Home Finance Does it bother you that your financial assets may go down in value because of the broader financial meltdown?

Does it bother you that your financial assets may go down in value because of the broader financial meltdown?

by Business News Report

By Omoh Gabriel,
AS the global financial melt down takes its toll on companies’ share value, financial instruments and in recent time human lives, Nigerians are beginning to worry about their assets especially those who put all their trust and hope in money. The President Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) Dr. Simeon Okolo advise that government should be more careful in 2009 on resource allocation and what it spends on. Government according to him should enthrone good governance by cutting down on cost of governance. He reasons that if the huge resources spent on the presidency amd the national assembly are cut down, it would release funds that could be utilised for capital projects to create job opportunities. He further said that government at the various levels should be transparent and reduce incidence of inflated contracts to release funds for development. On the part of individuals Dr. Okolo counselled Nigerians not live a flamboyant life in 2009 but spend money on basic necessity of life.
The greatest asset at a time like this Manufacturer Association of Nigeria(MAN)’s President Alhaji Bashir Borodo counsels, is hope. When there is hope of a better tomorrow there will be life. But when hope is lost all is gone and could lead to suicide. It was the lack of hoped that made German billionaire Adolf Merckle throw himself in front of a train after his business empire, which included interests ranging from VW cars to pharmaceuticals to cement, ran into trouble in the global financial crisis.
The 74-year-old’s body was found recently on railway tracks at Blaubeuren in southwestern Germany, prosecutors in nearby Ulm said in a statement. They described the death as a “railway accident” and said there was no evidence that anyone else was to blame.
His family, which had reported Merckle missing after he failed to return home Monday, issued a brief statement saying he took his own life. A person close to the investigation, who requested anonymity because he was not authorized to speak with the media, said Merckle left a suicide note. Its contents were not divulged. Merckle’s holding company, VEM Vermoegensverwaltung, recently had been in talks with banks to secure credit after its business interests ran up high levels of debt, and also lost value amid the global financial crisis.

The company declined to say how much it needed, or to comment on German media reports that it might have to sell some of its interests. In addition, the holding company recently said it had suffered heavy losses on shares of automaker Volkswagen AG, which fluctuated wildly last fall as fellow car maker Porsche SE moved to increase its stake in the company. “Adolf Merckle lived and worked for his family and his firms,” the family statement said. “The distress to his firms caused by the financial crisis and the related uncertainties of recent weeks, along with the helplessness of no longer being able to act, broke the passionate family businessman, and he ended his life,” it said.
Merckle’s business interests included generic drug maker Ratiopharm International GmbH and cement maker HeidelbergCement AG. Merckle helped turn his grandfather’s chemical wholesale company into one of Germany’s biggest pharmaceutical wholesalers, Phoenix Pharmahandel, in which he held a 57 percent stake.
He used his wealth, estimated by Forbes last year to be $9.2 billion, to take stakes in HeidelbergCement and Ratiopharm. HeidelbergCement shares were down 5.8 percent at euro31.39 ($43.18) in Frankfurt trading after news broke of Merckle’s death. Merckle also owned stakes in companies that made a wide array of goods from all-terrain vehicles, software to textiles. The governor of Merckle’s home state of Baden-Wuerttemberg, Guenther Oettinger, said the region had lost a “great entrepreneurial personality” who built up a “business of European significance.”
Merckle was awarded Germany’s highest decoration, the Bundesverdienstkreuz, in 2005. Despite his wealth and prominence in corporate Germany, Merckle mostly avoided publicity. He is survived by his wife, Ruth, and four children
Nigerians worry that if prices remain below $40 per barrel the federal government budget and that of the states will be frustrated as their will not be enough resources to finance the recurrent expenditure of about N1.6 trillion not to talk of the capital projects.
What this means is that there will be no additional job created in 2009 and many who are currently on employment may lose their jobs. As the government resort to domestic borrowing, it will crow out the private sector from having access to bank loans as it will jack up interest rates. As interest rates goes up only the government can afford to borrow at all cost. Many manufacturers will be denied access to working capital and may either reduce their production levels which will lead to low capacity utilisation, cut back in production line, will not expand or invest in new production line or close down and send their work force to the labour market.
As this happen stock of inventory of finished products will stare manufacturers in the face as a result of low purchasing power of the citizenry. Inflation of course will take its toll on the economy. Already the government has forced the Central Bank of Nigeria to devalue the naira, it most likely that in the cause of the year the naira will be further devalued. With fiscal restraint there will be limited money in circulation in 2009. As most businesses in Nigeria depends on government contracts it appears that business activities in 2009 will be on the low side.
MAN President says businesses have already tighten their belts since 2008 which he described as a rough year for businesses Many Nigerians have lost millions of naira on stock as a result of the financial melt down. At the moment many who still have money to speculate have moved from stock market to foreign exchange speculation following the devaluation of the naira. MAN’s President Alhaji Bashir Borodo who disclosed this said that devaluation was not the best for the country as it will add to the cost of doing business and eventually cost of locally produced goods. This he said will erode the general welfare of Nigerians in 2009.
He feels the government should deliver on its promises to the people and enhance their living. He also believes that the current economic situation, bad as it is, does not give government reasons not to deliver on its promises. He urged government to provide electricity, disbursed the N70billion textile funds to put more Nigerians back to work and rehabilitate the railways. He said when government talk about austerity it does not affect recurrent expenditure and capital projects that ought to create jobs and put more people to work is the one that suffers. He thus urges government to show insight and creativity in dealing with the swing in oil prices and the global economic recession.
Mr George Onekhena, a management consultant with George and Andrews, a Lagos based consulting firm said that Nigerians now need to plan their expenditures. Conspicuous consumption which has characterised Nigerian way of life has to give way. This is not the time for ostentatious living, it is time for re assessment of needs, self value, strength and weakness in order to gain understanding of the out come of the global oil and financial turmoil and their spill over effect not only for 2009 but beyond. He said the fundamentals of the global economy are changing radically and individuals need to alter their financial plan and programme.
The financial Expert advice that Nigerians should begin to imbibe new values that are not based on money. The role of money according to him is to serve as a medium for trading value. Of course many Nigerians have tried to turn money into something else. They adopt a moocher mind-set, playing the money game to win at someone else’s expense. Many Nigerian companies he argued operate from this mind-set. They either produce nothing of real value, or their products and promotions actually serve to lower consciousness instead of raise it.
Money he however said has its place, and it’s not a bad thing to become wealthy, as long as the individual becomes so by creating and sharing an abundance of value with others. This will bring more money but under such conditions, money isn’t the most important reward.
Other financial experts counsel that Nigerians should know that there are many “returns” on investments that are much more important than money, including the impact of such investment, the goodwill such work generates, and the relationships it builds. If the financial markets crash, those things still hold their value, while the cash could end up being worthless. So relationships they advise are a much more useful and flexible currency than cash. If given a choice between losing all their money and financial assets vs. losing all relationships and connections with people, psychologist argue they will rather lose the former.
The numbers in an individual’s life may get smaller, but money isn’t the primary way to store the value he or she has created. It is better to hold excess value in goodwill and relationships, not a number in a bank account. but rather have a million friends than a million dollars.
Such stuff that’s most important in life can’t be bought — it can only be earned. that money is the most powerful currency? You can have all the money in the world and suffer a very unhappy retirement. Money may allow you to meet your physical needs, but it won’t make people care about you. However, if you learn to open your heart and connect with people, you need never be alone. You can be quite happy without a dime. And when you reach this state, you just won’t care about money so much. You’ll realise that love is truly the most powerful currency. A heart filled with love will do more for you than a wallet filled with cash.

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