Inflation dwarves profit
Imagine living in a world where you're in a perpetual loss for nothing wrong. In fact, you could even be absolutely right and you'd still be at a loss.
I stumbled into a publication about stocks hidden gems in Nigeria. This is a big deal because it is widely known that the stock market is not your friend over here.
Anyway, it actually gets much worst than many people report it to be. It is so bad that some of the "hidden gems" to celebrate are still bringing losses to people.
Peeking through the peephole
I've always wanted to buy stocks but I've never gotten around to doing it. My wife bought some stocks though but I didn't because I just wasn't in the mood.
The problem with buying Nigerian stocks isn't the companies in question. In fact, it is safe to say that businesses in Nigeria are among the most hardworking and productive you'll ever find in the world.
The real problem is the environment. To put it plainly, the government fucks everything.
I was checking the data on investment and the reality is really grim. You could be making "huge" gains in Naira and all of the value gets weathered by the brutal inflation that's eaten into the very fibre of our existence.
For example, the statistics behind the cover image is quite misleading. So, if you bought Dangote stocks in 2015 for 172 each, today that stock value would have grown to 243 per stock.
So your 172 Naira has grown by an astonishing 41.2% in just 7 years. By stocks standard, I say that's quite impressive but the reality is quite grim.
You see, in 2015, the average dollar to naira exchange rate was $1= 195 Naira. In 2022, which is today, the official CBN rate is roughly $1=415.
So to put it plainly, again, your 172 Naira in 2015 had more value than your 243 Naira in 2022. In fact, if we were to correlate 173 Naira in 2015 to today's exchange rate, each share should be trading at least 366 Naira.
Here's the thing though, this maths doesn't account for a lot of variables. It only accounts for the surface and digging deeper only unearths more dirt.
If you had bought Dangote Cement stocks in 2015 for 173 Naira, the only way you could possibly break even today by selling is if the stocks are trading for 366 naira.
If we were to convert this entire transaction to another currency, like say, the dollar, you get a better picture.
In 2015, each Dangote stock traded for about 88 cents and today, each stock trades for a little over 58 cents. So, in the space of 7 years, your shares value lost a whole 30 cents in value.
I don't know much about financial maths but I know that when any asset I hold drops by 30 cents, I definitely worry.
Investing to lose
Buying stocks is a relatively safe way to invest money. Crypto is volatile and risky, so I don't expect everybody to go this way.
In fact, for many people, it feels much safer to invest in their local currency, rather than some magic internet money that they don't understand the fundamentals of. Well, this is not to say that they understand the fundamentals of their fiat but at least you can pay bribe with it.
Anyway, when you think about it though, investing in profitable stocks still mitigated the amount of loss.
Assuming the individual that bought stocks decided to simply dig a hole and keep that 172 Naira for seven years, the value would have dropped from 88 cents to about 42 cents. So, yeah, buying stock mitigates the loss by a fraction.
You could say that it's still profit since we don't directly live off the dollar and the cost of living isn't the same with people that spend dollars directly. However, a closer look at the cost of commodities has risen.
It is also worth pointing out that we're a consumer state in Nigeria. We don't even make enough money in the country to cover our yearly budget.
It's a rather weird situation for everyone living in a country with so many idiots in charge. Everything about the country stinks and it is all arranged to screw you over.
Every year, the country is constantly run into the negatives. Many government workers are paid wages without being productive, contractors are overpaid, lots of fraud, and all that crap keeps eating into everything the government touches.
It is a very unhealthy situation to be in, Sadly, I don't see any hope for the near or long term future of the country. I hope I'm wrong.
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