Nigeria’s inflation rate rose to 32.7% in 2024, so it has become urgent to learn the best ways to protect your money from inflation. Insights from the 2024 PiggyVest Savings Report show us how inflation impacts everything, especially the cost of living. And with over 80% of Nigerians spending the most money on food and groceries, one thing is sure: inflation-proofing your cash is the only way to combat inflation in Nigeria.
Protecting your money begins with educating yourself about earning, spending, and investing. By reviewing your budget and diversifying your investments with a focus on high-yield returns, you can prevent inflation from eroding your purchasing power.
Here, we will walk you through practical strategies you can adopt to protect your money from inflation in Nigeria.
5 Ways To Protect Your Money From Inflation In Nigeria
1. Review your budget
A budget review is the simplest and most effective way to protect your money from inflation as a Nigerian. You want to thoroughly examine your budget to understand your spending habits throughout the week/month and identify the areas you can afford to cut back.
A budget review will help you combat inflation by providing insights on how to manage your money better. It will help you differentiate between your essential and non-essential expenses, optimise recurring subscriptions and charges on your account, and kickstart your journey to building an emergency fund.
2. Educate yourself
Financial literacy is vital to slow the effects of inflation in Nigeria. Understanding the basic rules of investing, saving, and budgeting can help you create a strategy to protect your income or wealth.
Take some time to study financial markets and how they evolve, and stay abreast of the economic trends and policies. This way, you can understand how investments perform during inflationary periods, how to manage risk and make necessary adjustments to your portfolio. If you can get a hold of an expert to answer your questions, that works too. For instance, if you subscribe to our Money Matters newsletter today, you can ask Odunayo Eweniyi your money questions.
3. Diversify your investments
Before you start your investment journey, remember that investing is not a get-rich-quick scheme, but a long-term endeavour, as risks are involved. As a result, you do not want to put all your eggs in one basket when investing.
A diverse portfolio of inflation-proof assets (assets that maintain the same value or appreciate over time) can help you hedge against inflation in Nigeria. And there are different types of investments in Nigeria. A few of them are:
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Stocks:
Buying stocks is a great way to protect your money from inflation. A stock is a tiny fraction of equity in a company, and like every kind of investment, buying stocks comes with a degree of risk.
Market conditions can cause the value of a stock to decline or appreciate, but good stocks tend to perform well in the long term. You can buy and sell stocks in Nigeria on the Nigerian Stock Exchange (NSE).
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Bonds:
A bond is a fixed-income security that constitutes a loan lent to a government or institution for a period and is typically used to finance projects, especially with government-issued bonds used to supplement revenue or makeup budget deficits.
Most bonds are lower-risk investments, where investors are regularly paid interest and receive their investments at an agreed-upon maturity date.
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Real estate:
In Nigeria, real estate is one of the more common types of tangible assets. It is a property type that consists of land and/or the building(s) on it. Apart from bare land, real estate can be residential, commercial, industrial or special-purpose property.
Property rights give you ownership of the land and its fixtures. In real estate investment, you earn interest as the value of the land appreciates or from renting or leasing the property. So don’t just buy real estate for the sake of it; strategically purchase property in fast-developing areas, and the value of your property will appreciate over time.
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Mutual funds
Mutual funds are another innovative way to protect your money from inflation in Nigeria. It is a type of investment where individuals pool funds together to buy assets like stocks, bonds, money markets, etc. When you buy shares in a mutual fund, you become a co-owner of all the securities in the fund’s investment portfolio. The fund’s value depends on the performance of all your assets, and a mutual fund manager oversees this portfolio.
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Other commodities:
Many commodities are inflation-resistant as their intrinsic value comes from constant demand and global appeal. Tangible assets like gold and silver are examples of hard commodities that constantly increase in value, particularly in inflationary times. Nigerians can also invest in energy commodities (e.g., crude oil) or soft/agricultural commodities like soybeans, millet, sorghum and millet.
5. Focus on high-yield returns:
In inflationary times, you do not want spare cash idling in your account, losing purchasing power by the day. Focus your efforts instead on high-yield savings and investments to mitigate the effects of inflation on your finances.
PiggyVest has a selection of savings and investment options available depending on your goals. Investify provides vetted investment opportunities with sweet returns. You can also automate your savings and build financial discipline with PiggyBank or save for your rent using HouseMoney, all while earning good interest.
5. Increase your income streams:
Having more disposable income adds to your financial security. Interest from stocks, bonds, commodities and other investment types are great passive income sources, but there are different ways to expand your earning power further.
The more money you make, the more you have to spend, save and invest. And there are many side hustle options to explore in Nigeria. One great way to hedge against inflation in Nigeria is to earn in a foreign currency if you’re fortunate enough. You can earn more from leasing property, earning royalties on your intellectual property or starting a small business.
Inflation-Proof Money Strategies For The Average Nigerian
Inflation-proofing your finances is the surefire way to survive Nigeria’s economic uncertainties. To protect your money from inflation, you’ll need an approach that encompasses a personalised selection of the different saving and investment strategies listed above.
While these strategies might not relieve the current economic pains in Nigeria, they can help you attain some stability and be better equipped for the future.
