I hope the CBN and those who control our economy are watching the Greek debt crisis?
Over the last 2 weeks or so, the global markets (Europe and America) have seen the value of their stock market plummet for fears that Greece may default in the payment of their loans. As you may well know, every country borrows money to fund Government expenditure which range from capital to recurrent.
This is because tax receipts (their primary source of revenue) is hardly enough to fund expenditure such as roads, quality healthcare, defense etc. As a matter of fact some level of borrowing is good for the economy.
So what’s Greece’s problem? Well they’ve taken the advantage of being a Euro member and have borrowed money over the years. Money they’ve spent unwisely resulting in huge deficits which their economy can’t sustain. Some Governments borrow and spend in such a way that their economy grows while others spend on frivolities such as Greece, Spain and Portugal has and Nigeria did during the military years.
Based on the above, there is panic the Greece may default in the servicing of these loans which may in turn trigger a run on European Sovereign debts. Just as the US housing crisis precipitated the World Wide Economic Crisis. So how does this concern us?
Over the last 2 weeks our stock market has witnessed a sudden resurgence! Analysts have rightly or wrongly attributed this to the low deposit rates, or lack of investment havens!! Some do have a point but is that why the stock market should inch nearly 1% on Friday? What could be the driver I thought?
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I suspect a lot of funds are coming in from hedge funds and investors in Europe who are looking for high returns on their investments stemming from the Greek crisis. With the sudden reduction in the value of the Euro and the sell off in European stock markets it’s only logical to look at Africa
And when you talk Africa, Nigeria comes to mind. Our stock are actually under valued and mostly below their intrinsic values. The market is starved of liquidity, the NASS just passed the AMCON bill (meaning the toxic debts will be bought) and we have a new President!
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So what do you expect? Naija suddenly looks a good investment haven albeit for the short term! So our stocks will inch higher and higher until it can’t support itself again! This is where I get worried as the crash of 2008 is all too fresh in my memory to forget!
This was also what happened in 2008 when Soludo claimed we were immune from d Global Economic Crisis! History has a way of repeating itself doesn’t it? If you don’t believe that, then you are setting yourself up for a disaster.
So if you’re being pressured to invest by your stockbroker with the illusion that things are getting better, I’d suggest you take a chill pill and read between the lines! Even if you must invest, I’d suggest you go short term or just keep your money in the Bank. Bank, Oh not that word!!!
If you think long term, well I wish you the best! If my assertion is remotely correct, then expect the hedge funds and speculators to scamper just as Sanusi starts to gloat about our sudden economic “recovery”.