Nigerian Market...No.5

One Senior market analyst, Jeremy Steins, once said in the relation to another domain options market, that "stock price volitility strongly mean Reverting" which if translated in market Nigeria should mean the following; short term options should behave differently as a reel on the prices of long term options should behave differently as a reel on the price of long term options. Gains on short term IPO's should mean reverting to an actual domain option after an expected business cycle of 36 months, albeit at lower percentage profit.


As far as Standar deviation in concerned with respect to range of expansion on a weak platform an population size, this is probable not true at least in market terms. Much still in market, liquidity markets like Nigeria, with very limited structural adjustment proved incapable to withstanding the barrage of business drama at the top. Bribery and corruption built a tunnel from top to bottom, unleashing as it were an avalanche of waste and military suppression in once promising economy.


Not barring oil and gas as a normal bias, Nigerian market proves a point in the immediate discourse. For instance, Nigerian market has consistently increased in the last two decades with an upside view of 10% annual rise in the next probable ten years. The New Government in Nigeria had been trying to set aside the problems of the past, while doing what is considered right by other citizens' standard. Until the recent government, Oil and gas rose in Nigeria as Naira dropped over the same period, meaning high and cur inflation capable of gaining psychological dimension as demand fell for imported goods.


From that 1986 Nigerian adjustment to SAP (structural Adjustment Program) and the idea of 'super currency' and IMF, Nigeria and foreign hedge fund managers went at logger-heads. Naira facing corruption and bribery and expense driven trade deficit which forced Nigerians into debt and compounding debt that forced Nigerian Naira into a slide. The drop was so consistent with oil that it was easily expected every Friday. Few began to wonder when such drop will mend, fewer suspected a compromise from the Nigerian federal government. With the rise of trade deficit in Nigeria and with oil exchanging hands from June and September each year, Nigeria Naira like most betrayed currencies of the world kept sliding till foreign businesses began to pull out, but the harm has already been done.


Exchange driven disaffected buyers looked else for profit from around 1986, leading to further devaluation of the overall economy. The blame easily went to poor fiscal policy of the government and its military weight and loan servicing. In no small part did the isolated incident of Nigeria took place only in Nigeria, it was a world wide economic problem. By 2004, the weight of the currency has depreciated from slightly over 5 Naira for 1 dollar to 148 Naira for a single dollar. Naturally, investors were discouraged to place more bait with such a country called and until 2004, market Nigeria dwindled under the axe of monopoly.


From that 1986 till the licking of Nigeria would in 2004, there is always the issue of acquiring distressed asset which usually occur when US dollars is at all time high and Americans who once backed the Bretton Wood will now cease the opportunity to spread their business. The rise of
US dollars forces currencies around the world to become worthless and then a penetration of American backe securities.


In essence, if you plan your market very well, it will revolve around around a circle, starting with the rise and fall of US mortgage and then US government backed intervention, a tightning of credit, a stronger US dollars and a weakened foreign currency leading to inflation like the problem in Russia. Like the problem Nigeria Naira faced in November which cause inflation leading to distressed assets. If they had released their distressed assets to foreigners, it might rehabilitate the circle of debt in future.


But this has no remedy in current markets in the world, but in Nigeria, there is a command to all asunder to invest now the chips are down. The circle would been fully broken with a few more years of Charlse Soludo, but his removal might be a blessing in disguise since eyes are now wide shot. Embrace Nigeria now and she was will embrace back. Embrace Russia if you can.