Once again, we changed the format of the LBS Breakfast Session. Today we adopted Q & A, providing brutally frank answers to the following salient questions:
- Why is GDP up and income levels are down?
- Food prices are rising but inflation is falling! What do we believe?
- The best hedge against inflation: a) Real Estate b) Equities c) US dollar investments d) Bitcoin?
- Is the Naira likely to crash to N600/$? If so, when?
- Is the PIA going to make things better? Or is it another case of the more things change, the more they remain the same?
We remember that in 1999 Professor Sam Aluko said: “The poor cannot sleep, because they are hungry! And the rich cannot sleep, because the poor are awake and hungry”
Nigeria ranks 116 out of 149 countries in the happiness index. The joy should naturally be accompanied with great news like economic growth and declining inflation. However, beneath this supposed happiness is the undercurrent of misery, which is reinforced by high unemployment (33.3%) and rising multidimensional poverty. Nigeria’s misery index is at a record high of 50.68%. People are worried about the divergence between great data and pain. In the words of Fela, Nigerians are “Shuffering and Shmiling! 49 sitting, 99 standing”.
While we expect inflation for August to fall again to 16.8%, the impact of insecurity, exchange rate pass through and higher energy costs could exacerbate inflationary pressures. The EIU projects inflation to average 17.3% in 2021. For an investor trying to hedge against inflation, we recommend you diversify your portfolio to include investments in the Nigerian equities, US equities, real estate and possibly cryptos/precious metals or e-Naira.
It is very unlikely that the naira crashes to N600/$. The necessary and sufficient conditions for naira stability at the parallel market is a significant increase in FX supply at the official window rather than administrative solutions. We believe that the invisible hand is better than the hidden hand in bringing equilibrium to any market (forex market inclusive).
In this edition of the LBS Breakfast Session, Bismarck Rewane and the FDC Think Tank attempt these questions with brutally frank answers.
Enjoy your read…