CAPITAL MARKET INVESTORS PAYING THE PRICE FOR FAILING TO HEED WARNINGS.
“For if a miracle does not take place for our people, its path will be one of ultimate doom and destruction.”
Adolf Hitler, 1897-1945.
Under ordinary circumstances, this would have been a time to gloat, to say to investors on the Nigeria stock exchange, who had ignored my previous warnings “I told you it will happen.” Coronavirus only accelerated a steady decline in share prices – which were inevitable. The slide was inescapable because the Federal Budget which in the last three years had been prepared by Federal Government officials all seems incomprehensible if we do not assume the deliberate intention to bring about the destruction of the Nigerian economy. In no single year was the revenue estimate achieved. That was bad enough. In no single year could the government have expected to achieve its targets if they had been honest with themselves and with the people of Nigeria.
Budgets of illusion had become the norm under the Buhari administration and the Nigerian economy had become like a sand castle built by children on the sea shore. Sooner or later the structure was bound to collapse and every decoration placed on it. To some extent the lids were better, they had no illusions that what they built will last. Buhari presented each budget with the solemn belief that what he placed before the National Assembly, NASS, was a serious document.
The ever-complaisant NASS, more a “ship of fools” than anything else when it comes to interrogating budgets, after a perfunctory exercise, including padding, passes the budget. That the budget estimates had not been achieved in any single year since 2016 is the only testimony we need that it is no honour for a people to be ruled by leaders of poor quality. Any hope we have nourished that the budget each year will bring about the start of a sustainable economic recovery has been dashed. But, we cling to the mirage because we have refused to accept the fact that a nation, like “an institution is the lengthened shadow of one man.” (Ralph Waldo Emerson, 1803-1882,VANGUARD BOOK OF QUOTATIONS, VBQ, p 105). We stand under President Buhari’s shadow. That is the pity.
“You can’t give what you don’t have” – as the lawyers have told us repeatedly. Try and tune to the CNN and listen to the candidates vying for the Democratic Party Presidential ticket. Listen to them talk about their economic policies and plans, as well as how they intend to go about achieving the goals they have set for themselves. Compare with anything you can remember Buhari to have said during the 2019 election campaigns. More than one difference is clear. Those leaders blessed have clear minds, and who continue to expand them, and those who don’t. Incidentally, the lucid minds were built on education far in excess of School Certificate attempted and no evidence of success – even at that low level. With low quality leadership, a nation cannot compete effectively in the world today.
That has been the background for the forecasts of the last three years; all of which had been ignored by investors. But, all of which had come to pass. Certainly, I have been vindicated. However, self-satisfaction counts for nothing when the nation is in deep trouble. There is serious danger ahead. People are at risk of losing more trillions than they have squandered already. There is very little room for manoeuvring. Yet something must be done before people literally start committing suicide or dying of apoplexy on account of unbearable losses.
The place to start is to return to an article written in the recent past.
In NIGERIAN STOCK EXCHANGE AND FINANCIAL SUICIDE, published early in March this year, regular readers of this column read this.
“In the third week of January 2020, when the shares quoted on the NSE were seemingly heading for the skies, one of the few serious readers of this column called to ask me “Dele, why the silence on the Capital Market in 2020? Is it because the market is now experiencing a recovery and you can no longer make your usual doomsday predictions?” My answer to him was short: “Wait until March and then call me back to tell me about recovery.” Well, you are reading this in March; and, if you don’t already know that a Tsunami is approaching the NSE, then you must have rocks where brains are supposed to be.
I advised one of my close relatives, who was thrown out of Treasury Bills by the Central Bank of Nigeria, CBN, to forget the Capital Market during the period of national euphoria about a good year. I directed him to go elsewhere. He grumbled but took my advice at first. He called back a week after to ask me if a mistake had not been made. I told him: “Definitely not.” We met on Monday before Ash Wednesday at his request. He jumped out of his car and hugged me enthusiastically. After receiving the first returns on his new investment and comparing with what he would have lost if he went into the NSE, he had made a positive gain if N5.7 million in ninety days only. “What next?”. He asked again. And the answer remains the same – “stay out” ”.
As usual there was no response at first – until the global markets collapsed. Then a mad rush started for the exit in Nigeria. I could have predicted it. The economic principle of Fallacy of Composition has already informed us that if one or a few people act in one way, they might gain from it. But if everybody acts the same way, nobody gains.
“There are no desperate situations; only desperate men.”
Joseph Goebbels, 1897-1945. Hitler’s Propaganda Chief.
My phone had not stopped ringing since Monday March 9, 2020. There are millions of desperate shareholders out there who are now exposed to loss on three fronts on account of holding on to their shares until now against my advice. The first is share price decline; the second is the exchange rate effect and the third is inflation. None is escapable as long as the shares are held.
Let me touch only upon the foreign exchange effects. If your shares were valued at N3.6 million, when exchange rates were N360/US$1, then they were valued at $10,000. If the exchange rate jumps up to N390/US$1, then the value becomes $9230.76. If the share price declines to N300, then the value drops to N3,000,000 or N7692.30. However, if the exchange rate accelerates to N420/US$420/US$1, as was the case on March 12, 2020, then your wealth has dropped to $7142.86. The sad part of this narrative lies in the fact that my fellow Nigerians were given advice which their stockbrokers will not free of charge. They ignored the counsel. They chose to be the architects of their own misfortune.
If you are in this predicament, remember this. You received advice but chose to ruin yourself. Despite that, there is a future. The biggest question now is: what should you do with what is left?
Wait for it.