Cashestate vs TBills: 5 Year Comparison

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A handful of people have asked us why we insist that earning 10–13% in dollars with Cashestate is better than buying treasury bills that pay 17% in naira. We decided to first explain why from a high level, then demonstrate it with actual numbers.

The two main reasons why our investments are better and offer more returns than treasury bills are: inflation and devaluation.

Most investment providers in Nigeria don’t want you to talk or think about inflation when you judge your returns. Because if you did you’ll realize that far too many options do not provide enough inflation adjusted returns (or real returns) to be worth your while. Investing is about increasing your future purchasing power, that is, I want to invest one naira today so that I have the equivalent of one naira, twenty kobo tomorrow. And inflation is the relative loss of value or purchasing power of your currency over time. So if annual inflation in Nigeria is 11–12%, that’s how much value your investments are losing every year when you leave them in naira. So that 17% return on TBills, is really only 3% real return. How?

Your original investment: N1,000,000.00

After returns from T Bills (17%): N1,170,000.00

The value of your investment in naira (after 12% inflation): 1–0.12 = .88 and N1,170,000 x 0.88 = N1,029,600.

So real return on N1,000,000.00 after inflation is N29,600 or roughly N30,000. 3% return.


It’s even worse when the T Bills return is something much smaller like 13%, or more. You’re basically breaking even with inflation at that point, or in some cases, actually getting a negative real return.

On the other hand, by converting your investments to dollars at the beginning, and throughout the duration of your investment, you’re instantly outperforming naira inflation, even without doing anything else. Holding your investment in dollars protects you from inflation right off the bat. Then add the 10–13% Cashestate gives you on top of that and you have a real compelling proposition on your hands. Not only is your purchasing power protected, you earn solid returns in dollars on top of that.

The gap between your naira and dollar returns is widened even more when you consider the periodic devaluations that the central bank has to do to keep their balance sheet from imploding.

In 2016, the CBN devalued the naira by over 80%, sending the dollar exchange rate from $1: N154 naira to $1: 360 overnight. So your N1,000,000.00 went from $6,400 to $2,800 overnight. And in an economy where almost everything is imported, that dollar devaluation impacted prices across the board.

So if you had invested N1,000,000.00 into T Bills and N1,000,000.00 into Cashestate in January 2014, and reinvested all interest, where would your money be today?

Let’s do the math: assuming you earned 17% every year on T Bills (not likely, some years you did 13, some 15 but we’re generous) that would be:

2014: N1,000,000.00

2015: N1,170,000.00

2016: N1, 368,900.00

2017: N1, 601,613.00

2018: N1, 873,887.21

2019: N2, 192,448.04

Which we can generously round up to N2.2 million.

Now, if you had invested N1,000,000.00 into Cashestate instead on the same January of 2014 here’s how things would have gone instead:

N1,000,000.00 converted to USD at $1: N154.00 naira

2014: $6,493.50

2015: $7,337.65

2016: $8,291.55

2017: $9,369.45

2018: $10,587.48

2019: $11,963.85

At today’s exchange rates, that would be:

$11,963.85 x N360 = N4,306,986.00

N2.1 million more than what treasury bills will give in the same period.

Considering the next five years, it’s important to remember a few facts that under girds our proposition.

  1. Naira loses 12–16% of it’s value every year. And you need to subtract this rate from your stated returns to get what your actual returns are.
  2. Our central bank devalues the naira periodically to maintain exchange rate parity, which destroys most of the accumulated value of your naira investments.
  3. By investing in dollars, in a safe, cash flowing asset portfolio, you set yourself on track to enjoy the best long term wealth creation experience in our market.

As we always say in our country? Don’t dull. Check out today. We can’t wait to have you.

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