In Nigeria, the economic crisis has deepened with the removal of petrol subsidy and the depreciation of the naira, leading to a staggering inflation rate of 34 per cent, the highest in 28 years as of June. As families and individuals face challenges in meeting basic needs, a look into strategies to weather the storm becomes imperative.
The Nigerian populace has endured prolonged hardship, often attributed to poor leadership, corruption, and weak institutions. The situation exacerbated when President Bola Tinubu announced the end of the petrol subsidy regime in May 2023. This move led to a drastic increase in petrol prices from N238.11 per litre to N545.83 the following month, with further spikes to $1.17 per litre by June this year, according to the National Bureau of Statistics.
The economic turmoil worsened as the Central Bank of Nigeria floated the local currency, resulting in a 70 per cent depreciation over the past year to N1617.08/$. This shift significantly drove up the prices of essential goods, given the country’s heavy reliance on imports, particularly refined petroleum products.
Consequently, Nigerians are grappling with a cost-of-living crisis as high inflation erodes their purchasing power substantially.
Meristem, an investment firm, has identified several strategies individuals and families can adopt to navigate the current challenges.
Diversify Your Savings
Establishing a habit of saving is crucial for financial planning and preparedness. Savings act as a cushion for unforeseen financial obligations. For effective saving, Meristem analysts recommend categorizing your savings based on different goals such as emergency funds, holiday savings, and long-term investments to track progress and encourage consistent saving habits.
It’s common for people to keep all savings in a single account, making it challenging to differentiate between different saving goals when withdrawals are necessary. By segregating savings into distinct categories, individuals can monitor each goal’s growth accurately.
Trim Your Expenses
Amid the current economic climate, high living costs, particularly related to food, pose a significant challenge. Prioritizing expenses is crucial to identify areas where costs can be minimized. Strategies like reducing unnecessary outings, opting for virtual meetings, and cutting back on non-essential expenditures like refreshments and entertainment can help manage expenses.
Meristem also emphasizes the importance of conserving energy and utilities to curb expenses. Simple practices like turning off lights and appliances when not in use can lead to substantial savings over time.
Debt Management
As individuals seek financial relief amid currency devaluation, accumulating more debt, especially from high-interest sources, may exacerbate financial strain. Meristem advises creating a structured debt repayment plan to ease financial burdens and improve cash flow.
The debt snowball and debt avalanche methods are recommended for addressing debts during an economic downturn, with a focus on clearing smaller debts first for motivation or targeting high-interest debts to save on interest payments.
Diversify Income Streams
In times of economic uncertainty, diversifying income sources through services or products in demand can help build a financial safety net. Offering essential services like food processing, water supply, logistics, or educational services can generate supplementary income streams.
Exploring investment opportunities such as equities to hedge against inflation is also encouraged by Meristem as a potential strategy for wealth preservation.
Optimize Idle Funds
Leaving significant sums of money idle in bank accounts may not be optimal in an inflationary environment. Considering low-risk investment options that offer growth potential while maintaining liquidity can help preserve and grow idle funds.
Skills Enhancement
Enhancing skills and pursuing learning opportunities play a crucial role in coping with economic challenges. Developing new skills not only enhances income potential but also boosts career prospects. By offering value through acquired skills, individuals can adapt to market demands and potentially create additional revenue streams.
In conclusion, adopting these strategies can help individuals and families navigate the current economic uncertainties effectively. Prioritizing savings, cutting costs, managing debts, diversifying income sources, investing idle funds, and enhancing skills are key actions to weather the financial storm.