Hello everyone, I hope we are all doing great and keeping safe?
I need not be a
Soothsayer to tell of the scourge of COVID-19 on the world economy and coming
home to the Nigerian economy, we are not just facing the Virus we are also
facing low oil prices which is as a result of the faceoff between Russia and
Saudi Arabia (Talks on going to resolve)
As at 20th April 2020. the price of Crude Oil was $13.5 the lowest
since 1999. So, the implications of all this is that we have in our hands an
impending Recession, if not already in Recession.
The truth is these
affects the world all over, most countries are heading towards Recession, if
not already in one.
Let me quickly explain
how they intertwine.
The faceoff between
Russia and Saudi Arabia started before Corona Virus became a Pandemic, so in
other words the USD crisis we are having now is not just as a result of the
Pandemic.
That is, In layman terms
and in summary we have more supply of Crude in the Oil market and simple
economics law of demand and supply kicks in thereby crashing the price
worldwide and you and I know that Nigeria is largely a mono economy depending
on Oil revenues with our National Budget set at $57/Barrel. But this was
reduced to $30/ Barrel. But even at that we can still meet up as it was sold
at $13.50, 20th April 2020. Not only that we have less demand as most factories
are shutdown worldwide due to COVID-19, meaning a further reduction in price.
In March 2020 the CBN devalued
the Naira to N380.5/$1 and as at today the black market is selling at N416/$1.
What is the meaning of this, someone who had 360m before the devaluation you
had $1m but now that as reduced significantly. And experts are still looking at
a further devaluation soon. What this in turn mean for you and I is that we
have our income reduced and our disposable income with it, so we will be
experiencing inflation
Because of the high risk
of person to person transmission of the COVID-19, the Federal Government lockdown
Lagos (Financial Capital) Ogun (Industrial Capital) and Abuja (Federal Capital).
And thereby causing Businesses to either a full or partial shutdown, I spoke
with some of my Entrepreneur friends and the said they are doing half salaries
this month for their staffs and if the lockdown persists they will do no
salaries and the sad truth is some businesses may not recover from it.
So, what would I have done before the
devaluation (This is for next time):
· If you
had a foreign currency loan (Business Owners) you should hedge (NDF, SWAP is
not visible here in Nigeria).
What should be done now:
· Review
your expenses and reduces frivolities’ as much as you can.
· Verify
investments well and be smart as fraudsters will increase, the last time we had
rescission was 2016 and that was when MMM grew more even though it started late
2015.
· Be financially
disciplined.
· Make
and work with a Personal Finance Budget.
Lesson from the whole episodes:
· Increase
your savings culture, so many people are ‘broke’ because of the lockdown.
· Review
your business model/ life model to include contingency plans for situations
like this.
· Always buy
things in bulk (Majorly food stuffs etc)
In all this the most
affected industries are Tourism, Aviation, Sports, Cinemas, Entertainment,
Fashion Hotels etc are all counting losses in revenue.
While some industries are
hit hard some are having surge in revenue, Telecommunications, Video Streaming websites
(Netflix, YouTube, etc) ,Social Media (Twitter, Tiktok, Instagram etc), Pharmaceutical,
Food, Supermarkets etc.
Above all, I am an
optimist and I believe we are more than able to come out of this strong and
better as a person, as ‘Though Time Never Last but Tough People Do- Robert Schuller’
Let us remember to Keep
Safe, Stay Home, Wash your Hands, Maintain Social Distance and remember it is
only the living that spends money.
I remain your friend and
Personal Finance Coach Babatunde Ayorinde, follow me on twitter @pistis03, on
Instagram @personalfinancebabat
And if you like to engage
us to speak in your program or for adverts send us a mail at babat09@gmail.com.
Thanks for reading,
invite you Family, Friends, and Foes to read the blog, as we move ahead to our
financial freedom.