In an inflationary economy such as Nigeria’s where the Naira depreciates every day, it’s important to make contingency plans to be able to mitigate financial loss.
The Nigerian economy, influenced by Naira decline, high inflation, interest rates, and high cost of living has a tremendous effect on the savings culture of the citizens.
Historically, Nigerians have grappled with cultivating a strong savings culture, with a significant portion of the population finding saving challenging, largely due to income being lower than expenses. The uncertainty in income streams for some, in addition to inflation reducing the purchasing power of money, makes it difficult for individuals to set funds aside. Financial education is equally poor, leaving many Nigerians without proper or adequate knowledge on how to manage personal finances effectively.
The instability of the economy has a significant impact on savings rates. High inflation rates lead to lower disposable incomes and reduce the value of savings over time, where you find that the things you could have easily afforded a few months prior are no longer affordable with the same amount of money. Additionally, savings play an important role in investments, the financial sector’s development, and by extension, the country’s economic growth.
Savings give a sense of independence, preserve stability against inflation, and also reflect the growth in the economy. Many Nigerians live paycheck to paycheck, making it difficult to choose savings over immediate expenses, coupled with a culture that prefers immediate consumption over long-term planning. Many Nigerians are yet to understand the benefits of saving and the right tools that help mitigate financial loss in the seemingly never-ending battle against inflation. This lack of knowledge leads to reliance on unconventional methods such as saving boxes (Kolo), which are neither secure nor effective.
Staying afloat in an economy such as the one we have in Nigeria requires financial discipline. Nigerians must cultivate a habit of effective budgeting, prioritizing savings, and using financial tools that can help protect against inflation. This is where fintech solutions such as Piggyvest, Opay, Cowrywise etc come into play.
Fintech offers a solution to the savings problem many Nigerians have been facing. They allow its users to save money, even in small amounts, which is crucial as disposable incomes are low. The apps are designed with user-friendly interfaces that are intuitive to use and to encourage savings. Piggyvest, for example, has a safelock feature that allows Nigerians to set money aside for up to a year and up to 10% interest.
These fintech apps give the citizens a fighting chance against the constant inflation of prices and decline in Naira value.
In conclusion, Nigerians can leverage the progression of technology to manage their finances more effectively in order to stay afloat in challenging economic times.