These are not the
best of times for IR practitioners in frontier and emerging economies like
Nigeria. There are untoward challenges only the brave and practiced can
confront, what with the tumbling oil and asset prices accompanied by currency
depreciation. The times present an opportunity for IR to enter uncharted space,
the most unlikely being advocacy. Here I present a three part series on how
this can be done.
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| Oscar Onyeama, CEO NSE |
A less obvious opportunity, with compound interest, is that
which allows Investor relations people to stretch the boundaries of their
activities from helping their company stocks achieve individual corporate fair
value, to one targeted at raising the values of their host economies.
Attaining Fair Value is the sole objective of traditional IR
practice.
Fair value, Wikipedia says, is a
rational and unbiased estimate of the potential market priceof a good, service, or asset.
For our purpose, Fair Value is the attainment of robust
growth and economic development.
The standard textbook and traditional means of achieving
this endpoint is “to build understanding and relationships of trust with
financial media, analysts and shareholders”, according to Ian Linton, an eHow Contributor.
Working as a group, the IR community can move towards
achieving a robust aggregate of stock fair values and value added to set an
economy on a path to recovery; But in the case of booming economies, towards
higher output or GDP.
They can take up from where financial and economic analysts
leave off in their forecasts of and projections on the economic prospects of
nations. This is at best.
At worst, they can work in concert with the men of prognosis
to achieve the above results.
It is happifying to note that one such golden opportunity
has presented itself in the recent economic flight of capital in Nigeria.
This first came in the guise of tapering in January 2014
when the US financial authorities ended their $85 billion dollar a year bond
buying programme in emerging/frontier economies.
And then there was the Central bank of Nigeria’s 8 percent devaluation
of the naira, which moved the target band of the currency to 160-176 naira to
the U.S. dollar.
The domino effect was further felt from the tumbling of oil
prices in the international markets from a high of over $100 to less than $50
in late January.
The Naira took a further hit and foreign investors headed
for the exits while citing the heated political scenario and the free rein of
terrorists in North Eastern Nigeria.
The cumulative effect on the Nigerian stock market of the
barrage of economic punches was a steady investment portfolio outflow of
N793.17bn.
This is a rather scary 67.5 per cent rise over the N473.61bn
in the corresponding period of 2013. It also marked the first time in three
years that FPI outflow would surpass inflow.
Summing up the effect on the markets, Oscar Oyema, head of
the Nigeria Stock Exchange (NSE) said, the “bearish sentiments prevailed for
most of the year as foreign investors steadily withdrew from the Nigerian
market due to currency risk and the recovery of developed economies, and the
effects of the US Federal Reserve tapering of its quantitative easing policy.”
It got so bad that JP Morgan threatened to yank Nigeria off
its Government Bond Index (GBI-EM), the MSCI index of emerging market bonds, of
which the country makes up 1.8 percent.
“The
JPMorgan Government Bond Index-Emerging Markets (GBI-EM) indices are comprehensive emerging market debt benchmarks
that track local currency bonds issued by Emerging Market governments. The
index was launched in June 2005 and is the first comprehensive global local
Emerging Markets index.”
References
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