return on investment
Return on investment is what you gained, divided by what you put in, shown as a percentage so you can compare anything with anything.
In plain English
Return on investment is the question underneath every financial decision, and most people never actually calculate it.
It is a simple division. Take what you gained, divide it by what you put in, and turn it into a percentage. Put in ₦1 million, end up with ₦1.3 million, and your return is 30 percent.
Its power is comparison. It lets you put a shop, a plot of land, a fund and a treasury bill side by side and ask which one actually paid you best for the money you risked.
But there are two traps, and both are common. The first is time. A 30 percent return over one year is excellent. The same 30 percent over five years is poor, and quoting it without the time period is how people are misled. Always ask, over what period.
The second is inflation. A 20 percent return while prices rise 28 percent is not a gain at all. You have more naira and less wealth, which is the trick Nigeria plays on savers constantly.
Return without a time period is a boast. Return without inflation is a lie by omission.
You invest ₦2 million in a business and receive ₦2.6 million back after two years. Your total return is 30 percent, which is about 14 percent a year. If inflation ran at 25 percent, you lost purchasing power while feeling successful.
Questions people ask
What is a good ROI in Nigeria?
Anything that reliably beats inflation over time, which is a much higher bar here than in most countries. Compare against treasury bills as your baseline.
What is the difference between ROI and yield?
Yield is the income an investment pays each year. ROI is the total gain including any change in value. An investment can have a strong yield and a poor ROI.
Should I chase the highest ROI?
No. The highest advertised returns almost always carry the highest risk, and sometimes carry no investment at all. High and guaranteed together is the signature of a fraud.
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