UNDERSTANDING THE BIG PICTURE

The investing public at this time should be able to understand and identify the stage the Nigeria economy is and different economic cycles to guard against wrong investment. The economic cycles and policies would guide investors in analyzing sectors, industries and companies.

It will also help them to ascertain the best performing sector and how to perform the best industry or company at any given time.

These economic cycles are in five stages, the early expansion, middle expansion, late expansion, early contraction and late contraction that comes with different investment opportunities.
To know the stage of the economic cycle we are in, one needs to identify the current stage of the economy and the best sector taking into consideration the economic indicators like interest rate, inflation and industrial production. It’s very imperative for investors to understand these economic cycles now so as to know where to pitch their tent in the new Nigeria that would emerge after the elections.     

The early expansion stage of an economy is where the interest rate is relatively low with inflation at its lowest level and the nation's output increasing on the strength of industrial production to drive the whole system.

Here, our economy is yet to attain this stage but investment in movable industries such as capital goods, technology, transportation, manufacturing, communication equipment, airlines and construction is advisable. At the mid expansion of any economy, the interest rate is on the gradual increase  as the inflation rate remained low, while the output of the nation experience geometric increase on the strength of low cost of funds for expansion purposes and take off of new enterprises  to boost development and growth. 
At this stage, manufacturing, machinery, construction and industrial goods sectors would experience a boost meaning that companies in these sectors or industries would thrive well and investors must consider them.

The late expansion of an economy is a situation where the interest rate increased geometrically with inflation to keep the nation output at a constant level.  Here the cost of borrowing is high and the prices of goods and services are high due to inflationary pressure. The sectors that does well are the energy, consumer staples and basic materials. Like the power, oil & gas, chemicals,  Aluminum , Beverages, foods, distributors, health care, hospital management, household products and medical products.

The early contraction stage is where the economy start dwindling due to high interest rate and inflation rates with low output. 

This is the current state of our nation economy today as general output is declining due to high business cost occasioned with falling oil price, the devaluation of the naira, exchange rate and the coming elections. 

The sectors or industries that thrive at the stage are the utilities and consumer staples like the energy companies.
Finally, the late contraction, occurs when interest rate is declining with high inflation rate and the nation output continued to degenerate due to high cost of goods and services.

At this stage, it’s the financial and consumer cycles sectors that do well while the industries are insurance brokers, investment bank, banks and savings and loans.