What a year 2015 has been! This time last year crude oil – Nigeria’s main source of income – was about $60 per barrel, FX was N168 to the US Dollar, another political party was at the helm of affairs in government and if you happened to travel abroad, you didn’t have to worry too much about taking foreign currency cash with you because you could just use your Naira MasterCard/Visa debit card to make payments offshore.

Fast forward to today and it’s a very different story. Crude oil is less than $40 per barrel, officially it is N200 to $1, daily foreign currency transaction rates on Naira denominated cards have been slashed, banks aren’t accepting foreign currency cash so people and companies have resorted to buying ‘inflows’ at anywhere from N240 to N260 per dollar.
Because we are such an import dependent #economy, naturally the cost of living has gone up and pretty much almost all your budget and savings plans have practically gone up in smoke.

2016 – The Big Picture
According to industry experts, there won’t be dramatic changes in the economy as oil prices are projected to remain below $60 per barrel on average with the government benchmarking its budget at crude oil price below $40 per barrel. Our economy is at the very early stages of turning around, so the government is also going to look at increasing internally generated revenue which means taxes will go up.

What does this mean for you in 2016?
2016 will be a time to look seriously at protecting your current income and creating additional streams of income because if taxes are increased and there is a further devaluation of the Naira as the analysts are expecting, things are likely to remain tight for a while.
You can’t afford to be a bystander in the coming year, you have to put in place a well thought out financial plan to succeed.

How do you put a plan in place?

Net-worth calculation: The first step you should take in having a financial plan is to calculate your net-worth: how much do you have in the bank, can you clearly identify your different forms of assets and how much do you owe? This doesn’t have to be difficult and you can quickly calculate your net-worth by clicking on this link.

Check your spending: Once you’ve calculated your net-worth, look inwards and critically re-evaluate what you really need to spend money on. If you go to work, why not take food from home? Spending N500 a day on snacks for instance adds up to N10k per month or N120k every year. Maybe car pool with your neighbour if you’re going in the same direction so you save on petrol? You’ll be surprised how these ‘little’ expenses add up.

Create new sources of income: An unfortunate side effect of high operating cost environment is that companies will also look to reduce costs and as such downsizing in a lot of sectors is almost inevitable. If you’ve been affected by this don’t despair and don’t get stuck on getting another job. Think of how to create income and put a structure around it.

Creating an additional stream of income even if you still have a job also helps you match a source of income to your expenses e.g. school fees, holiday trips, etc. In addition if you have expenses in foreign currency (e.g. school fees or a mortgage) you very quickly need to start thinking of export services/products you can engage in that can generate the FX you need to make these payments as this won’t be impacted by movements in the Naira. It doesn’t all have to come from your salary.

Check out just a few opportunities below and do your homework:

E-commerce: Companies like Konga, Jumia, Webmall, Openshopen, DealdDey, have made it easy to get your products/services online so you don’t have to worry about setting up a physical shop or getting your own website. All you need to do is have a good product, which they showcase for you and you pay them a commission on the sale price. With all the issues around buying things from outside of the country, more people will look to sourcing locally so you need to step up your production quality.

MSME Fund for women: Did you know that the Central Bank of Nigeria (CBN) has a N220Bn (yes, billion) single digit interest rate fund and they have earmarked over 50% of this for women owned businesses, particularly start-ups? Click on this link to learn more about it. Don’t leave cheap money on the table.

Transportation: We all know that the public transport system isn’t great, so if you have a car why not turn it into a source of income? Uber Nigeria is looking for partners to help grow their #business network. They take care of finding customers and payments so no physical cash is handled, you just need to make your car available.

Housing: Perhaps you have a spare room in your house/flat or a residential property that you haven’t been able to get a tenant for? Airbnb is looking for partners to host guests with nightly rates ranging from $30/night for a room to over $100/night for a one-bedroom apartment. Make that empty space work for you!

Agriculture: I know that this is a massive sector, but opportunities here actually go beyond farming. Look at the steps involved in getting the product from the farm to your hands. Did you know that up to 70% of the country’s agricultural produce gets wasted before it even gets to a market? What can you do to reduce this? Companies like Reel Fruit for example convert fresh fruits into dried form which are then packaged and sold as snacks. What fruits grow in your environs? Or you could invest in a small palm oil milling machine and package and sell the extract. The options are quite vast.

Services: It doesn’t all have to be about physical products as there are a host of services you can offer. Look at the niche you’re interested in and identify the gaps/problems/what’s not working and create a solution to fix the problem, package it and sell it as a value added service. It could be anything from training, facility management, event planning, to providing day care/after school services for the children in your neighbourhood.

Traditional investments: If you’re not necessarily business inclined, you can still put your money in the traditional sources of investments such as Treasury Bills (minimum investment value of N10,000), fixed deposits, mutual funds, etc. which will give you steady – though not dramatic– returns. You can always ‘top up’ your investment amount as your finances improve.

I hope this has got you thinking and has helped you see that you have an opportunity to create new sources of income beyond the norm. 2016 will call for creativity which goes beyond the traditional saving and budgeting plans. It promises to be a very exciting year if you do your homework, create a sound financial plan and diligently stick to it.

Tags:  business economy SME