Lets Talk Investment Challenges

By Isaac Orieka

When charting a new course for investment, you set new goals for growth by using the mind positively. Your mind is a very valuable asset that must be disciplined teaching it to be focused in one direction so as to be successful in business. Instead of being thoughtless.
Therefore, it would be a dream to grow the economy at a stable rate without a discipline mind and thought hence economic recession are one of the facts of life in any clime and unavoidable as the sun sets.
The Nigerian economy has a cycle that involves both periods of growth, expansion and periods of recession and decline depending on the management of economic indices.

What is Recession?
Recession can be defined as an extended period of significant decline in economic activity, including negative Gross Domestic Product (GDP) growth, faltering confidence on the part of consumers and businesses, weakening employment, currency and poor sales and production of goods.
Exceptionally, this is not an environment that would lead to high stocks or a sunny growth, for stocks and high prices. Other aspects of recessionary environment like in Nigeria relates to investments including a heightened risk aversion on the part of investors and a subsequent flight to safety. However on the bright side recessions do eventually lead to recoveries and it follows a relatively predictable pattern of behavior along the way through government policies.
Monitoring your investment
A key to investing before, during and after recession is to keep an eye on the big positive picture, as opposed to trying to time your way in and out of various market sectors niches and individual stocks.
Thoughts on the political economy
President Muhammadu Buhari was elected on the platform of the All Progressives Congress (APC), a party that promised change and now next level, that it will bring all round development to the nation. Sadly, there seem to be more hardship in the country’s economy, considering the prices of goods and services. Undeterred, the Buhari led government has consistently encouraged Nigerians to be patient, reassuring that the promised change will come. He explained that for development to come the country will go first through some tough times.
Some economic experts have criticized the government for injustice, unfocused branding, while others have towed the line of patience, trusting that the ruling party will deliver.
Therefore, a lot of historical evidence has shown that the country is trying to pick up, while investment throughout recessions is beyond the ordinary investor. However, there is no need to be discouraged because there are many ways an ordinary person in Nigeria invest to protect and profit during this economic cycles.
Knowing that at times like this, even the agric sector suffers massively to survive the poor and negative impact of recession. Considering the macroeconomic issues of recession and how it affects capital markets, recession hits companies, slow down business investment, consumers slow down their spending and people’s perceptions shift from being optimistic and expecting a continuation of good times to become pessimistic and uncertain about the future.
At the equity markets, the results are obvious as Nigerians become uncertain about prospective earnings, they perceive a greater amount of risk in their investment, which broadly leads investors to require a higher potential rate of return for holding equities for expected returns as to go higher, which may lead current prices to drop, as investors said their risk investments and move into safe securities, including government debts. This is why equity markets tend to fall often, prior to recessions as investors shift their investment to a more profitable venture.
Investments and recessions
History has shown practically that the Nigeria equity markets have the ability to serve as a leading indicator for recessions. But even in a decline, there is a good news for investors as there are pockets of relative performance to be found in the equity market. Investing during recession periods is the safest relative places to invest which are in the high quality companies with many years of business successes as these companies can handle long period of weakness in the equity market.
Traditionally, the safest places in the equity market is consumer staples. They are the last products to be expunged from the budget. Therefore electronic consumers, discretionary companies suffer as consumers hold on to these higher end purchases.
Investing in commodities
One area one may consider in the context of recession is the commodity market. Generally, the rule to understand investments in commodities is to grow the economy and inputs or natural resources. The need for natural resources grows and the prices for resources rises.
However, as the Nigerian economy slows down demand slows and prices go down. That said, as investors believe recession is forthcoming they will sell commodities, driving prices lower for profit gains. Also commodities are traded on a global basis and local economic activity is not the sole driver of demand for resources, such as oil, gas and steel. Be that as it may, do not expect recession in Nigeria to direct impact on commodity prices
Advice for investors
Investors should note that during recessionary periods it is key to focus on the horizon and manage your gains, losses and exposures. It is important to minimize the risk in your portfolio and maintain your capital to invest in the recovery process. Therefore you don’t know the beginning and the end of recession to the day or the quarter but having a foresight of a recession in advance, is good for business to stabilize.
The real business trick is to simply have the discipline to step away from the high returning investments during times of extreme optimism, wading out of the stormy waters, by having a discipline to embrace risk at a time when most people are struggling to manage the cycle of recession and getting ahead of it. Instructively the ideal balance between performance and value improves both your personal productivity and your office environment with an elegant space saving design to cope effectively.