I really appreciate the amount of research put into this.
I was talking with a friend that relocated to the United Kingdom earlier this year and was shocked at their low interest rate. I joked with him that if I could access a credit offer there to boost my business, I will gladly take it. The official Monetary Policy Rate in Nigeria is 27% meaning taking bank loans is around 32% to 36%. The ripple effect is what we see in the Mutual Funds interest rate.
Your research perfectly shows how the same financial instruments differs across countries. Your ETF comparison shows what the average Nigerian investor faces.
ETFs generally should be the go-to investment option, I know when crypto space was agog on news that Bitcoin ETF will be traded and all. I was confused that what is the fuss about this but now I understand better.
ETFs in Nigeria is a murky terrain when you consider the low trading volume, fees, and entry requirement. This is why we opt for easiest option which is mutual funds.
Your point on investment diversification is also key especially with the research you made on price of stanbic ETF and the naira fall. In a country like Nigeria where inflation and currency devaluation are common, one has to hedge his position by investing in crypto assets so as not to lose out. Else, you just see that you are making money in naira but losing out in the dollar value.
Take for instance, back in 2023 before the current government was sworn in, $1 equals 460 naira. The same $1 goes for 1,500 naira. It means if you invested $1,000 in a business back then which is 460,000 naira and the business yields 100% in two years. You will have 920,000 which is $613 now.
The same amount diversified and managed properly would have done better not just in naira terms but also in dollar value.
Haha.... The research I put in is the whole point of the Great Little Dragons. Figure out what investments make sense and why using real life examples. And of course turning it into a game when I have the time. You are correct though. I don't know about Nigeria but I do know in the Philippines access to reasonably priced capital to grow a business is very challenging.
No money to grow the business means the business stays small and never reaches its full potential. Enter the stock market or low priced loans and it makes things fare more reasonable to grow.
Then again, low interest rate makes people want to overspend (like on houses). There are drawbacks on that too :(
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