“INFLATION: Your one million Naira today will be worth about N600K in the next one year”

With Nigeria’s inflation at 16.47 percent, the value of the naira in your savings account will likely continue to diminish if the inflationary pressure endures, says a financial analyst, Ayodeji Ebo in an exclusive chat with Nigeria Today recently.

According to Ebo, who heads Retail Investment &Investment Management Group at Chapel Hill Denham said the rate of inflation means that one million Naira today will only be worth a little over N600, 000 in the next one year if the trend persists.

He recommended that investors should leverage strategies that will help them stay above inflation rate or at least reduce the gap.

He said, “Investors need to change their perspective in terms of investments. Even if you are unable to invest above inflation, you need to look for investments based on your risk tolerance level. You need to look for investments that will help you reduce that gap. That is what the focus should be, because if you continue to invest with a very low-interest rate, then it means that your purchasing capacity will continue to erode.

“Putting it into perspective, if you look at inflation rate at 16.4 percent, it means your one million Naira today will be worth just about N600,000 in the next one year if it continues at this same pace or we can say your one million Naira last year is worth just six hundred and sixty-something thousand Naira today.

“What you can buy has reduced. What do you need to do to increase so you do not just put your money in a savings account where you are earning just one percent when inflation is at 16.4 percent?

“You need to leave your comfort zone, try other alternatives. Even if you cannot do commercial paper, can you do mutual funds if those will give you 2/3 percent? Can you look at stocks that will give you yields of about 8/9 percent?

“In essence, all efforts should be towards bridging that gap. I will not say you can cover the gap but that should be the major focus.”

According to him, food inflation drives high inflationary pressure because of insecurity in the country, and unless that is tackled, food inflation will continue to affect the headline index.

He said, “We know Nigerians are lamenting the impact of inflation. When you look at the January inflation at 16.47 percent, the major culprit is food inflation, which is above 20 percent. We know the current challenges the sector is going through. It is a surprise that the Agric sector improved in the recent GDP report, but we all know the security problem is a major risk to our food production, which will continue to affect the headline index.