What are the best investment options in Nigeria this year?
You’re probably asking this question if you are looking for ways to grow your wealth in 2021. You know the candidates often tossed up by investment advisors. But you’re not sure if they are best for the peculiar times we’re in.
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The truth is, not all the popularly touted havens for your money will give you returns worthy of your patience this year. That’s because current economic conditions and government policies have rendered some of these options less attractive.
For example, Federal Government bonds and other fixed-income securities may not generate the sort of returns you want. In the past, they came with interest rates exceeding 10%. But at the moment, these assets post percentage yields in the low single digits. That’s hardly better than just keeping your money in a bank account.
If you’re looking for the best way to invest money in Nigeria in 2021, here are some of the better things you should consider.
The real estate sector took a bit of a hit from the COVID-19 pandemic in 2020. Demand for property fell across most of the country, as would-be buyers held on to their funds or spent them on more basic needs.
A gradual return to normalcy this year should translate to increased activity in the sector, so there’s something to look forward to here.
There are several ways to invest in real estate in Nigeria. You may flip land for profit over the short term; or you could purchase property, hold it for years, and watch its value rise over time. Alternatively, you might opt to build something that you could rent out for residential or commercial purposes.
If you don’t have enough money to invest by yourself, you could partner with other people to get this done and share the profit among each other when it comes in.
Investors fleeing the low yield bond market have channelled their funds to buying up stocks instead. This, among other trends, contributed to the record-breaking performance of the Nigerian Stock Exchange in 2020.
If you invested ₦200,000 in Dangote Cement shares at the start of 2020, that investment would have been worth about ₦345,000 by the end of that year—a return of over 70%. If you purchased shares in Airtel for the same amount, their value would have exceeded ₦560,000, a return of more than 120%.
However, stock investing is risky business. Share prices can also plunge sharply within a very short time, erasing gains that have taken a long period to build. Get advice from a stockbroker before putting money in the stock market.
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Agriculture remains one of the best investment options in Nigeria. As data from the NBS has shown, it’s the sector most insulated against the recessions that the country has experienced in recent times.
But it’s a vast space, encompassing a huge variety of food and cash crops, livestock, and fishery, as well as the value chains that depend on these sub-segments. You want to be sure that you’re picking the right niche to invest your money in.
There are many paths to earning from agriculture. You could start a farm, fund a produce supply business, or establish an agro-processing firm. Or you may invest in a range of agri-businesses from wherever you are, using any one of the legitimate agritech investment platforms that exist in Nigeria.
Precious metals like gold and silver have remained a reliable store of value for millennia. They are trusted by people who seek refuge from currency devaluation and inflation, and the underperformance of alternative investments.
Many analysts believe that gold prices will rise significantly this year, owing to a convergence of factors affecting the global economy. You can position yourself to reap from this by purchasing gold-backed securities.
You don’t have to buy physical gold. Investing in gold Exchange Traded Funds (ETFs) should suffice. Gold ETFs are traded on the stock exchange just like regular stocks. But they’re different because they are backed by gold. These securities are available on both the NSE and foreign stock exchanges and may be accessed via stock trading apps like Trove and Bamboo.
Perhaps this isn’t the best investment in Nigeria—it’s very risky –but there’s the prospect that you’ll scoop a large return if the market develops one of its occasional super-bubbles.
For instance, the bitcoin price rally that peaked early in 2021 saw many investors reap returns that were multiples of what they had put in.
It’s worth repeating the warning that cryptocurrencies are a risky bet. Gains could be wiped out fairly quickly. You should watch the market trend before getting involved. Buy the dip (i.e. invest when prices fall); be wary of jumping in when a bubble is already building up.
We have presented you with some of the best investment options in Nigeria right now. It’s up to you to weigh these options and choose the ones that suit you.
Featured Image Source: The Guardian NG
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Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.