We Finally Figured How Much Billionaires Lost To Brexit On Friday

It is often said proverbially that “when it rains, it pours”. So was it on Friday when world markets were routed by the unexpected “Armageddon” that came with UK’s vote to leave the EU. Nigerians will tell you that it is after the race that you count the miles. For Brexit, it

does look like the counting of the miles will last for a long time. However, some of its effects were almost immediate as Global markets witnessed sell offs and panics. The S&P lost 3.6% of its value erasing its 2016 gains and recording its worst one-day loss in 10 months. The DOW plunged more than 600 points or 3.39% which, like the S&P, marked its worst one-day loss in 10 months. The Nasdaq dropped 202 points, or 4.12 percent while Japan’s Nikkei 225 saw its worst day since March 2011 falling by 7,02%. It is estimated that the global markets lost about $2.1 trillion on Friday.

According to Bloomberg Billionaires Index, “the world’s 400 richest people lost $127.4 billion” on Friday as a result of Brexit Vote. This represented a 3.2% as the net worth of those billionaires fell to $3.9T. Europe’s riches man, Amancio Ortega was the hardest hit as he lost more than $6 billion while the likes of Bill Gates made losses in the neighborhood of $1 billion each. It is not yet known how much Nigeria’s and African richest man, Aliko Dangote lost to Brexit but it is not expected to be much like the losses of Bill Gates and co.

Back home in Nigeria, the effect does not seem to have been felt as much as in the west. The Nigeria All Share Index fell by 1.36% to close at 30,649.66 points with market capitalization falling by only N0.12T. Comparatively, the loss in the Nigerian market is a far cry from what happened in the US, Japanese or UK markets may be because the economic impact of the UK on Nigeria is minimal, if at all. Unlike the likes of S&P whose 2016 gains got erased, most of the major indexes in Nigeria still remain profitable on a YTD basis except for NSE-Lotus Islamic Index (-.94%), NSE Insurance Index (-1.7%) and NSE Oil & Gas Index (-5.03%).  In a day when the world saw red, 21 equity positions in Nigeria recorded gains while 30 ended the day with loses.  The Nigerian market still boasts of about 43 equities that carry positive YTD returns many of which are in double digits.  See All Stock/Index Performance

For Nigerian stock market investors, it is business as usual, Brexit or no Brexit.

Difference Between Trade & Settlement Dates

What The Terms T+1, T+2, T+3 Mean & Difference Between Trade and Settlement Date

 

In the financial world, time is money, so when a trade is executed, a day or two is needed to clear the transaction and pass the funds (ownership) from the buyer to the seller. This is where the disparity between the trade and settlement date occurs.

The transaction date is the date on which the transaction occurs, so for example if you buy the shares of a company, or purchase treasury bills or bonds on the 23rd of June 2016, this date will be your transaction date. The transaction date will not change, as it will always be the date on which you made your transaction.

The Settlement date is however different, because it refers to the date on which ownership is transferred and money is exchanged between buyer and seller.

Settlement dates are usually denoted by T+1, T+2, or T+3 days.

What Do T+1, T+2, or T+3 mean?

If you buy (or sell) a security with a T+3 settlement on Monday, and we assume there are no holidays during the week, the settlement date will be Thursday, not Wednesday. The T or transaction date is counted as a separate day. In Nigeria, bonds can also be traded on a T+2 basis.

In Downgrading Nigeria, Fitch Summarized Buhari’s Blunders In One Blunt Paragraph

Global Rating Agency, Fitch announced last week that it was downgrading Nigeria’s long-term foreign currency Issuer Default Rating (IDR) to ‘B+’ from ‘BB-’ as well as the country’s long-term local currency IDR to ‘BB-’ from ‘BB’. The issuers rating on Nigeria’s senior unsecured
foreign-currency bonds was also downgraded to ‘B+’ from ‘BB-’.

In case you are wondering what all the “B’s” mean, rating Agencies assign ratings to countries and corporations around the world using Alphabets such as AAA, AA, BB etc. A ‘triple A’ rating signifies that the country’s economy is so strong it it unlikely that it will default on its debt. Countries like the US, Germany and UK have triple A ratings. Ratings are relied upon by investors and the countries or organizations that are been rated to price interest rates on bonds. The higher your rating, the lower the interest rate your lenders will charge you and vice n versa. Countries ,organizations and investors take these ratings seriously as it indicates what loans are riskier and how to price them. In more advance countries, individuals also get rated via a credit score.

So as you can see, anytime Nigeria gets a downgrade it has broad implications for the government and by extension you and I. The more interest rate the government pays, the less we get for developmental projects. In fact, in extreme cases, lenders may not be willing to buy your bonds if your credit rating is downgraded and then your economy declared “Unstable”.

Nigeria’s latest downgrade is on the back of a warning issued last September when it listed conditions that could have them downgrade Nigeria. They were;

• A policy response to lower oil prices that undermines growth prospects, public finances or external stability
• A loss of foreign exchange reserves or an increase in government debt/GDP
• Reversal of key structural reforms and anti-corruption and transparency measures.

They also identified other conditions that could have them reconsider our status as “Stable”. You can find that here. From the above, it is obvious that Nigeria had basically fallen short. The rating agency summarizes their reason for the downgraded in one these blunt sentences.

Nigeria’s fiscal and external vulnerability has worsened due to a sharp fall in oil revenue and fiscal and monetary adjustments that were slow to take shape and insufficient to mitigate the impact of low global oil prices. Renewed insurgency in the Niger Delta in 1H16 has lowered oil production, magnifying pressures on export revenues and limiting the inflow of hard currency.

As we have repeatedly mentioned on Nairametrics, the President’s because economic blunder to date is his slow attitude towards take economic decisions when what is needed is nimble, adaptive and aggressive approach towards decision making and implanting them. The examples are littered across the economy. From fuel subsidy, forex reforms, delay in announcing cabinet members, budget delays etc. These delays have now cost us our credit rating and possibly a lot more that we are yet to comprehend.

You can get the rating below;