General Elections to elect a new Nigerian President, Federal and State Legislators, and Governors were conducted in February and March 2023. Rewind to the start of 2022 – a pre-election year – some Nigerians nursed hopes that the government would increase its efforts to reduce poverty and unemployment, and improve the deteriorating economic environment. With dashed hopes, Nigerians watched as the country’s population growth continued to outpace it’s efforts towards poverty and unemployment reduction.

Why Should You Care

Nigeria is heavily dependent on oil for exports and revenues. Efforts to diversify foreign exchange sources, close the infrastructure gap, build strong and effective institutions, as well as address governance issues and strengthen public financial management systems, seem not to have availed much. Nigeria continues to face development challenges.

• Inflation now at 21% and rising, has led to a massive increase in the cost of goods and services, making it more difficult for people to afford basic necessities. Rising inflation has raised the cost of living and about 133 million Nigerians (63% of the population), are poor.
• The unemployment rate has also made it challenging for individuals to provide for themselves and their families. Young people have had it worse. Youth unemployment is currently at 43%. It was below 10% in 2015.
• Foreign exchange shortages have made it difficult for businesses to import goods, which has led to shortages and higher prices.
• Increased oil prices from 2021 amidst declining oil production and a costly petrol subsidy which is consuming a large share of gross oil revenues.

Nigeria’s economic challenges have led to higher prices, lower wages, and a decrease in the standard of living of the average Nigerian. The current state of the economy limits the government’s ability to invest in education, healthcare, and infrastructure. It is essential for you to be aware of the state of the economy to seek out ways to thrive despite these challenges. For example, following historical inflation trends, you can make postulations that everything you buy today may cost 2.5 times more in 10 years, and you might be right.

What you can do

The keys to thriving in this economy can range from planning ahead, to building, managing, and securing your wealth. You can start by doing the following.

1. Build up your emergency funds

Where you keep your money can have a significant impact on how much that money is worth over time. You can build your sleep-well and fall-back money – emergency funds – in savings accounts that earn interest, so your money gradually increases over time. It can be an effective way to combat inflation.

2. Track your spending

You will be even more effective with saving when you can track every spend. Check that you are not paying for a streaming service you don’t watch/listen to, going out to eat more than you cook at home, paying for a gym membership that hasn’t been used in more than a few months, etc. Trimming these sorts of unwarranted spending can reduce strain on your budget.

3. Live Within Your Means

Tracking your spending will enable you notice gaps in your spending and help you live within your means. If you make it a habit to live within your means during the good times, you are less likely to go into debt when food prices or other living expenses go up. Experts suggest that if you have a spouse and are a two-income family, try living off of only one spouse’s income. In good times, this tactic will allow you to save incredible amounts of money. In bad times, e.g., if one spouse gets laid off, you will be fine because you will already be used to living on one income.

4. Invest for the Long Term

That extra income that you are able to save can be put into investments.

• Stay Invested In Equities That Grow Over Time: The wisest thing to do in times like this is to stay invested, with a preference for assets that grow over time, such as equities. Equities perform best when inflation is between 2% and 4%. Invest in irreplaceable items. Things that cannot be easily duplicated. E.g., land and real estate. They perform extremely well during times of inflation because they cannot be easily duplicated.
• Review Your Investment Allocation: Check in with an advisor to guide you on the right investment allocation to match your risk appetite. Consider a moderate 60% equities and 40% fixed income asset allocation. Invest in entities that rise with inflation – commodities, treasury inflation-protected securities, shorter-term bonds, floating-rate instruments such as mortgage-backed securities, and collateralized debt obligations, precious metals (gold and silver), real estate and financial company stocks, as they may rise with inflation.
• Create A Mix of Investments: Create a mix of investments that differ from each other to keep up with rising prices. Diversifying across several different types of assets to help withstand a volatile stock market period is essential.

5. Increase Active and Passive Income

Increase your active and passive income at a rate greater than inflation to outpace it. Add to your full-time job an extra source of income on the side. Consider consulting, affiliate marketing, content creation. Diversifying your streams of income is as important as diversifying your investments.

The economy may be at a deplorable state and clad with challenges. However, you can thrive despite these challenges by following the steps above.

Do not just live, thrive!