By Babajide Komolafe

The latest information on inflation by the National Bureau of Statistics, NBS, showed that the monthly inflation rate (rate of increase in prices) rose to 2.01% as against a decline of 2.88% in January.

The data also showed that the Food Inflation rate (rate of increase in prices of food items) rose to 12.1% from 8.89% in January. This implies that individuals and households spent more money in February to purchase the same quantity of goods and services compared to January.

This is expected to worsen in March. It will be more challenging to save, invest and build wealth. You can reduce the impact of inflation by also following these steps.

Save in Dollars: Another reality of the Nigerian economy is occasional depreciation of the Naira. The exchange rate of the dollar mostly adjusts upward due to the fact that most of our dollar supply comes from crude oil and the economy is highly import dependent, leading to high demand for dollars.

Whenever our dollar supply or earnings fall, due to any reason, the exchange rate of the dollar goes up and the Naira depreciates, meaning you need more Naira to purchase $1.

Hence, from below N100/$ in 1999, the exchange rate rose, and doubled, almost every 10 years, till it got to N1,400 per dollar today. This trend will continue. It may not be as bad as in the past. But it will continue.

That is why one of the best strategies to build and protect your wealth is to save in dollars. If you had saved N57,000 in dollars in 2023 when the exchange rate was about N570/$, today, that savings would have increased to N140,000, that is 145.6 per cent returns in less than three years.

To enjoy this advantage, open a domiciliary (foreign currency) bank account. Regularly buy dollars with your Naira savings, deposit the dollars into your domiciliary account. When you have saved more than $100, invest in a dollar mutual fund, to earn about. This will yield about 5% interest/return on your dollar savings.

This is a very critical way of protecting the value of your long term savings, including savings for retirement, children education etc.
Invest in the stock market: Investing in the stock market is also another proven method of reducing the impact of inflation on your wealth building efforts.

In the last five years, Nigeria’s stock market recorded 262% growth in value of listed shares. This translates to an annual average of 52%. This far exceeds the annual average inflation rate of 15.89% during the same period.

Thus you should consider the stock market to protect and grow the value of your long term savings (To be continued)