Coping in today’s world, characterised by a rising cost of living, requires a pragmatic and prudent lifestyle for all. Beyond the need for prudence, it has become expedient to critically and holistically consider measures that will enable individuals and corporate entities to remain financially resilient despite the negative implications of inflation and economic pressures. Whether you live in Aba, Lagos, Abeokuta, Okrika, Eleme, Kano, Lokoja, Agbor, or Benin, the reality is the same.
The ultimate goal for individuals and organisations should be to identify “remedial actions” that can help them withstand these economic challenges. This article seeks to explore possible solutions that can enable Nigerians to triumph economically, financially, and socially, even in the face of hardship.
“Above all, embracing effective financial management practices is the surest path to financial resilience.”
At present, the prices of foodstuffs have soared, leading to increased hunger across communities. Electricity tariffs have also risen sharply, threatening the much-publicised ease of doing business. Inflation continues its upward climb, with education costs (especially tuition fees) adding to the financial strain. The value of the naira has weakened, reducing purchasing power and worsening the plight of households.
Borrowing and lending rates are also climbing, limiting the money supply in the economy. Standards of living have dropped while poverty levels continue to rise. Job losses and high unemployment compound the situation, while consumer spending and investments in critical sectors have dwindled. Accessing basic healthcare is a huge financial burden for many Nigerians. Meanwhile, the price of petroleum motor spirit (PMS) keeps skyrocketing, driving up transportation costs, which in turn fuels food inflation and the rising cost of goods. Affordable housing is also slipping out of reach for ordinary Nigerians.
In the midst of this economic turbulence, survival requires deliberate choices. Practical steps include adjusting lifestyles to current realities, embracing bulk purchases for discounts, diversifying income streams, and adopting a culture of simplicity. Investing in farming, cutting down on unnecessary expenses, and opting for more affordable accommodation are also viable strategies. Prioritising expenditures, practising cost reduction, and channelling excess income into appreciating assets such as real estate are equally important. Above all, embracing effective financial management practices is the surest path to financial resilience.
Understanding financial management
Financial management encompasses activities such as financing, investment, liquidity, and dividend decision-making. Specifically:
Financing Decision: Identifying the most suitable funding options available to individuals or businesses.
Investment Decision: Choosing where to invest for favourable returns.
Liquidity Decision: Ensuring cash and cash equivalents are readily available to meet obligations as they fall due.
Dividend Decision: Determining whether profits should be paid out to shareholders or reinvested into the business.
At its core, financial management provides a roadmap for managing personal or corporate finances, setting financial goals, and working toward financial freedom. It also involves budgeting, cutting down on debt, preparing for retirement, securing insurance, and creating emergency funds to handle unforeseen circumstances.
The gains of effective financial management
When well implemented, effective financial management yields enormous benefits:
Enhances overall financial stability.
Helps individuals prioritise spending through budgeting.
Reduces the burden of debt and financial stress.
Promotes financial security and protection.
Strengthens the management of financial portfolios.
Provides knowledge to cope with rising costs and inflation.
Improves cash flow management.
Ultimately, it leads to financial independence and freedom from borrowing.
Effective financial management equips individuals and organisations with the tools for informed decision-making, risk reduction, and increased opportunities. It provides greater financial control and promotes independence, even during economic turbulence.
Conclusion
By adopting effective financial management practices, individuals, corporations, and government institutions can exercise meaningful control over their financial lives, achieve stability, and ultimately experience financial freedom with a secure future.
Dr Kingsley Ndubueze Ayozie, FCTI, FCA, is a public affairs analyst and chartered accountant. He writes from Lagos.
