fixed deposit August 10 2024 | 7 mins read

Experts Predict 21% Decline in Naira in the next 5 Years: What to Do!

A recent report by coinindex predicts a potential decline in the value of the Nigerian Naira over the next five years, with a maximum projected depreciation of up to 21%. This news is understandably unsettling, however, there is no need for undue anxiety. Proactive measures can be taken to secure your financial well-being during this period of economic uncertainty. In this blog post, we will navigate the potential challenges posed by the Naira's predicted decline and explore what you can do to preserve your wealth.

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Understanding the Forecast

The anticipated 21% decline in the Naira's value is driven by various factors including:

1. Persistent Inflation: Rising prices of goods and services erode the value of the Naira over time. With inflation expected to remain a challenge in the coming years, the Naira's buying power could be further diminished.

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2. Global Oil Price Fluctuations: Nigeria's economy is heavily reliant on oil exports. Fluctuations in global oil prices can significantly impact the Naira's value. If oil prices fall, the Naira could weaken as demand for Nigerian exports decreases.

3. Domestic Economic Uncertainties: Ongoing economic challenges and policy uncertainties can create a climate of instability, making investors hesitant to invest in Naira-denominated assets. This lack of confidence can further weaken the currency.

Strategies to Secure Your Money

To protect your finances from the impending depreciation of the Naira, consider the following strategies:

1. Invest in Fixed Deposits: Fixed deposits offer a safe and reliable way to grow your money. By locking in a high-interest rate, you can ensure your savings appreciate over time, shielding them from some of the Naira's depreciation.

Imagine you invest ₦100,000 today in a fixed deposit with a 10% interest rate for two years. At the end of the term, you'll earn ₦20,000 in interest, bringing your total to ₦120,000. Even if the Naira depreciates by 10% in those two years (your 120,000 Naira would have the same buying power as 108,000 Naira previously), you've still gained some protection against inflation and earned a return on your investment.

Compare these two scenarios of ₦100,000:

Scenario	Naira Value After 5 Years	Potential Gain/Loss
Invested in Fixed Deposit (10% interest)	₦139,000 in actual gain (assuming 21% depreciation)	₦ 21,000 gain
Money not invested	79,000 Naira (assuming 21% depreciation)	₦ 21,000 loss

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2. Diversify Your Investments: Don't put all your eggs in one basket. Diversification is key to mitigating risk. Consider spreading your investments across various asset classes:

Foreign Currencies: Holding a portion of your savings in stable foreign currencies like the US Dollar or British Pound can hedge against the Naira's decline.
Real Estate: Investing in property, particularly in growing areas or commercial properties for rental income, can provide a hedge against inflation and currency devaluation.
Stock Market: Investing in blue-chip stocks of reputable Nigerian companies or Exchange-Traded Funds (ETFs) can offer potentially higher returns and diversification benefits.
Equity Funds: Investing in equity funds that hold shares of reputable Nigerian companies can offer potentially higher returns and diversification benefits compared to individual stocks. Equity funds spread your investment across multiple companies, reducing your risk compared to picking single stocks.

3. Consider Precious Metals: Precious metals like gold and silver have historically been safe havens during economic turmoil. Investing in gold or gold-backed securities can provide a stable store of value and some protection against currency depreciation.

4. Maintain Liquidity: While it's important to invest for the future, maintaining some liquidity is crucial for unforeseen expenses. Ensure you have an emergency fund readily available.

Conclusion

The forecasted 21% decline in the Naira over the next five years emphasizes the importance of proactive financial planning. By investing in fixed deposits, diversifying your portfolio, maintaining liquidity, and seeking professional advice, you can safeguard your wealth against currency depreciation. We can help you make the best financial decisions to secure your money for the future. Click the button below and start comparing Fixed Deposits now!