How to secure my stocks and shares investment

 International financial crises otherwise known as the great Economic Meltdown is a global virus that is steadily spreading across economies around the world.

Nigerian is not an exception. The Nigerian economy is adversely affected, too. Though some financial experts has dismissed it as not having any significant effect on our economy. But, this can be seen from the recent slide in the currency exchange rate of the Dollar to the Naira. Also visible is the international crude oil price. Oil prices fell from over $100 in the last quarter of 2008 to below $50 in the first quarter of 2009.

This global phenomenon, which has set into the Nigerian economy, and its effect, is visible even to the ordinary Nigerian, though financial experts have variously downplayed the effect on the economy.

The Nigerian capital market, which has been reputed as to be one of the most profitable stock market in the whole of Africa, has since late 2008 been steadily dropping, defying any known solution.

As at March, 2009 investors have lost over 60% of the value of their investments. Investor’s confidence has plunged and panic is already setting in. The reasons for this downturn are mostly self-inflicted. A major factor was the flooding of the media with public offers by Nigerian banks in their bid to meet-up the N25 Billion capital base during their bank consolidation policy of the Central Bank of Nigeria. Regulators were also not very strict in watching the market.

The capital market witnessed a heated and unprecedented level of public offers, initial public offerings and hybrid offers to the mostly uninformed investors. The media became washed with advertisements of juicy offers, jumbo profits and multiple bonus offers. The first time investors were led to believe that investments in stocks and shares were the magic wand in money making and financial leverage.

This also gave rise to the emergence of emergency stock-brokers, brief-case investment analyst, stock advise magazines and other ‘financial experts’ and, of course, a plethora of stock broking firms.

The consolidated Nigerian banks with so much funds at their disposal, created share loan purchase products aimed at providing credits and funds to investors to purchase stocks and shares. Many investors even had to sell off their real estate and personal properties to invest in stocks. Some also borrowed from friends, relatives and financial institutions just to purchase stocks.

There were also some others who based on wrong advise, borrowed funds from friends, relations and other financial institutions to purchase stocks. This situation is not excludes financial and non-financial professional who, having access to their client’s funds; acted with or without their consent to trade in the stock market.

A few months later, the bubble burst. The market became bearish, stock prices tumbled, indices dropped daily and steadily, too. Then the speculators, financial experts and professionals who probably saw it coming, started off-loading their stocks. Foreign investors buoyed in by the international financial meltdown culled most of their stakes in some Nigerian firms. This further led to the prices plummeting further. Insider trades, sharp practices, over-priced stocks and price manipulations also led to further irreversible price falls.

 The innocent investor, the poor, the retired pensioners, the students, the novice, the uninformed and even the professional were caught in thee mesh. Heartaches, hypertension and even suicides have been reported in the, media as a result of this mis-adventure.

 Although the meltdown has caught up with the Nigerian stock market, how do we survive this era?

• Those who had already invested in stocks should not panic, but rather keep their stock and if they still have the heart, to purchase more stock at their present low prices.
• Panic sellers should stay put their stocks now, as off-loading them now would lead to more downward prices, otherwise, they should carefully study companies individually, get information on their operations and management and if they believe they cannot scale through, only them can they sell off and probably re-invest in stronger companies.
• On the other hand, they can cull up what they can salvage and re-invest into real estate. Real estate in Nigeria is the most secure investment for now.
• Group of investors can pool up their assets and diversify into the government bond markets, mortgages and real estate investments.
• The Securities and Exchange Commission and other regulatory bodies should enforce the laws and regulations. Scrutinise unusual price movements, bogus media advertisement of prices, unwholesome activities and generally create confidence in the investing public.

 As the global economic situation pervades, real estate investment is the surest investment in Nigeria as of today.