Kelechi ASP Ask.. For someone investing to start up a business in 3 years time, is it wise to invest in dollars or naira
Fokona Latest Questions
Please briefly explain why you feel this question should be reported.
Please briefly explain why you feel this answer should be reported.
Please briefly explain why you feel this user should be reported.
Kelechi ASP Ask.. For someone investing to start up a business in 3 years time, is it wise to invest in dollars or naira
Imagine Mama Ngozi, a hardworking tomato seller in the village planning to start her own farm in the next three years. Now, Mama Ngozi is saving up her money and wants to know if it's wise to invest in dollars instead of naira for her future farm business.Well, for someone like Mama Ngozi planning tRead more
Imagine Mama Ngozi, a hardworking tomato seller in the village planning to start her own farm in the next three years. Now, Mama Ngozi is saving up her money and wants to know if it’s wise to invest in dollars instead of naira for her future farm business.
Well, for someone like Mama Ngozi planning to start a business in Nigeria in the near future, it’s usually safer to invest in the local currency, which is the naira. This is because Mama Ngozi’s business will most likely operate in Nigeria and deal with local expenses like rent, salaries, and other costs in naira.
Investing in a foreign currency like dollars can be risky for Mama Ngozi because exchange rates can be unpredictable and fluctuate over time. If the naira strengthens against the dollar by the time Mama Ngozi needs the money for her farm, she’ll end up with less naira when she converts her dollars back.
So, for Mama Ngozi and many Nigerians planning to start businesses in Nigeria, it’s usually wiser to invest in naira to avoid currency exchange risks, especially when the business will mainly be dealing with local expenses and revenues. This way, Mama Ngozi can better protect her hard-earned money and ensure she has enough funds to kickstart her dream farm business successfully in the future.
See lessIf the business will be in Nigeria and your expenses will mainly be in naira, I would not put all the money in dollars. For a 3-year business goal, I would favour a mix of naira and dollar investments, with the larger portion in naira investments that earn returns. Nigeria's macroeconomic outlook haRead more
If the business will be in Nigeria and your expenses will mainly be in naira, I would not put all the money in dollars.
See lessFor a 3-year business goal, I would favour a mix of naira and dollar investments, with the larger portion in naira investments that earn returns.
Nigeria’s macroeconomic outlook has improved, but inflation and exchange-rate risks remain. The IMF projects average Nigerian inflation around 16% in 2026 and 15.9% in 2027, so simply holding cash in naira for three years carries purchasing-power risk. �
IMF eLibrary +1
A practical approach
If, for example, you are building a business fund of ₦10 million, you could consider:
Allocation
Amount
Purpose
60% Naira investments
₦6m
Grow the capital through money-market funds, T-bills, FGN securities, etc.
25% Dollar
₦2.5m equivalent
Protect part of the capital against naira depreciation
15% Naira cash/short-term fund
₦1.5m
Flexibility and opportunities
The exact percentages should depend on what kind of business you’re planning.
Why not 100% dollars?
If your future business expenses are things like shop rent, equipment purchased locally, salaries, registration, construction, stock from Nigerian suppliers, you’ll eventually need naira.
If you convert everything to dollars now and the naira strengthens substantially before your business starts, converting back could reduce your naira purchasing power.
Conversely, keeping everything in naira exposes you to the possibility that the naira loses value over the next three years.
So the key principle is:
Match the currency of your investment to the currency of your future expenses, while using some dollars as protection.
One important point
Don’t think of dollar vs. naira as the entire investment decision. The return on the investment matters too.
For example, if a good naira investment earns 15–20% annually while your dollar holding earns little or nothing, the naira investment could potentially produce a larger business fund—even after allowing for some naira depreciation.
The IMF also notes that Nigeria’s exchange-rate reforms have improved FX-market functioning and macroeconomic stability, so it would be risky to assume that the naira will definitely depreciate at the same rate over the next three years. �
IMF eLibrary
For a 3-year business fund, my preference would therefore be:
Naira income-generating investments + a meaningful dollar hedge + some highly liquid cash.