Speaking in 2010, the then Japanese president noted
that the only natural resources they have were natural sand. He went on to say
that natural sand is used in the production of microchips. And according to
Moore’s law the power of microchip doubles every 18 months. We are not
interested in the principle surrounding Moore’s law that will be a fruitful
discussion for students of physics. This therefore calls for a diversified
economy.
We are more interested in the impact of a deficit budget
in the bond redemption. It is longer news that the 2015 budget, is a deficit budget,
Nigeria is having an increasingly attack from Boko Haram , and there is now a
downward plunging of the price of crude. A price that has been far in excess of 65
dollars now hovering within 40 dollars.
In Nigeria oil account for more than 78 percent of its revenue, there is also an intending election expected to take place next month and according to Emerging Equity in an article titled “Nigeria’s Credit Rating Is Under Increased Pressure From Oil Plunge, Boko Haram” they noted that “all of these factors are “weighing on investor demand for Nigerian assets at the moment,” Matt Robinson, the Moody’s manager of the Africa sovereign ratings team told Bloomberg on Thursday. “We’re certainly seeing pressure on the currency, we’re seeing pressure on Nigeria’s bond prices, so it’s one of an array of downside risks.”
In
their conclusion they noted that Moody’s rates Nigeria’s debt at Ba3, the three
levels below investment grade, with a stable outlook.
In an article in This day, titled “Barely 6 Months in the Saddle, Emefiele Rated Best Central Bank Governor” which appeared on the 21st of December 2014 they noted that “explaining further, the CBN Governor said “Such high rates creates preserved incentives for commercial banks to simply buy virtually risk-free government bonds rather than lend to real sector,’’ he said.
According to trading economics, assessment of
rating agency about Nigeria based on the prevailing economic factors has all
been negative, Moody , Fitch and S&P
all gave it an overall API Index of 27 and negative outlook.
Continuing the credit economics noted that “Standard & Poor’s credit rating for Nigeria stands at BB-. Moody’s rating for Nigeria sovereign debt is Ba3. Fitch’s credit rating for Nigeria is BB-. In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Nigeria thus having a big impact on the country's borrowing costs.”
It could be also noted that virtually all the
Pension Fund Administrators invest more than 60 percent of their fund in
government bond.
So if the plunge downward what will be the fate of
the contributors, what will be impact on the PFAs, what will be impact on the
regulatory body, National Pension Commission , PenCom.
This is the time for the regulatory body to reexamine
the investment structures, alternatives and realign the strategies, to the
dictates of the economy, as the economy does not operate in isolation.
Will the government be able to redeem its bond with the dwindling oil prices, huge election budgets and the devastating impact of the Boko Haram ?
The aim in re strategizing is to find alternative means
of investments safeguard the contributions and provide happiness and succor to
the retirees as Kiyasaki (2000:398) will say that during economic bonanza,
there are only 3 kinds of people, those who make things happen, those who watch
things happened those who say what happened.
Borrowing from Kiyasaki, it is time for the
regulatory body to make more things happen as they have been doing in the past
by ensuring safety of the fund , this can do by realigning the investment
alternatives to other instruments that will usher in more confidence to the contributors.
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