The Political Uncertainty In Nigeria And How Investors Should React To It

The challenges being experienced in the Nigerian political terrain are already affecting the economic landscape. Rather than being rattled by it as in investor, the key is to be prepared

If you’re a Nigerian, no matter what part of the world you live in, chances are that you already know about the unfavourable political condition of the country. Chief amongst the reasons for this is the uncertainty arising from the recently postponed Nigerian elections.

In any economy, electoral activities affect the economy and the capital market being volatile, would normally receive the first hit. While the political uncertainty from bringing in new leaders will naturally make investors worried, recent happenings in the political landscape have gotten both foreign and Nigerian investors speculating.

From the political party decamping that has been normalized particularly between the two leading parties, APC and PDP in the last few months, to the messy arraignment of the Chief Justice of Nigeria (CJN), Justice Walter Onnoghen, investors are nothing short of panicked.

As such, many market investors have, in recent times, taken a back seat to investing while keenly watching the macroeconomic environment. Companies are starting to bear the brunt of it.

It also doesn’t help that the Central Bank of Nigeria, CBN, has warned that the country might fall into another recession if stringent measures are not taken to boost the economy. It’s a dire situation.

How Investors Should React To It

The only real risk affecting the stock market is how investors choose to react to it. Crashes in stock prices and all possible issues that could arise, with an overall stock market crash being the worst-case scenario, only happens when investors panic and begin to make haphazard investment moves.

As such, investor confidence needs to be strengthened towards the Nigerian capital market. While the stock market itself particularly the primary regulator, Securities and Exchange Commission (SEC) has its part to play in ensuring market efficiency, you have your role to play as an investor.

Exiting the market because of political uncertainty is a reaction that would not benefit to any market player.

However, trying to keep the market afloat is not the goal of the investor. Your goal is to make the best out of your investment. So what do you do during volatile periods to ensure you still come out on top? – Stick to your investment plan.

Indeed market swings can rattle even the most seasoned investor but it is important to understand that volatility is part of investing. Instead of being worried by volatility, be prepared.

For one, it is important to ensure that your investing plan is comprehensive and tailored to meet your goals. It is also important to be aware of everything taking place in the market so you can leverage opportunities as they arise.

It is also important to be comfortable with your investments and keep investing in order to spread your investment across different periods in the lifecycle. Market downturns are usually short-lived and there would be a boom for every bust.

In all these things, try not to time the market; volatile situations are so because they are unpredictable. If your investment plan is long term, you will still come out on top.

Written by Lawretta Egba