Tips for surviving 2009 (The Nigerian Context)

INTRODUCTION: TIPS FOR INDIVIDUALS:
“SURVIVING 2009”
(OUR FINANCIAL PERSPECTIVE– FOR INDIVIDUALS)

FORECASTS:
For once, both optimists and pessimist agree on one thing: 2009 would
probably be one of the most challenging times in living history for
most people. Even those who predicted that Nigeria was too detached
from the global economic crisis have all reversed their positions.

Warren Buffet (arguably the greatest investor of our time) says: The
secret to making money is to be cautious when everyone is greedy and
to be greedy when everyone is cautious. But a lot of questions are on
our minds: Have the Nigerian stock market reached its bottom?

Should I average down by investing at these low prices? Is there a real
estate bubble? Will Naira depreciate further? What else can I invest in?
Will I keep my job in 2009? Will there be a banking crisis or consolidation?
How best can I survive in 2009? This is our attempt to answer
all these questions and more.

Many experts on the Nigerian economy agree on the following predictions:

Foreign exchange rate will depreciate further to between N145
to N155 per US$1 by the year end 2009; Nigeria ’s foreign reserves may
have halved by 2009 ending, from about US$52billion in December
2008 ($63bn in September 08); Prime lending rates would range between
20% and 25% depending on CBN’s willingness to print money
and the mode of financing our N1 trillion deficit budget; Crude Oil
prices would range between $25 to $55 per barrel depending on
weather conditions and events in the middle east; Real Estate prices
would adjust downwards by between 10% to 50% (especially in Ikoyi,
Lekki and Victoria Island); Nigeria ’s cocoa exports would drop significantly;
There would be huge swings in share prices (upwards and
downward) with an average slow trend upwards; Unemployment
would rise (even amongst bankers); Consumer confidence would drop
and crime rate would rise; and the Foreign exchange ‘black’ market
would re-emerge and trade at a premium of between 5% to 10% above
the official exchange rate.

Generally, all you need in 2009 are the 3 C’s: CASH, COURAGE
and CALM. CASH to survive and take advantage of all the
golden opportunities which will arise. COURAGE to aggressively
implement all the highlighted recommendations/Tips; and
CALM to remain steadfast.

Other Tips Include:

Determine & Monitor your Net worth: Net worth is what is
left after you add all your Assets and subtract all your Liabilities.
For you, Assets include: Shares which have been dematerialized
into CSCS at current market prices; Real Estate with proper title
documents; Cash in Bank; Gold and any asset with a high probability
to appreciate and easily determinable market values. Please
note that items like cars, cloths and furniture are deliberately excluded
and are considered dead assets. Liabilities include: Loans,
mortgages, and anything guaranteed to cause consistent cash out
flows in the future. Your aim in 2009 is to measure and increase
your assets/net worth consistently on a monthly basis.

Form a Cash Backed Family Reserve: In 2009 we recommend
you have a Cash Backed Family reserve in your savings or Fixed
deposit account. This can be calculated by estimating your total
family expenditure for 6 months assuming you and your spouse
lost both Jobs today. If you do not have this reserve, sell what
you can and cut all unnecessary expenditure until you can form
this reserve. This amount should be left unused until 2009 ending.
Once you have your cash reserve you can stop saving and
start investing. Every additional inflow after your cash reserve
forms part of your investible funds.

Avoid Debt:With astronomical interest rates you should be very
careful before you use any debt in Nigeria .

Live below your means: If you cannot save/invest at least 10%
of your income you are living above your means. To live below
your means you should save/invest about 20% of your monthly
income, every other expenditure should be cut off or suspended.

Take a Health insurance and a life Insurance: This eliminates
2 major financial risks you and your dependents may face.

Invest in Real Estate using Investment Clubs: With the proposed
decline in real estate, small investments in different real
estate ventures, with minimal debt would be preferable to large
investments. This form of investment is usually available using an
Investment Club.

TIPS FOR 2009:

Invest in Equities: Invest with a 2 year perspective in selected highquality
company equities with higher dividend yields and lower P/E
ratio’s compared with their pairs. Buy gradually, buy what you understand,
and avoid stocks known to have manipulated prices. In addition
you may Invest in trusted Mutual Funds. Investment in Private Equity
can be very profitable if done via experienced managers. We recommend
about 20% of your investible funds should be allocated to equities.

Invest in Fixed Income: Invest in Commercial papers, Bonds, Guaranteed
investments, Treasury Bills, and foreign currency which can be
easily liquidated to take advantage of interesting opportunities. We
recommend that about 60% of your investible funds should be in this
form.

Like Buffet SEEK ONLY ‘DEALS’: In 2009 a lot of once-in-a-lifetime
deals would emerge, however only those who are ready with
cash would be able to take advantage quickly. Make it a point not to
part with your cash unless it’s a “deal of a life time”. Don’t be in a
hurry to invest. Always walk away if you are unsure. More deals would
come subsequently. The opportunity cost of spending your cash is
high.

Reconfirm the status of your Pension (PFA) contribution: Those
little monthly contributions could amount to a fortune in future.

Safeguard your assets and yourself: This include enhancing your
immediate security as crime rate is expected to increase. Also ,insure
your House and any major asset.

Do a Will or a Trust: As morbid as it may sound, this would make a
world of difference to your dependants, just in case the unfortunate
happens. Form the habit now and continue updating the Will as you
increase your net-worth.

Set 2 major Financial Goals: i.e. Education for you and your kids
and Housing for the family. Invest towards them aggressively.

Remain Motivated and seek opportunities aggressively: This is
the time to remain motivated and violently seek opportunities.
No gentle man survives the war front.

Do a Budget and stick to it meticulously: To manage your expenditure
you need to measure them continuously.

In Conclusion aggressively preserve your cash. This would give you
more options in 2009. Most importantly, be OPTIMISTIC not necessarily
about the future which you cannot control, but about your ability to
make the best out of whatever the future presents at you. Amidst this
uncertainty, most of the traditional assumption that determine the
industry boundaries/rules would have silently changed. Now more
than ever, a Game Changing Idea will work.