Nigeria’s double-digit inflation rate might be affecting your long term financial goals. It all boils down to the value of the money in your pocket in the context of meeting your needs. You can always earn more money but you must consider preserving the value of the funds you’ve made so far.
Here are five strategies for hedging against inflation.
Limit Your Wants:
The harsh reality of inflation is that you have to limit non-essential spendings. Or at least reorganize how you spend your earnings. You should spend more on experiences that will bring you long term happiness; and less on things that are unmemorable or harmful to your health. The key is knowing that there is always something you can do without.
Consider the Stock Market.
In many cases, companies are able to pass rising costs to consumers. So prioritize companies that are able to increase the prices of their goods and services without losing much demand. However, instead of throwing your money into one sector, or product, have a diversified portfolio by subscribing to an Index fund. Notwithstanding, I think you should limit your investments in the stock market if you are risk averse or not very knowledgeable about stock trading.
Seek Dollar Denominated Investments:
Earn in dollars or store some of your funds in hard currency; preferably in an actual account abroad. I think that the current regulatory environment in Nigeria is very unpredictable and you don’t want to be caught up in any policy change that will affect access to your funds. If you don’t have access to a foreign account, consider fintech companies that engage in Dollar-denominated investments. Sometimes people say that this strategy is risky because the Dollar could fall against the Naira. However, In deciding whether a currency is going to improve, you have to look at factors such as:
- Government revenue diversity.
- political stability
- Technological innovation.
- Human capital development.
- Political influence or power
So, leaving historical performance off the table, when you evaluate Nigeria and the US against these aforementioned factors, you have an idea which currency is going to be stronger in the next 3 years.
Improve your Ability to Earn More Money:
Despite raising inflation, you can still make enough money to meet all your financial goals. So, improve your body of knowledge by reading a lot and taking short courses that are relevant to your industry. Research best practices in your field and work towards closing those skill gaps. Or become an entrepreneur. Furthermore, be visible: Attend conferences, network with peers and use digital media to communicate your value.
Consider Leaving the Country:
“Alexa, please pay me Japa by Naira Marley”.
Have a global mindset. Leave Nigeria for a while, if you can. You can always come back. Be dedicated to the process of moving out of Nigeria. Don’t worry, the country would always be here (smiles, hopefully). But it’s not unpatriotic to move to another country. You could even become a digital nomad.
To conclude, I think that the future of your finances are somewhat dependent on how you manage the actualities of inflation in this country. But no matter what, as a Nigerian I am hopeful that Nigeria go better! Sighs!
About the writer
Tobi Amokedo is a pharmacist with an MBA. He works in medicine access, and blogs about personal finance, small business management, and self-development. He is also a renowned fashion stylist to boot! More recently, Tobi is a contributor in Glazia magazine’s latest issue. Get the magazine HERE.