What Investors Should Be Most Concerned Or Worried About In 2020 - Rewane

In an exclusive interview with Vanguard, Rewane, however, stressed that this growth projection is subject to how the federal government would respond to three major factors, namely investors’ concern about the current trend of negative real interest rates, external sector vulnerabilities, and infrastructure.

Speaking on what investors should worry about in 2020, he said

"All that they should be concerned about is the fact that we must have rate of interest that are not lower than the rate of inflation because if you go and get sucked into this low interest rate environment; For example, if I invest N100 now, if I invest in treasury bills, at the end of the year, I will get N104. 

"But the inflation, the value of my N104 will be about, even after adding my interest; I will end up with N92 instead of N100. If I leave the naira alone under my mattress, I will be worth N88 at the end of the year. 

"So investors after a while may manage that, but for all I care, because money serve two purposes; the first is as a medium of exchange for transactions, I want to buy your Vanguard, I give you N200, you give me your Vanguard, that is medium of transaction. But at the end of the day, the most important thing is that money serve as a store of value. 

"The store of value characteristics of money is the opposite of inflation, once there is inflation, value erodes. So if I leave my money in naira and I invest it, and at the end of the year I end up less than where I started. That is investors. Manufacturers on the other hand will say, maybe it is cheap to borrow money, but after a while, they too will know that that rate of interest is artificial. 

"So we have to resolve that contradiction. You can bring down interest rate, but you can’t bring it down from 14 percent to four percent in three months. Any such movement will lead to reaction which you will not be able to withstand and those reactions are building right now."