Next Multimillionaires in the Nigerian Financial Market


There are opportunities for most people who follow the simple rule we share in this article to achieve financial independence and become multimillionaires in the Nigerian financial market. Imagine starting a plan with as little as N200,000 in year 1 and you have over N53million in the future. Interesting, right? That means that your initial amount has increased by over 266times. But if your goal is to become a millionaire overnight through a money-doubling scheme, sorry to disappoint you – we cannot help you. Building an enduring wealth requires discipline, consistent savings and an investing lifestyle. And anyone can achieve it if one is guided appropriately and start at an early age. But don’t worry, whatever stage of life you are in at the moment, you can still make it, if you start now.

You have probably seen an episode of ‘Who Wants to be a Millionaire?,’ a TV series in which the contestant has to answer a series of questions correctly to win the final prize. Along the way, some helplines are provided for him or her to overcome difficult questions. The few people who make it to the final and highest prize are those who are diligent, focused, and utilise the helplines when required. So savings and investing in financial assets to achieve financial freedom over time share some similarities with the TV programme. It requires consistency and focus. However, the main difference is that while very few people get to win a million on a TV programme, nearly everyone who applies the simple rule we want to share can become a millionaire. The game here is also simpler than the TV Millionaire contest.

If you invest your money in a bank for one year at a fixed interest rate, at the end of the period you receive the amount that you invested and the interest earned for the period. If you do not withdraw both the principal and interest earned in the year 1, and possibly you added a little more money at the beginning of year 2, you will earn more interest at the end of year 2. If you continue this process for a long time, you may soon enter the
Forbes list of millionaires. This simple process is the basis for transforming your little savings and investments to multimillions to enable you to achieve financial freedom. And the good thing is that the process does not take you out of your normal business. Once you set the process rolling and you involve the right parties, you are good to go.

Now with practical examples. Imagine you start an investment programme with N100,000 on 1 January and vow to add N100,000 to the plan at the beginning of each year. So at the beginning of year 1, you have N200,000 made up of N100,000 initial investment and the N100,000 you plan to add yearly. If the investment generates 10% every year, and you are religious with the yearly contribution of N100,000 at the beginning of each year and you invest the interest each year, guess how much you will have in 40 years. Your investment
the account would have grown to N53,211,106.68 on the 40 anniversary of the commencement of the investment programme. This is becoming a millionaire through compounding interest and a disciplined lifestyle, while focusing on the long-term.

The Nigerian financial market now has instruments and structures that support the achievement of this goal. Some of the instruments are tenured funds with Banks, Mutual Funds managed by professional fund managers, Federal Government Savings Bonds, Commercial Papers, Treasury Bills and Federal Government Bonds. Each of these instruments has different characteristics and minimum amounts for initial start-up. You will need to speak with your investment manager to explain details to you. Stock is another instrument that can enable you to achieve financial independence. A word of caution here. There are substantial risks attached to this investment option. The performance of the Nigerian stock market as measured by The Nigerian Stock Exchange All-Share Index (NSE ASI), the barometer to measure the performance of the market, shows that the market recorded a return of 24,590% between 1985 and 2018. This means that an investment of N100,000 in 1985 was worth N24,690,102 in December 2018 without additional capital if we take the performance on the market as a proxy for the investor’s return – a growth of
24,590% over a period of 33 years. Not bad growth at all.

Your regular savings and investments help the government to access funds to build the required infrastructures and systems that enable the economy to grow. Such savings and investments also help companies to access funds to expand their operations thereby creating job opportunities. You may want to ask a question relating to the impacts of the general increase in price (inflation rate) and the movement in the value of the currency (exchange rate- depreciation) on the investment over the period. We are aware of all of these narratives but if you have no savings and investment plan, you are worse off. Regular savings and investing help you to reduce the negative impacts of inflation and currency adjustments on your wealth. The regulators in the Nigerian financial market now have zero tolerance to any infractions – their primary goal is to protect investors’ interests. If you have any complaints against any players in the market, the regulator such as the Central Bank of Nigeria and the Securities and Exchange Commission will be willing to take it
over. A mail to the regulator or a call will do the magic. The next line of action for you is to get an investment manager and sign up for a savings and investment plan that suits you. See you on the Forbes List in 40 years from now.

FSDH Research Analysis