You kept your money in the bank thinking it’s the safest place in the world to prevent theft. Inflation is that mutual enemy that comes to steal the money in your bank account without firing a gun.
I am sorry to break it to you. No security sophistication employed by the banks can prevent inflation.
In this article, you will learn why you need to be at the forefront in the war against inflation when it comes to your personal finances. You will also learn about the best ways to fight inflation in Nigeria.
When you save money in the bank, you are telling the bank to secure your money from robbery attacks, thefts, etc and release it to you when you need it.
The bank is obligated to keep only a small percentage of that money in cash by law. They can give out the rest as loans to rich and influential customers or businesses. After making profits from the money you kept in the bank, In return, they give you a few percent as interest only when you do not withdraw out of your savings account more than 3 times in a month.
Now, the problem is that the rates the bank is willing to pay you to keep all your money with them without withdrawing is low compared to the inflation rate.
According to the Nigerian National Bureau of Statistics, the inflation rate in Nigeria for 2023 was 28.92%. This means that if you saved ₦500,000 at the beginning of 2023, by the end of the year, the value of your money had depreciated to ₦355,400.
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What is Inflation in simple terms?
Inflation is the general increase in the price of goods and services over a period of time. This means that your money buys less things over time.
If a refrigerator cost ₦157,000 in December 2022, with an inflation rate of 28.92%, the price of the same refrigerator will be approximately ₦203,000 by December 2023.
Perhaps you had plans to buy this refrigerator and you kept your money in the bank, by the time you were ready, ₦157,000 could no longer buy it.
Best Ways to Fight Inflation in Nigeria
The first two ways to fight inflation are actually ways to help you save more money. During a period of high inflation, you do not want to spend your money extravagantly.
Here are 8 ways to help you fight inflation;
1. Create a Budget
Budgeting is a handy finance tool that can help you cut unnecessary spending. In the fight against inflation, the first thing you need to do is to create a budget plan.
Calculate how much you spend monthly on rent and lock up the funds with a tool like Safelock on PiggyVest.
Assuming your rent is ₦400,000 annually, you need to save about ₦33,500 monthly. Immediately you receive your income, you need to deduct this money and lock up the funds.
The next step is to calculate how much you spend monthly on transportation, feeding, self care, internet data, Netflix, health insurance and other subscriptions. Get the figure and keep the money in your bank account.
Also keep some money for emergencies. You definitely do not want to be caught unawares
2. Buy Groceries in Bulk
Buying groceries in bulk at supermarkets is way cheaper than buying from shops in your street.
Supermarkets sell for cheaper prices and the more you buy, the more money you save. Buying in bulk also means less travel to the supermarkets which are usually not close to residential buildings.
3. Save your Money in a Stable Currency like the Dollar
The United States dollar is one of the most stable currencies in the world. In April 2023, the price of Naira to a Dollar was ₦742 to a Dollar. Exactly 9 months later, the Naira is ₦1,363 to a Dollar.
Saving in the US dollar shields you from inflation as a Nigerian earning in Naira. You can buy the US dollars at the black market and save it in your domiciliary account.
When opening a domiciliary account for this purpose, you should consider a bank that makes it easy to transfer and receive USD through their mobile app. This way, you can easily transfer Naira to your trusted BDC exchanger while he sends Dollar to your account without leaving your home.
Reach out to your exchanger and ask for the best bank for this service.
Note: If the price of USD falls below the price you bought it, you have lost money.
4. Earn in Dollars
Do you have a skill that is in demand in first world countries? This is the best time to start offering that service on freelancing websites like Upwork and Fiverr.
Apart from reaching an audience with a high purchasing power, you also get to earn in a more stable currency.
Earning in a foreign currency like the United States dollars while living in Nigeria is not just an inflation proof strategy, it’s one of the easiest ways to get out of the trenches.
When you receive your earnings in dollars, stick to your budget, buy your groceries in bulk and save the remaining earnings in Dollars. Do not convert to Naira unless you have valid reasons to do so.
5. Save in a High Yield Savings Account
A less risky way to fight inflation in Nigeria is to save your money in a high yield savings account. Most banks offer interest rates between 3% to 7% annually. A high interest savings account offers more than the usual interest rate.
Neobanks in Nigeria also known as FINTECH apps offer some of the highest interest rates in the country. This is so because FINTECH apps have lower operating costs compared to commercial banks.
Piggyvest has an annual interest rate of 12.5% on its Safelock feature. Fairmoney, a Nigerian loan app claims to have an annual interest rate of up to 24%.
If you are not comfortable with Neobanks, then you should consider the commercial banks you are familiar with. Visit any commercial bank branch and ask for their savings account with the highest interest rates.
6. Buy Stocks
According to a tweet by a finance analyst on X.com, investors who bought 1 million Naira worth of Chams PLC shares in January 2023, had made 9 million Naira by November 2023.
If you invested a million naira in Chams , a 🇳🇬 listed tech stock in the start of the year. Your investment is now worth at least 9 million naira after brokerage fees
— Olumide Adesina (@olumidecapital) November 7, 2023
Investing in the stock market is a great path to hedging your money against inflation and making lots of profits. However, you must have access to quality information at the right time to make money from the stock market.
The stock market can give huge returns higher than the inflation rate in a given year, it is also highly risky as investors can lose all their money.
With the advent of technology, you can buy stocks in a few minutes by downloading an app and clicking a few buttons.
If you are interested in investing in the stock market as a means to fight inflation, you can check out Wealth.ng, Stanbic IBTC stockbrokers, and Bamboo for foreign stocks.
7. Invest in Land Banking
Land Banking is a long-term real estate investment strategy that involves buying bare/empty lands, holding it for a while and selling it for profit.
Land is a tangible asset that retains or increases in value over time. You can buy some plots of land in a less developed area. As population and development comes to these areas, the value of lands and properties in these areas begin to increase. At this point, you can sell your lands or wait for a few more years.
The best strategy to use in land banking is to buy lands in areas where the government or private sectors are heavily investing in.
If you hear that an airport, refinery, port etc is about to be built in an area, it’s best to acquire lands within those areas as those projects will increase the value of lands there in no time.
It’s also best to buy lands through a properly vetted real estate developer. Lands sold by developers tend to appreciate faster because developers sell lands in bulk and also build amenities that increase the value of the land.
8. Buy and Store Gold
Precious metals like Gold have come a long way in human history. At some point, Gold and silver were used as a means of exchange for value.
The United States and the United Kingdom once pegged their currency to Gold as a means of avoiding inflation. This is proof that buying and storing Gold is a potential hedge against inflation.
Data on Macrotrends shows that an ounce of Gold sold for approximately $1520 at the beginning of 2020 and sold for $1895 at the end of the year. In 2023, the price of Gold had risen to $2063.
If you want to buy Gold in Nigeria, you can reach out to Abokis or visit popular markets in the country.
There you have it, 8 best ways to fight inflation in Nigeria.
What strategy should you go with?
The strategy you should deploy in fighting inflation depends on your risk appetite. How much risk are you willing to take?
Each of the methods listed in this article has different levels of risks attached to them.
If you are a high risk taker and you have the right knowledge, you can invest in stocks. With the right stocks, you can make 100% return on investment within a short period of time. Before choosing to go this route, remember that you can also lose all your money in the stock market.
For a less risky way to prevent your money from decreasing in value and getting a high ROI from your investment, the land Banking option is the way to go.
With land banking and a real estate company like PropertyScout to guide you on the lands and properties to invest in, you can never go wrong. Yes, that’s a bold statement we are making.
Buying lands in developing areas comes with lesser risks among the other options. The more patient you are, the more profit you make.
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