Nigerian stocks hit a three month low on Monday as stocks recorded its 9th consecutive day of losses. The market capitalization fell to its lowest since March 30th 2015. To make it worse, the naira also hit another record low on the parallel market on Monday trading at about N242 to the dollar at the parallel market.
Things couldn’t be harder for Nigerians as they face a double whammy of seeing the value of their investments shrink and their purchasing power gradually become worthless. Many Nigerians may not immediately understand the effect of what is going but for those who do this is like a horror movie. Here are examples;
Investors – For those who have invested in the stock market over N600billion have been wiped out of the value of their investment in just under 9 days. If things continue at the same last week we may well be looking at about N1 trillion. Whilst many Nigerians have avoided investing in stocks, some still do and rely on it to build capital over time. So, even if you are not invested in the market you could have someone close to you asking you for some financial help or outright declare bankruptcy.
This should not be the end of the world, as a savvy investor, you will understand that investing in the stock market is only ONE form of investing. Should you wish to protect your investment, now will be a good time to attempt to diversify your holdings.
Alternatives opportunities include fixed income bonds, Commercial Papers on FMDQ OTC or money market instruments. Key focus should be that the alternatives offer a form of protection against fall in value (i.e. Investments which protect your Principal), as well as, generate pre-agreed interest income to partially offset impact of inflation, (we’ll strongly recommend re-investing interest income to benefit from effect of compounding)
Okay so maybe you still would like to diversify even more from tradable securities in general (i.e., divest from equities and fixed income), if so, another opportunity would be to seriously consider real estate investments.
A quick caveat, real estate investments require a LOT of patience. Starting from
- researching locations to determine the optimal site,
- to ensuring your documentation is sourced from the appropriate authorities
- to finally payback period. Most real estate investors should expect hold real estate assets for a minimum of 5 – 10 years (compare to fixed income commercial paper which are typically 90 days)
Thus real estate investing, will be better suited for long term investors
Regardless of what option you take, the focus now should be on defensive investments (i.e. investments which seek to protect capital and beat inflation) let’s leave the speculation until the policy guidelines become clearer.
Pension Funds – Nigerians have over N4trillion in pension funds. About 10% of those funds are invested in equities market. That is about N400billion at risk of seeing their values getting wiped out by the massive sell-offs. Perhaps some Pension Funds may have sold off in view of the impending risk whilst some may decide to ride the storm. Nevertheless, you should be worried about the state of your financial future – see above re investments
Inflation – With the exchange rate sky rocketing in the black market coupled with the fuel crisis, inflation rate is about to gallop. Already, inflation rate has been rising since November 2014 and is likely to hit double digits in a couple of months. Rising inflation means cost of goods and services are likely to hit the roof further affecting your purchasing power. Imagine what sold for N100 a few months ago now selling for N150. – see above re investments
Your job – Jobs could also be under threat as the economy continues to face huge uncertainty. Quoted companies, seeing their share price plummet the way it is currently falling will find it difficult to raise capital either from banks or through public offers. Companies also face and consumers with lower purchasing power. Lower purchasing power means they become cautious of their spending and priorities better. When this happens, companies post lower sales figure and often post losses. These all affects their cash flow and ability to expand thus making them look for ways to survive. One of such ways is to cut cost and what they typically do is downsize.
All hope is not yet lost, if for any reason, you are uncertain about your job prospects, we recommend that you immediately start your job search.
DO NOT WAIT until it is too late, rather
- dust up that CV,
- update it with the latest skills acquired during your most recent employment,
- list out all your achievements to date,
- include projects you successfully completed and
- then start to solicit feedback from colleagues.
(For this exercise, using www.linkedin.com is a very good resource for updating your resume and collating feedback from colleagues, clients and project partners alike).
Familiarize yourself with the job market, most especially what skills are being sought in the marketplace and then compare how your existing skill set matches or what gaps exist.
You may notice that updating your CV gives you renewed optimism and self-confidence to face any challenge in your path.
One thing to also recommend is that you should also give serious consideration to enhancing your skills by acquiring more qualifications. With every turmoil comes opportunities and new jobs but there is no way you will be able to take advantage of these new opportunities if you are lacking the requisite skills.
One thing I’ve also learnt in my experience is that studying for new qualifications re-focuses your energy and you worry less about things outside your control. It also serves as a welcome distraction. The objective should be that as you study to increase your qualifications, you can also attend interviews simultaneously. Employers often look favorably on candidates who are self-starters and demonstrate a persistent desire to acquire knowledge.
I am a huge believer in the on-demand economy where the best of the best succeed. So do not limit yourself to local opportunities around you.
For professionals, especially with the world now in the palm of your hands through the internet, make sure you search for international jobs also that can be done remotely (for that I’d recommend using the website www.flexjobs.com)
Always make sure you remember that in the international workplace, integrity is key. Specifically to ensure you get repeat business consistently do what you promise or is agreed, clarify what is required and do NOT misrepresent yourself or your output
Travel cost – Schools are currently on holiday and most families must be planning for their summer holidays. Summer this year is likely to be one of the most expensive in years as cost of air travel, accommodation and spending money is probably 35% higher than what is was 6 months ago. A $1000 dollar ticket that cost about N200,000 is now costing N232,000. Multiply that increase by the number of tickets you are buying for your family. To make it worse, the CBN has placed restrictions on how much you can spend affecting your ability to take advantage of discounts when shopping.
It is important to point out that there are local recreational facilities in Nigeria, which will provide ample entertainment for the entire family without incurring exorbitant expense.
One which comes to mind is Obudu cattle ranch (people actually visit from outside Nigeria) https://www.google.com/search?q=obudu+cattle+ranch+nigeria&safe=strict&source=lnms&tbm=isch&sa=X&ved=0CAcQ_AUoAWoVChMIg6S86_TbxgIVBXUeCh3i3QrI&biw=1600&bih=759
If more exotic trips are desired, our neighbors West African (Benin and Ghana), East African (Kenya, Tanzania) or North African (Morocco) provide ample locations for tourist visits to avoid exorbitant overseas travels
School Fees – Those with Children schooling abroad will also find themselves in tough financial waters due to the further depreciation of the naira at the black market. Most of these parents source for forex in the parallel market and have now found themselves in very tough financial positions. Things will only get worse if the naira continues to slide further down.
Thankfully, the growth in private education in Nigeria continues to provide alternatives for interested citizens to take up. The success of these private institution serves as a source of pride for the nation. As an example Covenant University partners with a lot of international universities with overseas professors participating in seminars and educational programs
Thus opportunities for provide education can be explored as an options
Interest rates – Higher inflation also translates to higher interest rates on most consumer loans. Personal loans, credit card loans, car loans will only get more and more expensive. This further eats into your disposable income infringing more pain on your finances.
For the savvy investor, now will be a time to de-leverage and drastically re-allocate resources as we’ve pointed out earlier, if however you find that your expenses still outpace your income, the recommendation will be to reassess your household expense baseline and attempt to sacrifice certain discretionary expenses
- How many phones do you really need?
- That DSTV subscription, is it really generating any income?
- Those extra clothes and shoes, does that increase your net worth?
- The next invite for “Asoebi”, joor let us wait first, why can’t it just be plain white?
- AyDee concert, let us wait until it is uploaded to YouTube rather than pay N50k gate fee
There is simply no way to succeed in life if your expenses continually outpace your income
What can change things? Buhari!!
- Let us start with the available opportunities first before asking what Buhari can do for us We are Nigerians, we are resourceful, we are intelligent, all we ask is leave us alone when we start to make our money!!!!!!!