In recent times, the global economy has experienced significant fluctuations, leading to currency devaluations and instability in various regions. Nigeria, a part of this global economic ecosystem, has witnessed its fair share of currency challenges, particularly with the naira. As a result, many Nigerians are seeking alternatives to safeguard their investments and financial future. One such alternative that holds immense potential is dollar investment.
“Why the dollar?” you may ask. Before we answer this, let’s discuss the naira and dollar.
A little about the naira and United States Dollar (USD)…
The naira has faced a history of significant volatility and depreciation, resulting in a loss of purchasing power for Nigerian citizens. This volatility can be attributed to factors such as inflationary pressures, economic uncertainties, geopolitical events, and fluctuations in global oil prices, as Nigeria heavily relies on oil exports. As a result, the value of the naira has experienced downward pressure, leading to a decrease in the standard of living for many Nigerians.
On the other hand, the USD has maintained relative stability and is widely regarded as a haven currency. The USD is the world’s primary reserve currency and is pivotal in global trade and finance. The stability of the USD can be attributed to several factors, including the strength of the United States economy, its status as a global economic powerhouse, and the credibility of its monetary policies. As a result, investors often turn to the USD as a safe investment option during economic uncertainty.
Now, why should Nigerians invest in dollars instead of naira?
Here are 5 reasons why Nigerians should consider dollar investments instead of naira:
- Currency Stability and Preservation of Wealth
Nigerians can protect their wealth from the negative impact of currency devaluation by investing in dollars, as the value of the USD is not solely tied to the Nigerian economy. The USD’s value is influenced by a range of global economic factors, making it less susceptible to the fluctuations of a single economy.
When the value of the naira declines, it erodes the purchasing power of your savings and investments. This can decrease the standard of living as the cost of imported goods and services increases. However, by diversifying their investment portfolio with dollar-denominated assets, Nigerians can mitigate the risks associated with currency depreciation and protect the real value of their investments.
- Capital appreciation
Furthermore, investing in dollars can also offer opportunities for capital appreciation. The USD has a long-standing track record of maintaining its value and, in some cases, even appreciating over time. This means that by investing in dollar-denominated assets, Nigerians have the potential to grow their wealth in real terms. This growth can provide additional financial security, opportunities for reinvestment, and the ability to achieve long-term financial goals.
- Diversification and Risk Mitigation
Investing solely in the local currency, such as the naira, exposes individuals to risks. The performance of any single currency is subject to various economic and political factors specific to that country. Nigerians can effectively reduce their exposure to the risks associated with a single currency by diversifying their investment portfolio with dollar-denominated assets. We wrote about how you can diversify your investments here.
- Access to global investment opportunities
Dollar investments provide an opportunity to tap into the global financial markets, which are more diversified and offer a wide range of investment options. The United States, in particular, has one of the world’s largest and most developed financial markets. By investing in dollars, Nigerians gain access to a broader range of investment vehicles, including stocks, bonds, mutual funds, and real estate.
Stocks: Investing in dollar-denominated stocks allows Nigerians to participate in the performance of leading international companies. This provides exposure to global economic growth and the potential for capital appreciation. With the U.S. stock market being one of the largest and most liquid in the world, Nigerians can benefit from a wide array of investment opportunities across various sectors.
Bonds: Dollar-denominated bonds offer Nigerians access to professionally managed investment portfolios spanning various asset classes and markets. These funds are typically managed by experienced fund managers who can make informed investment decisions on behalf of investors.
The U.S. bond market also presents attractive investment options for those seeking fixed-income assets. For example, U.S. Treasury bonds are considered among the safest and most secure investments in the world. Bond investment allows diversification across different industries, countries, and asset types, reducing the risk associated with concentrated investments.
Real Estate: Dollar-denominated real estate investments, such as international properties or real estate investment trusts (REITs), expose Nigerians to global real estate markets. This diversification beyond the local real estate market offers potential for capital appreciation, rental income, and long-term wealth accumulation.
Most importantly, diversifying these investment options (stocks, real estate and bonds) helps spread risk, as each asset class responds differently to economic conditions. Investing in dollar-denominated assets can help Nigerians benefit from global economic growth and mitigate the impact of domestic economic uncertainties. This diversification reduces the dependence on the local economy and can provide a cushion against economic downturns or volatility in Nigeria.
- Highly liquid
Investing in dollar-denominated assets offers the advantage of liquidity. The global financial markets are highly liquid, allowing investors to easily buy or sell their investments when needed. This liquidity provides flexibility, as Nigerians can quickly respond to changing market conditions or financial needs, ensuring their investment portfolio remains aligned with their goals and risk tolerance.
- International Trade and Business Opportunities
Nigeria’s economy is vibrant and interconnected with international trade and business. Engaging in cross-border transactions is common, and the USD plays a significant role in these transactions, as it is the world’s primary reserve currency. By holding dollar investments, Nigerians can gain a competitive advantage in conducting international business and eliminate the need for frequent currency conversions, thereby avoiding potential exchange rate losses.
In a rapidly changing economic landscape, Nigerians need to explore alternative investment options to protect and grow their wealth. Dollar investments, like Risevest, present a compelling option for Nigerians looking to safeguard their financial future.
Risevest gives you access to high-quality global investment opportunities like stocks, US real estate, and fixed income, which you can pick according to your risk appetite. You can also invest in all three asset classes. This way, you can spread your investment and tap into different economic conditions and markets, mitigating risks and getting better returns.
With our dollar-denominated investments, you can achieve all your financial goals with ease, while retaining the value of your investments. So if you haven’t created an account yet, start here. If you have, remember that investment is a journey you must stay committed to; hence, always ensure that you fund your investment and tap into the power of dollar cost averaging (DCA).