Smart Ways to Save and Invest ₦100K in Nigeria (Even on a Tight Budget)

Based on the current state of the economy in Nigeria, the purchasing power of N100k has depreciated so much so that it seems almost impossible to say one can be able to invest N100,000 and expect to earn a significant profit from it. Although, through my experience there are still smart ways to save and invest N100k in a more profitable business.

If we want to ordinarily compare this amount to the current economic reality in Nigeria, it may seem nearly impossible to say one can start a business with just N100k. I’m not guaranteeing you that this is a sure way to get rich but I just want to share my own experiences with you and how things really worked for me.

Introduction

What can you possibly do with N100,000? This is the kind of question that after saving money as a young adult in Nigeria you realize you saved up to N100k. Before you venture into anything, you need to first ask yourself this particular question (what can you really do with N100k now that you have it at hand?

Look around your neighborhood, what’s the thing that people need in your locality but it’s hard to get? Did you spot anything? If you don’t then I will reveal my own strategy for investing N100k which is still yielding profit for me up to this moment.

Before we proceed let’s first define some of the key terminologies that we are going to be using in this article.

What is saving?

The term saving as used in the financial context refers to the act of preserving or setting aside whole or a portion of money or other assets primarily to be used or sold in the future.

The things we save are money, properties, minerals such as gold, diamond etc.

What is investment?

I will refer you to one of my articles “10 Golden Rules of Money Every Investor Must Follow to Protect Their Capital” I defined and explain investment in detail in that article.

However, when you buy an asset, stock, shares, goods and other tradable assets for the purpose of reselling them when their prices are high or we buy in one market to sell in another market in order to make profit, then we have invested our money.

Just as the title of this article suggests, we are going to first discuss the smart ways to save and invest from the N100k. Let’s first discuss how we can actually save part of the N100k before discussing how the remainder may be invested. Below are the smart ways you can save and invest the N100k:

Step 1: Build an emergency fund

Emergency funds similar to miscellaneous in budgeting are very necessary as it is meant for any unforeseen circumstances or unplanned but unavoidable circumstances or events.

The emergency funds are a kind of standby resources to fall back to whenever the unexpected happens. For example, a man who suddenly lost his job may be stranded but because he had saved an emergency fund he will likely fall back to it, pending when he or she may have gotten another job. It’s actually a layer of financial security.

To do this, you need to first set your goals clear for either three months, six months, nine months or one year.

Emergency funds are necessary for all classes of civil servants, military, business owners and investors.

Step 2: Clear or reduce high-cost debt (if any)

Clearing up all your overdue debts can help you to save money. This is because overdue loans attract penalties such as late fees and it may even affect your credit scores.

Having many loans running simultaneously may put a lot of financial pressure on you, so it’s better to reduce some, but if the money is enough then try to clear them up.

When you settle debts you are building a strong credit profile for yourself as well as your business.

When you pay loans before they are due, the logic here is that you are saving the money that you would have used to pay for the late fees if the loan remained unpaid even after the due date.

Step 3: Invest part in safe/low-cost instrument

Safe/low-cost investments are the ones that has some form of guarantees on the capital. When you invest your money in the safe/low-cost, your capital remains safe but the interest is just modest too.

For example, if you invest in government bonds, fix deposits, diversified index and certificate of deposits your capital remains very safe even though the interest it may have accrued may not be much as compared to other forms of investments. According to the a publication by the Debt Management Office (DMO) which also oversees federal government bonds, has assured that federal government bonds are very safe so we can rely on their claim or assurance and deal with it as a safer investment option. You can verify the claim here.

The Central Bank of Nigeria (CBN) also published it’s data on the federal government bonds which shows those who invested in a 10 year bonds will receive a 15.58% interest on their investment. And the current bond is also being offered at 14.56%. you can verify here.

Step 4: Invest part in higher risk/higher return option (local stocks, mutual funds, fintech apps)

It’s not good to invest all your money in one thing to avoid losing everything, even though some type of investments has a guarantee over capital but their Return on Investment (ROI) is not too encouraging especially for those who just have as little as N100k to invest.

After investing in safe/low-cost instruments, in my case what I did was to also invest in a very high risk assets which also has high returns such as mutual funds, FinTech apps and stocks. These are very high risk investment options but at the same time their Return on Investment (ROI) are equally high.

This way, if the high risk options perform better then you’ll likely collect a very high profit which may even cover the minimal interest that accrued on the low risk investments.

Step 5: Education and skill-building to increase income

Skills building and education are another ways to strategically invest and also save money smartly. There are new skills that can help you to save money and also increase your income streams which includes Artificial Intelligence (AI), Data management, software development and data analysis. Having knowledge in any of these new skills may help you increase your income because we are in a digital age where the skills are sought after on a daily basis.

Step 6: Set a path for growth (turn N100K into N1-2 m over time)

This is not a guarantee but it does work for me, and I will tell you the strategy I also used. When you invest for like three months and at the end your investment has yielded good profit, for me I re-invested the interest again.

By re-investing the interest and also spreading or diversifying them, both the previous capital and the new interest will yield compound interest for you.

This should continue in the same pattern, if we want to turn the N100k to N1.2m in no distant time. For instance, if my first investment yielded an interest of N20,000, I will re-invest the N20,000 in something else.

At the end of the second circle, both my N20,000 and my first investment would have yielded a compound interest for me. This circle of investment will soon turn the N100k to N1.2m though this isn’t a guarantee.

Mindset and discipline matter

In all of these, the investor may choose to do what pleases him. If you have a mindset or determination to invest it will yield results within no time.

My cousin Tyolumun, is a trader. He trades groceries in village markets, he will not eat until the close of the market because he doesn’t want to touch his income, he wants to come back and calculate all that he has made, then he may take something out of it and buy food stuff he can prepare by himself (minimizing expenses).

Mindset

An investor’s mindset is quite different from ours because he conditions his mind to control emotions and impulsive decisions and he tries to focus more on his long-term goals that could easily yield success rather than intelligence and market knowledge being relied on by others.

Did you know that emotions such as fear or sometimes greed could push one into purchasing goods at a higher cost and sell at a lower cost?

For example, I have been trading Palm Oil but because Mr. A sold soybeans for N200k per bag which he bought for just N50k, emotions could prompt me into thinking soybeans may keep performing well, so I decided to wait and buy soybean during the harvest time at N100k and it happens that it fails to perform well when I wanted to sell it, I may have ended up selling at N60k losing both my capital and interest at the same time.

Importance of mindset for an investor

An investor’s good mindset may help him in many ways, these include:

• Control over emotions: a good mindset may help suppress the twin emotions of both greed and fear which may help him in sticking to his long-term goals. This will help him avoid purchasing goods during speculative rallies and also prevents him from panic-selling just because of market underperformance which may not last long.
• Stick to a long-term goal: look at the crypto market for example, those who bought Bitcoin around 2012 and HODL till now May have sold it over $100k. They bought Bitcoin for less than $5 but just a year later the price crashed so those who did a short-term investment may not have profited from the investment compared to those who kept for 13 years.

Discipline

Discipline as used in this context is the avoidance of any external or internal impulses by simply maintaining a consistent application of the pre-planned investment strategies.

Discipline helps an investor not to derail from the strategies he has planned to use before hand not minding how juicy others may appear to be of more benefits.

Importance of discipline

Discipline may help an investor overcome many things some of which include but not limited to:

• Risk management: when an investor applies the concept of discipline, he rely on approaches that helps in minimizing risks such as diversification which may help protect his capital.
• Sticking to a plan: another way discipline helps an investor is by sticking to a plan. When you derail from your original strategy just because you’re influenced by what others suggested to you, it may cost you because you are learning a new strategy in the middle of your investment which may not be healthy. So sticking to the original plan you had before making an investment may be better.

Conclusion

Even in a volatile market period, if you diligently invest and manage N100k wisely it will definitely multiply. Focus on what works for you and apply discipline to avoid switching to strategies that you never planned to use.