Everyone feels cheated when they get to the market and the price of rice has increased without an equivalent increase in the quality or quantity of the rice. We make remarks like “Nawa oo”, “what’s the meaning of all these now”, “why is the government doing this?” and many more similar remarks. What we are basically not fine with is the general increase in the price of commodities and services – inflation.

Imagine a bag of rice cost N15k in 2017 and you kept your money, say N15k (the price of a bag of rice) with someone to safeguard and you returned in 2018 to get the money but instead of getting the N15k, you were paid N25k (the new price of a bag of rice). On the surface, your money grew but its value dipped. You haven’t made a real gain. All you got is still a bag of rice, the same you would’ve gotten in 2017, for almost double the price.

A real gain will be a gain above the price of a bag of rice in 2018. If you’d gotten N26k instead of N25k, your real gain would have been N1k

We dislike inflation because it erodes the value of our hard-earned money, shrinks our purchasing power and reduces our standard of living. We’ve used the example of a bag of rice to illustrate this but inflation applies to all things in the economy and that is why there’s usually an official rate of inflation for every economy. Currently, the inflation rate in Nigeria is 12.82% while it is less than 2% in the US.

What has inflation got to do with your investment?

Your goal of investing should be: 

  1. Getting a return that is above inflation rate i.e. real return and
  2. Increasing your purchasing power

A thin line separates these goals. By now, you understand what real return is from the bag of rice analogy. 

If the inflation in a given economy is 2%, any return on investment above 2% means the investor has earned a real return. The inflation rate in Nigeria as at August 2020 is 12.82% and it has averaged 15% between 1960 – 2019 and 12% since 2000.

Data from www.macrotrends.com | Analysis by Rise

Going by the data of the past 19 years, the implication for the Nigerian investor is that they must allocate their capital in a way that will give them a return that is greater than the average inflation rate of 12% over the same period and beyond.

Getting a return above the inflation level will help in fulfilling the second goal of investing. It basically translates to having enough to buy other things after buying the bag of rice (increased purchasing power). That is, a return that ensures you have an amount greater than N25k in our imaginary scenario. That way, you will have some change after purchasing a bag of rice to buy something else.

Where to get the maximum returns

Nigerians can’t rely on Naira based assets because of double-digit inflation and devaluation affect the currency. Two examples are the Nigeria Stock Market and Government Securities.

Historical data of the Nigeria market index shows that if you’d invested N30,000 in the market index in the past 11 years, you would be worse off today as your money is not even up to N30,000 anymore. Of course, we’ve said nothing of the value of the Naira currency in question.

The message here is simple, The Nigerian stock market doesn’t accomplish the goals of investing. It does not beat the average inflation rate of 12% nor increase our purchasing power over the years under consideration.

The other alternatives are investments in Government securities. The latest 10 – year bond securities offered by the FGN offer a ROI of 12.5%. Going by our average inflation rate, that’s just enough to cover for inflation over the period. What’s unknown is will the value of the Naira remain the same in 10 years time?

How Rise can help

We saw how inflation makes it difficult for Nigerians to build wealth and decided to create the product suited to address this situation. The investor in Nigeria is faced with 3 major problems, devaluation of the currency, inflation and low ROI on investment options. We created Rise to provide a cushion for these problems.

  1. Rise invests your money in dollar-denominated assets. The implication of this is that devaluation immediately begins to work in your favour instead of against you. With more devaluation, the value of your investment increases.
  1. Rise invests your money in an economy with a less than 2% inflation rate. Implying that all it takes to have a real return on your investment is about 3%.
  1. Rise investment plans give a minimum of 10% return on investment on the average. That’s well above the inflation level of the economy it is invested in.

With Rise, if you start investing say $500 every month into the assets we select for you, here’s what your long term journey will look like.

If you hold for like 30 years, even though you would’ve only contributed $180,000 to Rise, your investment with us will be worth $1.13m by then.

Rise’s goal has always been about you, helping you to attain your investing goal with ease. You don’t need to do the work of selecting assets, Rise has experts and algorithms to do this for you. Select a plan, automate it to invest a specific amount from your account monthly and we’ll take care of the rest.

Visit rise.capital to start.