No economic activity is ever too efficient and ripe for a nation like ours to establish a stock market. We can learn from South Africa, Kenya, Nigeria, Ghana and the West how we should go about establishing our own stock market in this country of vibrant business minded people. Although, our National GDP and GNP (Gross Domestic Product & Gross National Products) by average, in comparison to international standards, may not qualify our country for such market, if these were the only yardsticks used to determine the viability for the establishment of a stock market.
Hence, the question that arises is: were Western countries or our African neighbors qualified in terms of their countries general economic activities before establishing their stock markets? Or were their income levels ripped for such markets, when they chose to establish them? Even the great United States’ markets before the establishment of States and Federal laws to govern the activities of their stock markets, were neither qualified nor efficient by current standards at the time of the introduction of national standards and rules governing stock markets activities.
During the embryonic stage, it was poultry, livestock, maize and other crops and agriculture products that made up the largest part of the stock markets in the United States of America. The markets were heavily stratified and were not free of problems, but they served the populace in various regions of the United States, well. Today, Americans, Nigerians, Ghanaians, Kenyans and South Africans, are heavily invested in the stock markets for growth of their investments, or savings for future retirements. They are hugely invested in Stocks, Treasury Bills, Notes, Bonds, Municipal and Corporate Bonds, and Mutual Funds/Money Markets, Options and overall, in Individual Retirement Accounts where some of the investment products mentioned above are traded. Yes! Some of the products indicated above carry minimal risks, while others carry maximum risks, unlike the stocks themselves. However, as statistics have shown, over the last three quarters of a century, companies that have been properly managed while they grew, their values appreciated, thereby increasing the values of their markets’ shares and that of their shareholders’ or investors’ portfolios. So far, I am certain that only T-Bills are available in our Banks presently.
Yes! We are ready for a stock-market, and why wait in the first place? In an effort to reduce mass poverty we must focus on strategizing applicable methods that will help the average Liberian accumulate wealth, thereby creating rational exuberance among our people. Although, wealth alone does not create excitement in people, but it removes a third of the frustrations, boredoms, tensions, extreme dissatisfactions, irrational-anger and world-weariness that create the feelings of national resentment for a government. When most people are happy with their lifestyles and circumstances, the chances of developing rebellious thoughts become extremely remote or non-existent. They think of how best to increase and share their excitement.
We must create the atmosphere where most citizens will have the opportunity to participate in the creation of wealth by investing in various companies through the purchase of companies’ shares. Investment in stocks has shown that wealth can be accumulated generously, but gradually overtime, once the companies are growth oriented, well managed and are doing well while the value of their shares appreciates. When the price-per-earnings ratio, commonly known as the PE/Ratio and other prime evaluation factors can be statistically interpreted as positive indicators including other factors that suggest that corporations or companies are being well managed and that they have the potential to expand or acquire other assets that would increase their market value, then the atmosphere is said to be ripped for investments. There should be no reasons for continuous delay in the establishment of a stock market under said circumstances.
Today, there exist a few dozens of International, National, Medium and Small Business Enterprises that are either licensed as Local or International Corporations, Partnerships, Limited-Partnerships, Micro-Businesses or Small (entrepreneurs) known as Petite-Traders, that have some tax waivers for a period of time in order to allow them develop their full potential for profit maximization momentums. If our citizens are therefore allowed to partake in investing in these companies to become shareholders, they stand the chances of accumulating wealth that will bring about durable gratification and exuberance in their lifestyles as we see in other countries. This process will have positive psychological effects on our citizens as I stated above.
Isn’t it viably prudent that we now introduce Special Retirement Plans, as Individual Retirement Accounts (IRAs) and Custodian Accounts and then educate our populace about the long term advantage and benefits that these plans would have for them and their children? Retirement Plans are usually tax deferred vehicles for holding investments and they can be established by individuals or by their employers. Minimum balances for the establishment of these accounts or plans can be set by an oversight agency or commission. Plans that could really benefit our average citizens in the category of retirement plans include; Profit–Sharing Plans, Defined Contribution Plans, Defined Benefit Plans, Tax-Deferred Annuity Plans-(403(b)) and Payroll Deduction Savings Plans. Over the last eight years, market forces in our Liberal Democracy have clearly played a part in defining the stage and pace of economic growth in our Country, why don’t we take advantage of these phenomena?
Rational exuberance should not be a fever well liked by Westerners alone. I believe that it is time that our well established and growth oriented companies go public, in order to have ordinary citizens purchase their shares. For instance, if 150 residents of each one of our 15 sub-political regions, are encouraged to do an initial investment of as little as US$500-$1000, with a plan to participate in direct monthly investments of US$30.00-$50.00 over a period of 10 years, there is potential for such investors to accumulate wealth between US$100,000 to $500,000 as value of their portfolios. An average Liberian who earns between US$500 to $1,000 per month, may never earn such yields through savings in banks in their life time, but can only do so through active businesses such as real estates, or Real-Estates-Investment-Trust (REIT), stocks investments, or through a profitable merchandise business which is presently, heavily flooded by foreign traders in our Country. Savings accounts are not bad options, but they pay very little interests, which don’t yield enough for customers. In investment, the rate of returns (ROI) for each investor’s portfolios may differ, base on the individual investor’s timing, style, choices and his or her market savvy. In fact, it is the well established Lebanese and other foreign businesses that reap the benefit of our citizens’ deposit accounts in banks. They’re often qualified to borrow huge amount of money because of their credit worthiness or connections, unlike our average citizens. Don’t get me wrong, savings’ accounts are necessary as equitable balances and for quick access to cash and they carry limited risks. Although money markets accounts with brokerage firms entitle the shareholders to access the liquidity of their accounts quickly likewise, they also carry some investment risks.
In view of my suggestions and reasons for the establishment of a stock market in our country, let me give a quick analysis of Merchandise Markets which are parts of our Financial Market: In our current economy, markets are not controlled by a single segment of financial institutions nor business-enterprise, neither by the commercial and petty-traders, whose activities overwhelmingly steer the volume of economic activities in and around our country. It becomes a little challenging sometimes for one to analyze or dissect the efficiency of our markets’ system.
Our markets may not be as efficient as our Western Counterparts, but they serve us well, generally speaking. All markets bear some similarities in their operational-characteristics. Hence, we may complain here and there, but so do they in the West, especially about unemployment, inflation and about the prices of goods and services or commodities. Although, ours bear some candid similarities in their manipulative nature, which include; the purchase of goods or health-services, real estates, transportation, rent-fees, clothing, food, tuition and fees for our children, to satisfy our daily wants and needs or necessities, using valuation of goods or commodities.
The dissimilarity includes; none tagged produce or goods, the constant negotiations for prices, and the irrational currency exchange rate, especially on the black markets where some petty currency traders and marketers exploit the system without oversight. For instance, in one part of the City of Monrovia, the exchange rate can be as high as $87-$88 LD for a single US Dollar, while the rate can be as low as LD$80.00-$82 in other areas for the same US Dollar. The role of the Central Bank as the National Referee in determining the value, worth and credit rating of our currency seems non-existent. Hence, what then is the Central Bank’s role in all of these? It is often left with the client who is requesting for exchange, to negotiate for a better deal. During my observations, what I found very interesting in simplistic economic similarity, is that when the wholesale or cost-prices of goods or commodities are high for our marketers, they the (marketers) tend to add the extra costs or expense to the sales’ price of their commodities in order to gain maximum profits, thereby passing on the extra costs to the buyers-(which is a common practice in merchandise activity and in some financial-markets). It is unusual but, an acceptable practice in financial economics. Hence, this circle often creates anxieties among local consumers who may have very little to spend for their daily family needs. Despite these irregular price movements, the dissimilarity remains an interestingly serious area for additional case study.
What I like to suggest in this medium that could enhance citizens participation in stocks investment for the accumulation of wealth, is that; our National Government should allow some of its controlled Public Enterprises, such as; LTA Liberia’s Telecommunications Authority, Liberia’s Petroleum Refinery Corporation-LPRC, Liberia Electricity Corporation-LEC, Liberia Water and Sewer Corporation-LWSC, National Transit Authority-NTA, LRA, CDA and a few others that have limited liabilities but huge profits/revenue generating potentials, to join other private companies
within the confine of our borders, to go public, where established laws or rules can govern their activities. Before a stock market is established in our country, the National Investment Commission can seek local and international grants in order to begin a nation-wide educational campaign to educate our citizenry, regarding the potentials of wealth accumulation through stocks purchases. We can use our local talents and expertise with limited assistance
from international experts to help us put a frame work in place. When a stock market is established in Liberia, after a serious media campaign, the efforts to enlighten the citizenry for their steady participation would increase and many would become convinced to invest. We have the advantage to use local media to do additional education of our populace at very low costs. Because it is cheaper and easier to invest in stocks other than real estate, I believe a serious media campaign will do the job in turning our populace to the desire for stocks investments.
Mr. Samuel TM. Dunbar is Director for the Integrated Departments of Human Resources, Planning and Research at the AME-ZION University. He also lectures on Development Planning, Public Financial Management, and Public Personnel Administration. Cell numbers: 0880702909/0776486956, Email: addresses; [email protected]/[email protected]