Timothy Alaka | What You should Know about Personal Finance and Investment Opportunities

Finance is a very broad concept, however, it simply involves how money is acquired, spent, saved and/or invested. Consequently, personal finance involves how the individual acquires money (via earning or borrowing), how it is spent and how it is saved and/or invested. Thus, finance and investment are quite related.

Here are some things to consider about Personal Finance:

1. You don’t grow wealth necessarily by how highly you earn. Your spending is as important as your earnings.
2. You should know how much a budget can help. It is important that as you spend time planning and strategizing on how to make money, you must spend equal time planning and strategizing on how to spend and invest your income. NEVER spend without a budget.
3. Try to draw-up your budget in percentages rather than actual numbers. This will ensure that you can live within your means whether your income increases or decreases. Of course, this should be subject to review from time to time.
4. As much as you can, NEVER borrow for optional expenses. Borrowings should be strictly to secure investment opportunities or for financial/personal investment.
5. Know the difference between assets, liabilities, necessity, and luxury. These can be quite relative depending on your profession, career and priorities.
6. Having an extra source of income is non-negotiable and not excusable. Seeking to earn passive income will go a long way in ensuring you enjoy financial freedom early enough.
7. Always diversify your investment portfolio. There are a lot of risky investment opportunities – the principle of risk is the higher the risk, the higher the returns. However, Beware! Never put monies (yes, this term is correct) you cannot lose in high-risk investments. your rent, children’s school fees, emergency funds and borrowed funds should not be invested in high-risk financial instruments or schemes.

Now, let us examine some things to note about Investment Opportunities:

Traditional Investment Models in Nigeria are becoming very dynamic. Some trends in investments are as follows:

1. Fixed deposit rates have crashed to between 0.5% – 5% per annum, irrespective of how much is being invested.
2. Treasury bills rates have equally crashed to between 2.3% and 4.6% per annum, and it is pertinent to note that individuals without NGN 50 million and above cannot invest.
3. Mutual funds will also give you a maximum of 6% – 7% per annum in interest income.  
4. Now is the best time to borrow for working capital. Why? Because interest rates have crashed and if you are currently borrowing from a bank, you should negotiate your rates downwards. Lenders are under a lot of pressure now to support small businesses.
5. There are also other various intervention programs from the CBN to support small businesses. You can find some of the circulars on the official CBN website and talk to your Bankers for more information. These are at single digit rates.
6. Foreign Exchange (FX or Forex) is not only appreciating against the Naira; it is also scarce within the official CBN window. This presents major opportunities as companies – including well known multinationals, will begin to pay attention to backward integration.

Here are some key areas you may want to invest in:

In Nigeria, it’s NEVER wise to keep idle funds – especially in Naira. Inflation rate (12.9%) and the exchange rate (US$/N472 i.e. parallel/black market rate) are rising unreasonably – the value of the Naira is being eroded on a daily basis while deposit rates have crashed.

What are the opportunities? 

1. If possible, hold your funds in foreign currency; the Naira will most likely always depreciate.
2. Invest in Forex (FX). If you do not know much about it, you can click here for a quick beginner’s guide. There are other sources and platforms for you to learn about FX.  Bamboo is a very good platform to buy shares of international companies whilst also hedging against FX.
3. If you run a service business, you can benchmark your fees against the dollar. Again, you are hedging against Forex risks.
4. Invest in business opportunities; some viable opportunities will include the following:

1. Agric-tech companies (i.e. FarmCrowdy and the likes); Corn Investment is an area one should pay attention to considering the recent ban on its importation. 
2. Logistics and its value chain. (i.e. selling and distribution of bikes, vans, spare parts, trackers, training and recruitment of dispatch riders etc.)
3. Food business, in all its forms, is a good investment. 200 million people have to eat at least twice a day to survive. If you can feed only 1 million of those people, your investment will make massive profits.
4. Online training and education – this is very scalable — especially if you are well versed in an area of expertise that is in high demand. Copywriting, Power BI, Data Analytics, Microsoft Excel, and Web Design are some of those in-demand proficiencies.    
5. E-Commerce & Healthcare
6. Telecommunications & its Value Chain
7. Import and Export is another very viable opportunity. I should highlight that exportation of food and raw materials is quite lucrative, coupled with the fact that you can also earn in USD. www.shoptomydoor.com is an online logistics company that can assist with the logistics around export. There is a misconception that you need millions to start importing/exporting. You can actually start with as little as NGN 50,000 – 100,000 if you work with the right agents.
8. Crypto-currency is gradually gaining attention in mainstream finance. Ethereum and Bitcoin are quite worthy of mention. Note that it is even of higher risk since the ban in Nigeria so only go into it if you are extremely sure of it. Nevertheless, it is still a profitable source of income if done correctly and with adequate knowledge.

This list is not exhaustive, but it highlights a few areas we can look to for investment opportunities. Some of these investment opportunities can be started with as little at N10,000. In some cases, you can start with no capital at all, considering that the Internet of Things (IOT) has made these possible.

NB: Kindly also note that these are opinions and should not be construed as an investment recommendation or financial advice.

To conclude, you must remind yourself that, ultimately, it is God who gives the power to make wealth:

“…He did all this so you would never say to yourself, ‘I have achieved this wealth with my own strength and energy.’ Remember the LORD your God. He is the one who gives you power to be successful, in order to fulfill the covenant he confirmed to your ancestors with an oath.” – (Deuteronomy 8:17-18, New Living Translation)

Also, the wisdom and might for personal financial success belong to God:

“That night the secret was revealed to Daniel in a vision. Then Daniel praised the God of heaven. He said, “Praise the name of God forever and ever, for he has all wisdom and power.” – Daniel 2:19-20, New Living Translation

Therefore, you must acknowledge and honour God in your approach to managing your finances and investments. With increased wealth, you can bless other people and further support the work of the Kingdom here on earth.

You should also endeavour to increase your giving – especially in this season, even as you prudently manage and invest your resources:

“Give, and you will receive. Your gift will return to you in full—pressed down, shaken together to make room for more, running over, and poured into your lap. The amount you give will determine the amount you get back.” – Luke 6:38, New Living Translation

God bless you and have a lovely time growing in your finances!