Published On: Mon, Jul 10th, 2017

Economy’s Half year heart beat

TESLIM SHITTA-BEY |

 

This is a great time to take a second look at your shareholdings. How many shares do you own? In what companies? For how long have you held the shares? What do you know about the company, its management and industry? If at this point you have a quizzical expression on your face, then you’re toast. But being toast is not the same thing as being dead, but it is not far off. If your heart is pumping at a blip faster than normal and you feel the bitter taste of adrenalin coursing through your mouth, then there is redemption for you yet.
Half way into the year investors need to take a reality check (apart from a mid-year medical examination). They need to answer some bland but niggling questions. Will NSE (Nigerian Stock Exchange)stocks go up or down? Easy, some stocks will go up while others will slide south. No tea leaves needed here. Will equity returns outstrip inflation for the rest of the year? Well this will depend on the combination of stocks you currently hold, the Biblical Psalm 23:1,’the Lord is my Shepherd……..’ could prove exceptionally useful here. Should you simply buy Treasury bills and save yourself the hassle of researching companies? Sure, that is if you can sell off duds and turn the cash into bills (don’t be too optimistic, investment fools,unfortunately, are not that common these days).
Truth be told, a lot of investment decisions for the rest of the year would hang on the thin chance that policy makers would act in the best interest of the economy. This is equivalent to believing that the best protector of your carefully grilled Salmon fish is a hungry alley cat. What may happen to the starving cat may be in doubt but the fate of the fish is certain. Here is one interpretation of how things may pan out for the rest of the year.
The fiscal authorities led by its head honcho, Minister of Finance, Kemi Adeosun, will prime the money pump a bit more in the next two quarters to create some semblance of stronger economic growth. A rich cocktail of projects would start to give temporary and ‘semi-permanent’ jobs to young Nigerians unsettled by the alarming 36% unemployment rate for adults between the ages of 18 and 34. This quick fix will be great on the pages of newspapers and the political soap box, but will remain fairly meaningless in the broad scheme of things as Hallmark Economic Intelligence Unit (HEIU) Economists insist that the country needs a gross domestic output (GDP) growth of between 12 and 15% per annum over the next ten years to significantly pierce through the unemployment armor. Mr. President in his usual manner will reel out dull statistics and repeat dubious change rhetoric while meaningful fiscal action remains frozen. At the level of monetary policy Godwin Emefiele Central Bank of Nigeria (CBN) governor will dutifully uphold the party line by keeping inflation in check, curtail domestic money supply and pull the plug on credit creation through Reserve restrictions. ” You don’t need to be a seer, to know that interest rates will not come down this year and that manufacturers will still be living close to the poorhouse”, says Moshood Mustapha, Chief Executive Officer of Investment firm, Outlandish Ventures,” If we are going to summarize the economy in the last half of 2017 we should be looking at a GDP growth rate of below 2%, inflation of about 15% and unemployment slightly above 13% (this could easily be about 23% for those between the ages of 18 and 35). In the words of a popular French proverb, ‘the more things change, the more they stay the same’ ”.
At the international level the price of crude is likely to stay ahead of the $100 mark for Brent. Hallmark Economic Intelligence Unit (HEIU) estimates that the price of Bonny light and Brent crude would hover between $ 48 and $ 52, and then dip to $46 in the first quarter of 2018 as slower global growth and production take their toll on the demand for energy, especially in countries like China and India that have hitherto been major factors for the sustained robustness of crude oil prices in the last five years. This means that oil revenues will remain fairly stable over the last two quarters of the year and the Naira to Dollar exchange rate may not stumble outside the N350–N370 to a dollar band. However, this stability may prove to be temporary as a lot would depend on the extent of fiscal spending in the course of the year and the central banks disposition to monetary easing in the face of crippling and socially incapacitating unemployment. Political expediency may require the CBN to allow for some monetary expansion to bring rates down and hopefully expand domestic output and employment heading into the 2019 elections when the President would need to wave cheery statistics in the face of a doubtful electorate.
As far as the stock market is concerned in 2017, investors with diagnosed hypertension or heart fibrillation would best look for other pleasant diversions (such as dancing Salsa or flying kites) rather than sweat over forgettable market returns for non-banking sector stocks. Essentially investors may do well just to hold their present positions if their portfolios reflect a healthy quantity of banking sector stocks (although not all that glitters is gold here to), a smattering of investments in property firms (real estate is currently on a roll), and a sweet dash of confectioners (Nigerians simply love their food seasonings), and a shunning of Insurers like the plague.

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