In December 2022, the Director of the Bank Examination Department, the Nigeria Deposit Insurance Corporation, Michael Oladele, revealed that N911bn had been lost to ‘get-rich-quick’ schemes in Nigeria over the last 23 years.
While this figure may present the raw facts of the damage of such schemes, it is a pointer to the innate need for individuals to attempt to build wealth. However, this is not a sustainable means to generate wealth as it comes with diverse consequences. More so, the widening gap of inequality continues to deepen, no thanks to global inconsistencies in economies, and peculiarities in the leadership management in Nigeria.
Regardless of these impossibilities, Nigeria houses some of the finest success stories in terms of building wealth, and some have been ranked by Forbes. Globally, there are proved examples of individuals that have risen against the tides to become wealthy. So when it comes to building long-term wealth, experts in the finance space advocate two things, savings, and investment.
Considering the current realities of the Nigerian scene, the former may seem almost impossible, but experts believe that anyone is capable of saving in respect of income generated.
Speaking on savings and investment, Founder and Chief Executive Officer of Kippa, Kennedy Ekezie during a panel session at the Grow with Renny conference in Lagos, said, “Savings is putting a portion of your income aside to be used for short to midterm. Investment requires a lot more planning.”
As a young Nigerian, Ekezie delves into the intricacies of savings and investments as it relates to the ripple effect of wealth creation. He highlights key hacks to put in place when starting out.
Investment strategy
According to him, “Another difference is that having money in the bank does not necessarily mean you will know how to invest it. And for you, you might have to choose what level of risk you are willing to take and build a personal investment strategy.”
Ekezie emphasises the need to carefully rummage over your decisions before launching into an investment net.
He says, “ It is actually worth spending some time to think. I am 24 years old and long-term investment is still what I am trying to figure out and this period of our lives is the best time for us to spend time learning.”
The co-founder and Chief Executive Officer of a digital financial wellness company for qualified investors,(Twelve) Mrs Tomie Balogun, says that the fundamental ingredient to ensure sustainable wealth creation was investing.
Breaking it down, Balogun draws on real-life context to drive home the point. She says,” Imagine you get the right job, you are putting in all the work and effort to get income. Now think about every time you take a break, either a vacation break or something. Your money does not stop working, that is how I will define investment in simple terms.”
Although she appraises the usefulness of savings, the finance experts notes the downsides of sole reliance on savings to build wealth.
She says, “ The thing with savings is that you store it somewhere where it is liable to ants, decay and so many things which represent inflation, currency devaluation, etc. With all these problems with finances, we do not know when they are going to stop. So your money has to be working. It also always good to have emergency funds.
It is money you put aside in case something comes up. Typically you should have about three to six months’ worth of your salary. So let’s say your salary is N100,000, you should have at least N300,000 in your emergency fund. Now, that is something that at a minimum you can consider a money market fund.”
Wealth mindset
Also on the panel session, Balogun speaks on the need to increase capacity in the mind in order to begin the journey to wealth creation.
According to her, “The first thing is your mindset, trust me if you do not get your mind right, it will always hold you back because we live in an environment that can put a blur on your mindset. It is easy to get carried away with the numerous economic problems. This makes you think it is hard to create wealth and be rich.”
She highlights the nexus between poverty consciousness and wealth consciousness,
Balogun said, “Guess what? There is no vacuum. You either have a poverty consciousness or a wealth consciousness. The difference is if you see something and the first thing that comes to your mind is I cannot afford this or this is too expensive, most likely, you have a poverty consciousness. If you have a wealth consciousness, it is very different because you ask the question-how can I afford this?”
Value
The major way to increase income is to become valuable, this is a golden rule that makes the world go round. It is the dynamics that exist in the world of goods and services.
“You have to be a person of value, a person of value attracts money. If you are a person that brings value to an organisation, you will be paid better. You are a solution provider and the world continues to look for people that provide solutions.
“You must always have to increase your ability to earn to be able to invest effectively because if you are not earning enough, how do you earn enough? By becoming a person of value to attract value.”
Balogun explains how to increase income significantly. She adds that discipline is also key to wealth creation,
She says, “You really need discipline. If you cannot be disciplined in N1m, you cannot be disciplined in N100m because everything will level up.”
Fixed assets
While speaking during the panel session, Managing Director of Property Matchmaker (a real estate company) Mrs Sefiyah Diejomaoh, highlights investment in fixed assets such as land to guarantee wealth generation in the long term.
Diejomaoh stresses the importance of a concept called the time value of money which is an essential factor in wealth creation.
She says, “Speaking about real estate investment, what I will tell someone in their 20s is different from what I will tell someone in their 30s, 40s, 50s or even 60s. But the primary thing about real estate is location. Please do not forget, there is something called the time value of money. It also speaks to inflation and the rest. So the time value of money has to be in your subconscious.”
She explains how the time value of money plays a huge role in the appreciation of fixed assets.
According to her, “You hear people say, my aunty bought land in Lekki 15 years ago and she bought it for N100,000 and today it is selling for N300m. Those stories are true and that is what the time value of money does. The small money you had 15 years ago can multiply into unbelievable sums.
“However, the technicalities of acquiring fixed assets have discouraged many from venturing into the purchase of landed properties.”
Diejomaoh shoves these claims and advises young people not to deter from acquiring land assets but rather follow the tidal wave of government leadership.
She says that despite popular opinion to buy land where others are buying, it is important to study the trends and simply follow federal footprints.
Diejomaoh adds that, “So when I say location, for young people today, in Nigeria, we have peculiarities that are not peculiar to other countries. In Nigeria, we struggle with infrastructure, roads, and drainages. Typically you will hear, go where people are going to invest in real estate. That is wrong, rather go where the government is going.”
The real estate expert cites the example of Nigeria’s first capital territory that saw the influx of governmental infrastructure in Ikeja,
She says, “What is the value of land in GRA today, in the commonplace that you know? They are very high, quite similar to the common places that you have on the Island axis of Lagos. Now when the capital moved to Abuja and Lagos became more like a regular state, people started moving away from Ikeja coming over to Victoria Island and the rest of it. But it is still the same concept and that is what gave the lands on the Island the value they have today.”
She reiterates “Going where the government is going. The government is in Ibeju Lekki right now, and you have time. You are 20 today, in 30 years time, you will be 50, and in 30 years that land that has been advertised for N5m may have become N500m. The time value of money is going to apply to that property. It would have served as a hedge against inflation.”
In simple terms, the art of creating wealth takes a critical level of discipline, mind consciousness, and lots of investment not just in money markets but also in the quality of who you are as a person.