By PROVIDENCE OBUH

Following the devaluation of the naira by the Central Bank of Nigeria, CBN, Shareholders in this interview speak on how it will impact on their investment especially in terms of dividend. Excerpt:

National Coordinator, Independent Shareholders’ Association of Nigeria (ISAN) Mr. Sunny Nwosu: Devaluation is a spiral issue, spiral in the sense that it will increase the cost of some of the companies quoted on the Nigerian Stock Exchange (NSE) thereby affecting their projections both in dividend and either in turnover or in profits. Which ever way you look at it, it will definitely affect their projections.

The first reason why it will impact on projection is that the money they have budgeted as the import element of their business will increase because they will now be putting in more naira in acquiring few foreign exchange and in the process they will not have enough money to operate and also if there is a borrowing element in their trading, it will increase so that they will be able to meet the naira requirement. As a result of this, all put together will then mean that they will spend more money than budgeted.

The function of dividend is based on the amount of profit they are able to make, if you put all these together, it means they will be spending more money than what they expected, as a result of that the dividend and profit projected will be threatened, because the sharing will be based on what they are able to make from profit margin.

Since they have gone to the bank for additional funding, they will have to pay higher interest because if you look at the other aspect which has to do with liquidity ratio, it has also increased, that then means that borrowing from the banks will also be affected in the sense that the banks will be charging higher interest and those who placed money with the bank will also be asking for higher interest since the bank lend out on higher interest. It is a spiral issue that they cannot run away from except the government decide to subsidize real sector borrowing by making special provision for the real sector of the economy, that is reducing the interest rate.

Mrs. Bisi Bakare of Pragmatic Shareholders Association of Nigeria:

I don’t think naira devaluation has anything to do with investment. This is because the deed has already been done in Nigeria, everything is now upside down, whether naira is devalued or not. If naira appreciated it would have been a different ball game but over the years naira has been devalued severally and

Any good investor will not be wearied because of naira devaluation except those who just jump into it, if you are a sound investor, ordinarily, you will know that investment in shares is not short term but a long term investment that you get the benefit gradually, is not something you pump in money this month and expect that in another two months you will get 10 percent appreciation, it does not work that way and that is what affected the shares about seven, eight years back. No good investor should sell their shares now, this is even the best time to sell shares for any good investor to buy shares because the price of shares are very good now, if not for manufacturing companies and cement manufacturing company’s that are going up other stock prices are very low.