It is true that your investments should have a long-term outlook if you want to stay profitable as an investor.
That brings the question of whether you should be investing in Naira in the first place.
With new fintechs making it possible to invest in assets across the globe and in different currencies from Nigeria, the options have definitely increased for today’s investors.
So, what’s the tee?
Methinks it is time for Nigerian investors to start taking a broader outlook in making their investments by leveraging the enormous advantage of technology to invest broadly and in a more diversified and secure way.
In other words, it’s time for investors to start looking beyond Naira investments if they are investing with a long-term outlook.
Inflation rate is higher than the average interest rate
As at March 2022, Nigeria’s inflation rate stood at over 15%.
Now, that might not be a problem in itself, but then you need to ask yourself how many traditional investment vehicles in Nigeria can give you at least 15% ROI?
Only but a few.
That means if you invest in an asset that gives you less than the prevailing inflation rate in Naira, your money effectively loses value.
It just doesn’t make sense.
Few Veritable assets for Diversification
The more you look at it, the more you begin to see that there are less and less performing investments for Nigerian investors today.
Majority of the assets are common institutionalized investments that lock your money in with little or no liquidity.
Apart from the few instruments offered by banks, brokerages and insurance companies, there’s not much meat left for ambitious beginner investors.
If you aren’t a sophisticated investor with a strong investor network and insider knowledge in Nigeria, then you’ll quickly become a small fish swimming against the tide and praying that the sharks don’t come for you.
You either take what’s available or you leave it. And if you try to play smart, you’ll quickly find yourself amongst the bandwagon throwing away their money at the many organized scams that have littered Nigeria’s investment space.
So, what am I saying?
You need to find new horizons. Nigeria and naira-denominated investments are just too limited for the ambitious investors with a long-term goal.
High Depreciation rate of the Naira
According to the International Monetary Fund (IMF), the long-term overview of the Naira’s depreciation since 1973 shows that the Naira loses 10.6% of its value annually.
Now, would you invest in a currency that loses over 10% of its value annually?
More so, when you consider the fact that Nigeria’s current interest rate stands at 11.5%, you begin to see a future that is not so profitable.
Invest for Cash Flow
I know some investors are stuck in their ways and just want to play it safe with the available Naira investment options.
Now, if you must invest in Naira, the way to go is to invest for cash flow instead of for capital gains.
Invest in assets that yield cash flow such as real estate, services, commodities, and Forex.
In other words, don’t sit on your Naira interest-bearing portfolio while praying that the economy doesn’t go to the dogs.
Be intentional about choosing investments that generate cash flow from the onset and you won’t get stuck.
Invest in Dollars
Recently, I was arguing with someone that I’d rather invest in a dollar instrument that gives me 10% annually for the next 20 years than a Naira instrument that gives me 15% annually.
That’s excluding plans to reinvest the yield. If you just want to consistently throw some change into some portfolio and hold for the future.
My argument is that if the Naira appreciates, your dollar investment doesn’t depreciate, as you could convert to Naira and still have a strong purchasing power.
Also, if the Naira depreciates, the value of your dollar investment appreciates against the Naira.
So, a win-win for you.
I don’t see any disadvantage in investing in a stronger currency like the dollars barring any crazy monetary policy from the pairing currency.