Keep Calm & Invest in Dollars? Really?

Last week, the Nigerian Dollar black market started breakdancing over fears of possible Naira devaluation, linked to Coronavirus concerns and falling oil prices. For a brief time, Dollar was about N400 to the Naira. Thankfully, the Central Bank of Nigeria put out an official statement denying any plans for devaluation and the market self-corrected.

However, I am concerned about people who rushed to make Dollar-backed investments, without understanding their options, the potential risk and the suitability of such investments. So, here are some thoughts to chew on, if you’re considering Dollar based investments.

Understand the risk profile of what you’re investing in. There are low risk options like Dollar Eurobonds & Mutual Funds. You can access these products either through your bank or any asset management institution. Then, there are medium risk options like US Real Estate and finally, high risk options like US Stocks. I will share more on the last two options in the succeeding points.
There are apps that help you to invest in Dollar Eurobonds, Real Estate and Stocks from Nigeria, using Naira. You can operate these apps from the comfort of your phone and they include RiseVest, Bamboo and Chaka. But, please do your due diligence and be clear about the corporate entity in the US that holds your assets in trust for you. Should anything happen to you, also ask about the process of your family reclaiming your assets or funds. In addition, research the pros and cons of using each platform. They are not all the same.
Please do not invest in a high risk vehicle like stocks which requires knowledge, time and attention if you don’t have knowledge, time and attention. You will lose money. Instead, let a licensed stockbroker assist you and manage your account. In my investment cooperative, we work with credible stockbrokers.
When you liquidate any Dollar investment, ask whether you will receive your funds in Naira at the prevailing rate, or in Dollars via your domiciliary account? If it’s the former, you’re still at risk of currency changes in Nigeria, CBN transfer limits and the policy environment. Think about how to hedge the risk.
So, here’s my advice – do a mix of Naira and Dollar investments. Don’t just focus on Dollars alone, as you may miss some Naira opportunities available to you, based on fear. For Dollar investments, actively invest. Don’t just hold cash in your domiciliary account.

Finally, despite Coronavirus shocks to the economy, this is no time to panic. Rather, this is the time to plan and execute. You worked hard for your money. It shouldn’t be devalued before your very eyes, regardless of the circumstances.

Thanks for reading and please send me an email if you have questions!