agriculture and agro-allied ventures.
- Angela Aya – Real Estate & Gold.
I was keenly reading to see how much a #20,000 can invest and reap returns.
Thanks for the article. Now I know where to put my money. CFA, REITs,….. I wish you wrote them out in full. Not all of us are financial experts.
Interesting but its more like you were targeting the already rich who are looking for where to hide their money in estates…. I will appreciate rich article /analysis for any common man looking for alternative source of wealth, thanks .
God bless you
From my understanding, this article emphasised more on real estate development.
Those that have the money for Red are not looking for where to invest their money.
Investments under 500k would benefit most of your readers.
What do you think?
INSECURITY in the land is a major factor that is turning away foreign investors and discouraging local ones as well. How do you invest in agribusiness when kidnappings and wanton destruction of farmland by killer herdsmen is the order of the day. Also, not many people have enough disposable income for long term investment. Generally, the Nigerian economy is not a friendly climate for any meaningful investment. Many local investors are just doing it for love of country.
You’ve made analysis that will guild local investors not foreign investors. Right now we need foreign direct investment in the economy to lift it from the current state of her ordeal. This analysis also sounds great for those making so much from the economy. Presently there are few of those going by the harsh economic condition. Your analysis on agriculture is true, but then that also comes with the challenge presently being faced by farmers and herders. We need solutions to little investment that will help that common man whose salary has been slashed, to those who have lost their jobs in the period and want to invest to maximise profits that will help lift them from the ravaging poverty that have saturated the land. For all looking to invest. I have 4 words for you. Innovate, Plan, Action and Create. Gradually we will see an end to this.
From what I have read so far,I think the Nigerian economy is in complete comatose and this also proved that we have regressed instead of progress.
This further points at the fact that fixed income and other financial instruments through which one can make some cash at the end of each month has been eroded by inflation and hyperinflation. I feel for the poor and those who do not have opportunities to read up educating piece like this.
How can one crowd fund a project when no one trust his fellow brother either in business or in relationship? except we decide to change our views about business and choose the path of honesty like the indians and Lebanese do,if not we shall remain in the abyss.
in conclusion, I will further advise us to put out money in foreign currency such as Dormiciliary acct and landed properties pending when things get stabilised.