How to make 100m Naira in a year

Let me start with a story. I will tell you the moral of the story and how you can make 100m.

There's this restaurant in Yaba area of Lagos called White house. Their amala and pounded yam are made in heaven. (I am not a foodie by any chance).

There was this day I went to eat and after paying for my food, the guy responsible for collecting cash (there's no cash register) didn't have change. He gave me a square cut cardboard measuring about 3 by 3 inches with N100 written on it. Said I could use it to pay for my water. The guy selling water in the section of the restaurant where I ate collected the cut cardboard without any qualms.

It sort of dawned on me that while that cut cardboard was totally useless outside white house, it was actually currency and a representation of value inside white house.

Money isn't paper or the numbers in your bank account. Money is a representation of value. Money is an exchange for value that you create through building something, being something or knowing something that others want and are willing to pay for.

That said, earning 100m especially if you were earning say 10m or less doesn't require ten times more work, just a change in mindset and approach. Will give you two real examples.

I have a friend who builds websites for usually between 50k (if you are his person) to about 250k. He always told me the small jobs gives you the most stress. So he stopped taking those jobs and started going after Requests For Proposals from international agencies wanting to build tech solutions to solve local problems. Now his least invoice is 5m. Same skills just different customers.

Another person I know who runs a real estate business and basically did lettings of two to three bedrooms in middle class neighborhoods of Lagos decided to switch his focus to selling houses in the same neighborhood. He had to change his network in the process. He changed his place of worship. Joined a club where you had many "old money" people, changed his dressing (strictly natives) and his car as well. His commission went from 100k there about that he earned renting out flats to sometimes as high as 6m when he sold houses.

My point being these guys started earning twenty times more without necessarily putting in twenty times more physical effort.

I will give you four hacks that can put you on a path to earning 100m.

1. Start a business: I was having a discussion with a friend at the beginning of the year and we both have goals to buy a house this year. He works a 9-5 and I run two businesses. He wants to get a mortgage and I am thinking cash. Nothing wrong with both strategies. Only thing is his required equity contribution to the mortgage for the type of house he wants to buy is about 8m. He's yet to figure out how to raise 8m.

It is easier to earn 100m in a business than on a job.

1b. If your currently run a business, what would you do if you had to generate twenty times your current revenue.

Three things can impact that.

a. Distribution.

b. Customer segment

c. Product or service offering.

(I could tell you how but then I'd have to bill you).

2. Government Contracts: Not sure about the exact figures, but most of the "big men" in Nigeria are government contractors. One government contract can put 100m in your pocket. And the fortunate or unfortunate thing is (depends on how it affects you) you don't even need to be qualified to execute the contract. You simply need to know someone or know someone that knows someone. Your best shots are state governments, government parastatals such as NNPC, NIMASA etc. You rarely get contracts here on merit so forget your proposal. Focus on building relationships that can get you through the doors.

3. Start a Startup: While this might not put 100m directly in your pocket, it easily can put it in your startup's account. What differentiates a start up from a regular business is growth and scale. There's a lot of money waiting to fund the right startups.

4. Solve industry specific problems: Recall I mentioned that money is exchange for value created. There are three industries where urgent interventions are needed and have the capacity to return 100m or more for you.

A. Power. I don't see our government solving the power challenge over the next four years. It might happen but I won't bet on it. Create an alternative to PHCN and generators and you are in business. Inverters have solved power needs for small homes. Find power solutions for estates and manufacturing and large commercial businesses that doesn't put you in direct competition with the Discos.

B. Food Preservation: more than 70% of produced food in this country is wasted. This industry is literally begging for someone to save it.

C. Cyber Security. We are starting to create databases in this country. FRSC has got their database and several other government and private agencies. If it's the country I know, most of our data infrastructure won't be the best they should be. Simply hack these databases to show the loop holes in the system and offer to sell them solutions so it doesn't happen again. (I will deny you if you say I told you this).

There are two things I should bring to your attention though.

1. You will require some money to do most of the things I mentioned. If you are hungry enough and you have got hustle, money won't be what will stop you from doing what you need to do.

2. If you don't solve what I call transactional expenses, expenses such as car maintenance, basic bills, rent, health, school fees, you will stay stuck trying to get out of this level. Couple of suggestions. Know what those costs are and provide for it. Have your spouse pick up these bills till you land the 100m, have a side business that doesn't require your input to bring in this revenue.

Hopefully this helps and remember to send me a bottle of champagne when you hit your mark.

Commodity market: How it works

Commodities are mostly generic, largely unprocessed, goods that can be processed and resold. They are usually agricultural and natural resource assets and range from rice to natural gas to gold. Commodities are typically not differentiated based on brands or benefits, i.e. gold from Kebbi is the same as gold from California.

Commodities are typically grouped into 4 main groups:

• Metals (e.g. gold and iron ore),
• Energy (e.g. crude oil and LNG)
• Livestock and Meat (e.g. live cattle)
• Agricultural (e.g. rice and cocoa)

Commodities are bought and sold purely on price. They are tradable assets, with prices set via interaction of demand and supply between a willing buyer and a willing seller on a commodity exchange.

Evolution of commodity trading

Commodity trading started off as sellers of commodities e.g. farmers converging on physical locations to trade their agricultural goods for cash from buyers. Prices were agreed, cash was exchanged on the Spot and contract for sale closed. “Spot” thus refers to a transaction for immediate delivery of goods specified in a contract and involves the immediate exchange of cash for commodities.

This spot trading evolved to the same farmers coming to the market to trade their expected harvest from their farms. Thus, a contract was drawn up, not for immediate delivery but for delivery in the future. Thus, buyers came to the market to buy Forward deliveries. These transactions were also settled, not for the physical goods but for the right to receive those physical agricultural goods from the farmers later, in exchange for payment today. The farmers put their goods on sale, and the buyers called out their intentions to buy.

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A Forward contract specifies the transfer of ownership of a commodity at a future date in time. Both the farmer and buyer agree to terms on the contract including price, quantity, quality, delivery date and expiration date for contract. The contract is settled on the expiration date in the future by the farmer delivering his goods at that date.

The evolution of the commodities markets was complete when the initial buyers of the Forward Contracts from the farmers, sold their options and rights to receive those goods to other buyers. Thus, a secondary market was created where investors could come into these primary transactions and take positions on the future prices of commodity contracts, in effect, betting on the demand and supply of commodities. Most of these buyers were not end-users of the commodities, they simply traded to profit from price movements. The market to accommodate these investors offer them Options to buy and sell the commodity contracts in the future

Futures contracts are a type of Forward contract traded on organized exchanges. The commodity exchange formalizes the terms of the transfer. For instance, it sets the minimum quantity of say paddy rice that can be offered to be bid on and when that transaction will be settled.

The role of the commodity exchange thus becomes to standardize contract terms. This standardization in turn drives trading, price discovery and liquidity. Trading on an exchange also enables enforceability contracts that protect all parties.

Thus, we can summarize the function of the commodity markets as:

• Enabling price discovery
• Enhancing risk management by allowing buyers and sellers hedge against price fluctuations
• Guaranteeing performance by all parties

Trading commodities

Commodities trading are essentially betting on future demand and supply. If paddy rice today sells for N131,666 and an investor believes demand for rice will increase in the future, meaning an increase in prices in the future, then he can buy a Future contract at today’s price for future delivery or a call option. These positions give him the right to buy paddy rice in the future but at today’s price. If prices rise, the investor can thus buy at the lower price and sell his commodities at the higher price.

Notice, the investor is not looking at “fundamentals” of paddy rice, he is just focused on determining the future demand and supply direction of paddy rice.

Similarly, if the investor believes paddy rice supply will increase in the future, thus leading to a fall in prices, the investor can buy a Put i.e., an option to sell at today’s prices today in the future, thus if prices fall the investor can still sell at today’s higher prices in the future.

Keep in mind, buying an option gives the investor a right. If the investor sells an option, he is giving another investor and option to demand action from him.

Selling options is very risky

Commodity trading is about actionable information that can be translated to investment decisions. The commodity Investor only must make two decisions:

• Will the commodity demand rise or fall leading to a rise or fall in prices?
• What is the appropriate trade to make?

Thus, the commodities trader is macro focused, seeking demand and supply assumptions to guide investment choices. Will the weather affect harvest of cocoa? If rains will be high and harvests will be poor, then the investors take a position by buying calls on cocoa. If harvests will be bountiful, the investor can sell puts on cocoa.

Why invest in commodities?

• Commodities are not correlated with traditional asset cases such as Bonds and Equities. Goldman Sachs calls Commodities a “portfolio enhancer.” According to the investment bank[1] “Commodities are significantly negatively correlated with both Bonds and Equities, implying that even a small allocation to commodities will reduce portfolio volatility.”
• Commodities provide a hedge against inflation, as they perform well during periods of rising inflations. Primarily because the Commodities producers also raise prices to ensure their assets keep pace with inflation.

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How do you invest in commodities?

• Investing directly in the commodity, e.g. buying soybeans.
• Investing via Derivatives, e.g., Futures and Options contracts.
• Buying shares of exchange-traded funds (ETFs) that trade in commodities.
• Buying shares of stocks in companies that produce commodities