Where to Invest Money In Nigeria During Economic Collapse – Learn The Best Mutual Funds Investment Opportunities During Economic Recessions.
So far, the Dollar to Naira exchange rate has been stable for more than 10 months now, a positive trend that is directly tied to the bullish oil market, increasing foreign reserve and the introduction of an alternative and highly liquid FX market; investors and exporters window where the exchange rate is market driven.
Foreign investors confidence in the economy is also at an all-time high, at least you can see from the data presented on my post on how to make money from the stock market even when you can’t trade yourself.
Nigerian is no doubt an oil-driven economy, the short-medium term bullish oil price is the major factor driving the overall economic growth; thanks to the OPEC decision to cut production quota in 2016.
The US proposal to withdraw from the IRAN nuclear deal is another supporting factor that is believed to have driven the commodity market to newer higher (above $75), the market has already priced the possible US pull out knowing that Donald Trump had continuously criticised his predecessor on IRAN Nuclear Deal.
All these are big reasons, analyst are bullish on the crude oil in the short-medium term.
As of this writing, CBN foreign reserve is at $47b mark, a result of greenback supply from crude sales, foreign direct investment (FDI) (into the financial market) and sales of EURO bond, the federal government alternative source of funding infrastructural development at a lower interest rate.
While this news is attracting hot money into the economy and positive for NSE investors, it is no doubt exposing the economy to a greater risk that could outweigh the benefits if diversifications are on FG priority list. A larger percentage of the FDIs aren’t invested into long-term or developmental projects, but are channelled towards the financial market; these foreign portfolio managers are looking for short-medium returns from the equities and bond market.
The big risk here is that these foreign funds can easily be withdrawn from the financial market if an unfavourable news ( like Oil market fall, possible resumption of attacks on oil facilities in Niger Delta or political instability) breaks out.
Looking at historical trends when the CBN reserve growth was stalled and FDI suffered setbacks on oil production coupled with the fall in Oil price to an all-time low, we saw how the greenback (dollars) exchange rate to the Naira increased significantly to N500, a level that made importation difficult.
The stock market at that point fell as investors pulled out fund to a safer haven, capital flight was an everyday activity as foreign companies repatriate capital (in USD) back their home country while manufacturers restored to local farmers to sustain their business. The period was indeed a tough one.
However, even in tough and rough financial markets, you might ask, can one still find alternative profitable investment opportunities in Nigeria? My answer is “YES”
For those looking for opportunities in tough times, here is a look at the best-performing mutual funds to channel your funds to when the Dollars to Naira exchange shows another sign of increase:
FBN Nigeria Eurobond USD Fund
Although, it is usual that during an uncertain difficult period in Nigeria where USD/NGN exchange rate is rising faster, investors tend to buy into fixed income investment opportunities like the bond, and treasury bills. But, smarter investors like us invested in FBN Nigerian Eurobond, a USD denominated fund, a better place to invest to explore double return. The reason isn’t unconnected to the fact that the fund is fully invested in USD denominated debt instrument which doesn’t only offer a fixed interest income but enjoys a higher income from translation gain.
Translation gain is the gain that results when amounts stated in one currency are translated into another currency. Assuming you invested $1000 ($ = N305) into FBN Eurobond in 2014 with an annual interest rate of 7.5%, that’s like $75 receivable on your investment. As of this writing (2018), a USD = N360, that’s like an additional N55,000 added to your portfolio (N360,000 – NN305,000) and N108,000 ($75 x 4 x N360) interest income. You will notice that a major percentage of your portfolio gain will come from the forex conversion.
The profitability of this investment idea depends on the USD/NGN exchange rate, you are highly advised to always follow the oil market closely, economic and political activities for guidance on how the dollar exchange rate will play.
Personally, I feel this is one of the reliable fixed income investment (where to invest money in Nigeria during economic collapse) any parent can subscribe their kids to, why? despite the introduction of the investors and exporters windows, Nigerian is still an oil economy and such dependency makes us prone to a sudden economic shock, that may scare foreign investors.