By Oyindamola Oni
After barely surviving the recession that rocked the economy in 2016, it seems that Nigeria is once again facing an economic slump, prompted by the crash in the price of Crude oil, crippling foreign exchange rates and the Coronavirus. We’ve all read the economic forecasts and the reports. We can conceptualize the urgency of our situation as a nation. However as an individual currently living in Nigeria, what does an imminent recession mean for your own wealth? Your life savings? Should you even be considering saving money when the value of that money is steadily declining? Is this a good time to invest?
Regardless of the exchange rate and the Consumer Price Index, saving money, or investing in low risk money markets is a prudent idea when facing a recession. Unemployment, salary cuts, and rising food inflation are all reasons to cut spending habits. Financial experts advise that we develop an emergency fund that is liquid, easily accessible, protected from risk. The equivalent of three to six months salary, depending on your financial responsibilities.
So what about wealth generation?
Investing your excess funds during a recession has the potential to earn you high returns, provided that you are willing to invest for a long period of time. Stock prices tend to fall during a recession and will more often than not, rise again when the economy recovers. This may take years, however, so only invest money that you can afford to lock away. Alternatively, mutual funds are a less volatile option with flexible maturity dates. Investing in commodities is also a viable way to beat inflation and secure the value of your money. Ultimately, stocks, bonds, mutual funds and commodities, all ensure that sufficient liquidity is available at all times, valuable characteristics during a recession.
So can you build wealth during a recession? Possibly. Investing during a recession is a daunting experience that could possibly result in losses long before you see results.
Individuals who stay the course and are consistent in their investment, however, do eventually see returns.
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