While no investment is entirely immune to economic turbulence, certain strategies and asset classes have historically proven more resilient and offer better potential for returns in the Nigerian context
Emmanuel Thomas l Saturday, April 18, 2025
LAGOS, Nigeria – The Nigerian economy is in turbulence, with statistical indicators very discouraging.
These negative statistics are influenced by fluctuating oil prices, currency devaluation, spiralling inflation, and policy shifts.
In such an environment, safeguarding and growing wealth requires careful consideration of investment options.
While no investment is entirely immune to economic turbulence, certain strategies and asset classes have historically proven more resilient and offer better potential for returns in the Nigerian context.
Understanding the Nigerian Economic Volatility
Before delving into investment options, it’s crucial to acknowledge the key drivers of economic volatility in Nigeria:
Oil Dependence: A significant portion of Nigeria’s revenue comes from crude oil exports. Fluctuations in global oil prices directly impact government revenue, foreign exchange reserves, and overall economic stability.
Currency Devaluation: The Naira has experienced several devaluations, impacting the purchasing power of individuals and the value of Naira-denominated assets.
High Inflation: Persistent high inflation erodes the real value of savings and investments, making it imperative to seek returns that outpace inflation.
Policy Uncertainty: Changes in government policies can create uncertainty and impact investor confidence across various sectors.
Security Challenges: Insecurity in certain regions can disrupt economic activities and affect investment prospects.
Navigating Volatility: Key Investment Principles
In this dynamic environment, adopting sound investment principles is paramount:
Diversification: Spreading investments across different asset classes, sectors, and even geographies can help mitigate risk. If one investment underperforms, others may provide stability or growth.
Long-Term Perspective: Volatility often presents short-term fluctuations. Focusing on long-term growth potential rather than short-term gains can help weather economic storms.
Inflation Hedging: Investing in assets that tend to maintain or increase their value during inflationary periods is crucial to preserve purchasing power.
Due Diligence: Thorough research and understanding of the risks and potential returns of any investment are essential.
Professional Advice: Consulting with financial advisors who understand the Nigerian economic landscape can provide valuable guidance.
Top Investment Options in Nigeria’s Volatile Economy
Considering the above principles and the specific characteristics of the Nigerian economy, here are some investment options that warrant consideration:
1. Real Estate:
Why it can be a good investment: Tangible asset, potential for rental income, and historically, property values in certain areas have appreciated over the long term, often acting as a hedge against inflation.
Considerations: High initial capital outlay, illiquidity (can take time to sell), potential for property management issues, and vulnerability to economic downturns affecting demand.
Location is a critical factor. For instance, properties in rapidly developing areas like Lekki in Lagos have shown significant appreciation.
2. Agriculture:
Why it can be a good investment: Essential sector with consistent demand, potential for high returns, government support initiatives, and a hedge against food price inflation.
Considerations: Vulnerability to weather conditions, pests, diseases, and the need for specialized knowledge and management. Investing through reputable agricultural technology (AgriTech) platforms can mitigate some of these risks by providing professional management and diversification across multiple farms.
3. Gold and Other Precious Metals:
Why it can be a good investment: Store of value, safe-haven asset during economic uncertainty, and a hedge against currency devaluation and inflation.
Considerations: No inherent income generation, price volatility based on global market sentiment, and the need for secure storage. Investing in gold can be through physical bullion, jewelry (though this might have lower resale value), or exchange-traded funds (ETFs) that track gold prices.
4. Dollar-Denominated Assets:
Why it can be a good investment: Provides a hedge against Naira devaluation. This can include investments in foreign stocks (through international brokers), dollar-denominated mutual funds, or even holding US dollars (though this carries the risk of theft and earns no interest).
Considerations: Exposure to international market risks, potential for fluctuations in exchange rates (though often beneficial in Nigeria’s context of Naira depreciation), and the need to understand international investment regulations.
5. High-Yield Savings and Fixed Deposits (with caution):
Why it can be a good investment: Relatively low-risk options for capital preservation, especially when interest rates are high.
Considerations: Returns may not always outpace inflation, and the real value of savings can still erode over time. It’s crucial to compare rates from different institutions and consider the tenure of the deposit.
6. Investing in Yourself and Your Skills:
Why it can be a good investment: Enhancing skills and knowledge can lead to higher earning potential and greater job security, providing a more stable financial foundation during economic uncertainty. This could involve acquiring new professional certifications, learning a high-demand trade, or pursuing further education.
Considerations: Requires time and effort but offers long-term benefits and resilience.
7. Carefully Selected Stocks (with thorough research):
Why it can be a good investment: Potential for high growth and dividend income. Some Nigerian companies with strong fundamentals and a track record of profitability may weather economic storms better than others.
Considerations: High risk and volatility, requires thorough research into company financials and industry trends, and the Nigerian stock market can be susceptible to macroeconomic factors.
Investing in a volatile economy like Nigeria requires a strategic and informed approach.
Diversification, a long-term perspective, and a focus on inflation-hedging assets are crucial. While options like real estate, agriculture, gold, and dollar-denominated assets offer potential resilience, thorough due diligence and professional advice are essential to navigate the risks and maximize returns.
Ultimately, the “best” form of investment will depend on an individual’s risk tolerance, financial goals, and investment horizon.
A well-balanced portfolio that considers these factors and the specific nuances of the Nigerian economic environment is often the most prudent approach.
