Lately, stock prices on the Nigerian Stock Exchange have taken a dip not seen in a long time. Blue chips have declined considerably in value partly as a result of various factors.

The factors include the following:

1. Significant reduction in the influx of funds from abroad as most global financial institutions take a breather and review their risk management profile owing to the growing mortgage crisis in North America. Besides, sustained competition from emerging economies such as India and China and African countries such as Kenya, South Africa and Ghana have continued to affect capital inflow into Nigeria.
2. Nigerian banking guidelines such as the recently rescinded Central Bank of Nigeria’s (CBN) policy proposal asking all banks to switch to a common uniform financial reporting date of December 31 led to a massive retreat by banks from the stock market to accumulate funds to shore up their balance sheets.
3. Mixed results for most companies particularly from the manufacturing sector. Many companies are not immune from the rising energy cost. Again, Nigeria exports crude oil but imports most of its refined fuel requirements.  Increasing production costs affects the bottom line and with no commensurate rise in sales, operating margins decline thereby fully exposing Nigerian companies to the artificially inflated crude oil prices.

What to Do

1. Consider alternative investment channels such as real estate which remains a very good alternative.
2. Buy more stocks at the present depressed price. That way, you reduce the unit purchase price of each stock. Indeed, there is no doubt that the fundamentals are still very good , for instance, all Nigerian banks have their stocks selling at far less than 100 Naira or 1 US Dollar in spite of their operating results and balance sheet size.
3. Portfolio safety is critical in times of market volatility and may be an inducement to invest in fixed income securities such as the FGN Bonds and Money market instruments such as Treasury bills and certificates.
4. Invest in mutual funds and enjoy the twin benefits of portfolio diversification and risk mitigation especially in a period of sustained decline in share prices.