Investing in Nigeria is a tough one for all investors at the moment as hyperinflation keeps eating into investors’ funds, with inflation above 30% it would appear near impossible to see any investment that will return a sufficient ROI so as to beat inflation.
For any investor to have any positive returns on investment, that investment must have a return greater than the existing inflation . Surprisingly, some investments in Nigeria have defied the hyperinflation in the last one year to post real returns.
As the first quarter of 2024 runs out, it is still not too late to invest. Here are the Top Five place to Invest
The Money Market
Money finds no value staying at a fixed position. The job of money is to do work and return value at a rate that gives satisfaction to the investor. So, if you have cash seated somewhere, you need to put it to work to create value.
The money market is a financial market for short term securities for investors looking to get back their money within a short time. Investment durations range from one month to a year. Government securities such as the treasury bills and Open Market Operations(OMO) are money market instruments through which the government mops up liquidity within the economy. At the money market the government borrows money from the public to pursue various government monetary objectives such as reducing the money supply in the economy or to fund government expenditures.
Government securities traded in the money market are usually risk free as it is guaranteed by the authority of the state, who are unlikely to default on its own currency.
With the recent Central bank of Nigeria Monetary Policy Committee meeting in February and March where the MPR was increased by 400 basis to take the interest rate to 22.75 from 18.75% in February and by another 200 basis to 24.75% in March, the money market has become attractive, offering returns closer to the inflation rate. At the moment, the Money market is offering returns close to 21%.
Recently, The CBN 364 bills days tenor had a stop gate of 21.490%, the 91-day bills, 17.240% while that of 182-day bills at 18.000%. So far, all the bills have been oversubscribed. The 364 days tenor with an initially offer of N312 billion, was oversubscribed to N1.54 trillion, the 182 days initially offering N10.5 billion was oversubscribed to over N51 billion while that of 92 days N14.4 billion oversubscribed by over N66 billion.
If you are interested in the money market please speak to your banker and or your asset manager. You could also look up asset managers such as Stanbic IBTC Asset Management, UnitedCapital, Afrinvest and others.
The Nigerian Stock Exchange
The Nigerian Stock Exchange NGX has continued to record an incredible feat, surpassing inflation to be one of the most profitable Stock Exchanges in the world. In 2023 the Nigerian Stock exchange averaged a return of 45.90% to beat inflation, in 2024, the NGX is not looking to back down. Despite the renewed interest in government securities due to its improved yield, the Nigerian stock exchange continues to defy odds posting an impressive return in Q1 led by the stock of the FUGAZ( First Bank, UBA, GTB, Access Bank and Zenith). In Q1 0f 2024, the Nigerian Stock exchange is already up by 39%. In 2023 the NGX offered very good returns https://culturewealth.ng/why-you-should-invest-in-the-nigerian-stock-exchange-in-2024/
To Play in the Nigerian Stock exchange, please contact your stockbroker. You can also trade directly by purchasing through APPs such as Trove and Risevest.
Real Estate
Land assets continue to be a good hedge against inflation as the price of land keeps tracking inflation. During a hyperinflation as Nigeria is presently having, possessing cash is a wrong strategy as inflation will keep diminishing the value of your cash. It is necessary to find investment that will track the inflation rate- the value of the asset rising in the direction of inflation. Land is one such investment.
The Nigerian Real Estate is still in its infancy and still appears attractive. Speculating in land will always offer a good return on investment, especially in Southern Nigeria with its growing population. Search for land in emerging cities with sizable economic activities, ensure all regulations have been met before making any investment. Land values increase with time, the longer you leave it, the more its value appreciates. On the other hand, periods of hyperinflation are not suitable for construction as potential buyers would have had their funds eroded and will not be willing to make purchases.
If you are interested in purchasing a land, search for a reputable firm and purchase from. If you can find the owner of the land it would be much more better
Commodity Trading
Investing in commodities such as maize, soybeans, and other food items is a good way to hedge against inflation. Data shows that commodity prices increase as inflation does. Rather than keep your money at the bank, carefully select any commodity you are familiar with and invest cautiously into it. Commodity trading is very risky as it can blow up at any time. Approach with caution. If you have not dealt in commodities previously, speak to someone who has to guide you through the process.
Food Industry
No matter what the situation of the country is, the urge to eat will not reduce as it is a natural feeling. A recent report by Businessday shows that the restaurant industry continues to grow even as inflation surges. No matter what, people will continue to eat.
Always eager to read from Trice, truly he gave a great insight and I will surely explore that . Areas of interest Money market and commodity trade