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Most people are not as disciplined as
they would like to be when it comes to saving and investing. They may
save some money for some months and nothing at all for several others.

Yet for the vast majority of people,
the only way to achieve your financial goals is by earning through hard
work and saving and investing in a systematic and disciplined way over
several years.

Cost averaging, is a simple approach to
saving that helps you to save regularly whilst at the same time
building long-term financial security. It involves investing a fixed
amount on a regular basis rather than a lump sum, even when your
finances are stretched, and no matter what the market is doing. This
could be monthly, quarterly, or whatever suits you; you do not have to
time the market or look for the best entry point, you just invest
regularly.

It is almost impossible to time the
market as it is challenging to anticipate correctly its peaks and
troughs. For the average investor, and particularly for the smaller
investor who does not have lump sums to invest, what is required is an
investment strategy that allows you to maintain an even keel in rising,
fluctuating and falling markets.

Cost averaging accomplishes this and if
you can manage to apply this strategy to even a small amount of money,
with ease and efficiency, you will have a better chance of achieving
your goals.

Cost averaging is a particularly useful
tool in a choppy market as it provides a buffer for volatility. Even
though the value of your overall investments will fall as stock prices
fall, remember that you also bought more shares at lower prices. As you
will bed rip-feeding your funds into the market at different times, you
will be picking up investments at a range of prices; this reduces your
overall average cost.

Pay yourself first

Determine how much you can afford to
set aside each month. The amount you choose will depend on your own
particular situation. This could be a fixed amount each month that will
not change, or you might prefer to invest a percentage of your income,
sothat you invest more as your income increases; try to invest at least
10 percent of your income for your financial future.

What are you saving towards?

One critical factor to saving is,
knowing what you are saving towards. If you aresaving without any clear
purpose, you will eventually be tempted to dip into those savings to
satisfy your wants. If you have no savings whatsoever and currently
live from salary to salary, this is a good place to start. You need
short-term savings so that you are better prepared to deal with
unexpected expenses or emergencies. Start to build enough savings worth
about six months of your routine expenses. You also need to be
investing so that you can meet your medium to long-term goals such as
educating your children or being able to secure a comfortable and
fulfilling retirement for yourself.

Automate your savings

A most effective way to save is to put
it on autopilot so that you don’t have to think about it. If you are in
full time employment, your employer will already be withholding 7.5% of
your salary and transferring it to your Retirement Savings Account
(RSA) with your Pension Fund Administrator (PFA) on your behalf. This
is probably the most popular form of investment automation. And because
the money is removed at source, you are less likely to miss it.

But do not stop there. In addition to
your RSA you may set up a direct debit from your current account each
month and have it credited to an interest bearing account or an
investment account, such as a mutual fund. There are money market
accounts, mutual funds, and a variety of other investments that allow
you to designate a specific amount on a regular basis. Nowadays,
brokerage firms and banks have made the process so simple that you can
easily have your finances automated in a matter of minutes; and you
only need to set it up once. You then determine how much you want
debited each month and how frequently you want the withdrawals to
occur. You can usually even specify the date on which the withdrawal
should occur.

Automatically reinvest your dividends

You can also opt to automatically
reinvest your investment profits or dividends. For example, when you
sign on to a mutual fund account that makes periodic distributions, you
are given the option to re-invest your dividends by acquiring more
units in the fund before it enters your account. The fund manager is
authorised to automatically take that money and use it to buy
additional shares of the same fund instead of making it available for
you to withdraw.

While cost averaging can be a very
effective way to systematically build your portfolio overtime, it is
important to realise that there is no guarantee of profit; neither does
it prevent loss. Take a cursory look at your financial situation and
assess whether you will be able to contribute to your investment
account on a regular basis. If you are able to achieve this, remember
that even though the objective is to automate your finances, you should
continue to monitor your investments and make adjustments as required
and as your financial situation evolves.

While the prices of
quoted healthcare (pharmaceutical) companies at the Nigerian Stock
Exchange have seen marginal improvement since transaction opened this
year, trading activities in the sector have reduced significantly in
volume when compared with the sector’s performance last month.

The over 10 million shares that the sector usually record weekly, on the average, has reduced to half.

Apart from the
recent global financial crisis that discouraged investors’ appetite in
the sector and affected market general performance, analysts say the
challenges facing healthcare companies in Nigeria may further
discourage investors’ confidence in the sector.

Available data at
the Exchange showed that only Fidson Healthcare and GlaxoSmithKline out
of the nine quoted stocks in the healthcare sector rewarded their
shareholders last year. Some other companies listed in this sector
include Evans Medical,

May & Baker Nigeria, Neimeth International Pharmaceutical, and Union Diagnostic & Clinical Service.

David Amaechi, an
executive member of the Shareholders Association of Nigeria,
said,”Manufacturing sectors generally have been finding it difficult to
enjoy operation in this kind of harsh operating environment.” Mr
Amaechi said investing in the healthcare companies should be for long
term for investors to get good return on their investment.

Sector challenges

Afrinvest West
Africa Limited, an investment bank, in a healthcare report this month
said that Nigerian health sector has remained “grossly underdeveloped”
in the last five decades despite seeming better off than their African
peers.

“Healthcare delivery in Nigeria is characterised by inefficient budget execution,

inadequate funding,
poor service quality and a shortage of qualified personnel essential to
the delivery of public health services,” the report said, adding that
the absence of effective methods of addressing the healthcare needs of
the people as well as the low levels of government expenditure,
“currently averaging 5.4 per cent of the total budget since 2008” have
contributed to the nation’s “dismal health statistics.” The report also
said that the Nigerian pharmaceuticals sector has consistently been
under utilized, from a capacity perspective, as a result of widespread
counterfeiting, infrastructural challenges and corruption, despite
evident demand for effective drugs. “In spite of the substantial growth
potential within the pharmaceutical and healthcare industry, the
elements of risk and uncertainty that currently subsist, limit
international interest/investment in the sector,” it said.

However, it noted
that the government has demonstrated its “willingness to make the
country self-sufficient” in terms of drug production, by restricting
imports through partial regulatory regimes and tackling counterfeits.
“The federal government’s restructuring of the National Agency for Food
and Drug Administration and Control (NAFDAC) in view of its past
successes has moderately improved confidence in the sector’s reform.”
Nigeria’s pharmaceuticals sector is regulated by NAFDAC.

Data from the
Pharmaceuticals Manufacturers Group of the Manufacturers Association of
Nigeria showed that the local market of pharmaceutical producers
accounted for an estimated 35 per cent of the market size.

Meanwhile, the
report said access to essential medicines is fundamental to the
realisation of the Millennium Development Goals (MDGs). “Despite
government’s noble intentions, poor availability, high cost and
irrational use of essential medicines continue to plague the
pharmaceuticals sector. Efficient provision of essential drugs depends
on appropriate selection, quantification, procurement, quality and
storage, distribution, human resources and information management,” it
added.

Olumide Ajayi, Director of Business School Netherlands
International, said in spite of these challenges, “businesses can still
explore a number of opportunities and develop initiatives and
programmes that will change the landscape of engagement and provide a
better space for businesses to move Nigeria closer to achieving the MDG
targets as it relates to heath.” Healthcare industry watchers say with
the campaign by NAFDAC in the war against counterfeit, fake and
substandard drugs, the healthcare sector will witness growth this year
and quoted companies in the sector can reward their investors
accordingly.

There is hope of more jobs by re-invigorating the natural small
scale industrial clusters through capacity building and injecting new
technologies for increased productivity, says Peter Onwualu, the Director
General of the Raw Material Research and Development Council (RMRDC). Below is
excerpt from an interview he had with a NEXT reporter:

Taking research result to the industries

One of the projects
we started last year and we are continuing is the raw materials
processing clusters. One of the things we do is to give competitive
research grants to individuals and institutions who have the expertise
in doing research in value addition for raw materials sourcing and
processing. We have done this over the years and the question is how do
we move the result of some of these researches to the private sector in
order to use them for production purposes? If you look around the
country, there are naturally existing raw materials processing clusters
like the leather cluster in Kano; shoe, bags and textile cluster in Aba
and in Abeokuta. Our idea was to look at these clusters, study their
challenges and see how we can assist them to function better to produce
competitively by injecting technologies into existing clusters. In some
cases, the plan is to establish new clusters and we think this is a new
idea. In the past what we did was once we have research results, we
build a pilot plant and from there, we go into commercialisation but
now if we find out for example that people in particular community are
already processing cassava, we now go into such communities, work with
them, find out what their problems are especially with respect to
technologies, and then find the research centres where these
technologies have been developed then inject them into their
operations. In that way, they become more competitive.

Identifying the Clusters

As a first step, we
started what is called cluster mapping. This involves scientific
identification and analysis of existing clusters. For instance, around
the FCT here, you are aware that we have the Kugbo furniture cluster.
We are working with them. We have also done a number of such mappings
in every state using our state coordinators. We have a baseline mapping
that has taken us all over the country to identify those clusters that
already exist. The mapping also includes interacting with the operators
to know their problems, challenges. We also visited the knowledge
centres around them: the polytechnics, universities, research
institutes to find out what they can offer in terms of technological
input into these clusters around them. So that has been completed. The
report is almost ready but we also know that for you to start such a
programme, you also need to train people.

774 clusters to benefit

One of the things
we did last year was to conduct an international training programme in
collaboration with Swedish International Development Agency (SIDA) and
Pan African Competitiveness Forum. That Forum works on using clusters
to promote industrial competitiveness. We trained selected clusters
because after the baseline study we decided to start with at least two
clusters per geo political zone. The cluster training we had is to
prelude the emergence of at least one technologically viable cluster in
every local government. It is a tall order but it is part of our vision
2020. So we did this training and it was for Nigeria and Gambia. 30
Nigerian clusters participated at the training from all over the
country. They include the brass cluster in Bida; textile workers from
Aba; Tie and dye from Abeokuta; Otigba ICT cluster in Lagos among
others. Following that training, SIDA is now collaborating with us to
inject technologies into these clusters. What we told the different
clusters to do after the training was to go back, look at their
problems especially those ones that are technological and come up with
projects that will enhance their competitiveness. They were given some
templates for this. As I speak, they have all submitted their projects
and we are now synthesising them to be able to forward them to SIDA.
The arrangement is that SIDA will fund the project 50 per cent and raw
materials council will fund the remaining 50 per cent. The
beneficiaries will be these first set of clusters that have been
trained.

More Clusters to benefit in 2011

And in addition to
this training, we have now developed a blueprint for raw material
cluster development in Nigeria. This is ready for implementation and
then we have gone ahead to start with a few cases. One of the cases we
completed last year was the cashew nut processing cluster commissioned
in Ayangba, Kogi State. The plant is now functional but the entire
cluster is made up of a number of other cashew processing plants that
will be coming up in Enugu State, Abia State, Kogi State and Abeokuta
in Ogun State but we have already gone far in terms of discussion with
beneficiaries so that in 2011, you are going to see four of these
cashew processing industries all working together as a cluster. We used
last year to do a baseline and lay the foundation and started a few.
There are about three that we have ordered equipment for. One other
cluster we want to promote is the organic fertilizer production in
Emene industrial layout Enugu. In December 2010, the equipment for that
factory arrived from China and is now being installed. There is also
another one in Kebbi State on shea butter for processing shea nuts. The
equipment for that is being installed.

More money for SMEs

Clusters are
already in existence at rudimentary level with little technologies. To
make the programme very effective and successful, three different
bodies are involved. RMRDC represents the government and will provide
enabling environment through release of fund to research institutes
that develop technology that will be injected into the industry.
Ordinarily, the private sector man will not have the patience and time
to be going round looking for technology to use, the researcher may not
have the money to take his technology to the industries and that is
where the government comes in. We are also trying to bring in financial
institutions. We are discussing with NERFUND, Bank of Industry and some
commercial banks so that these small and medium scale enterprises can
source funding from the money market because there is no way we will
provide everything they need.

More jobs in the economy

In the last three
years, what has happened to the economy in terms of manufacturing is
that the figures are going down because a number of them are closing
down and some are relocating because of the challenges that the sector
faces. At the same time, government has a policy to diversify the
economy so that we don’t depend on oil all the time. One way to address
this is to see the emergence of more industries and we are targeting
the SMEs. Cluster exists as an informal sector. So what we are now
trying to do is, for any beneficiary, the number one step is that the
organisation has to be registered with the Corporate Affairs
Commission. Government gets revenue from the registration and it will
be easy to track the organisation for tax to increase revenue of the
government. An additional benefit to the economy is that each of these
industries must employ people.

The world economy has continued to “enjoy positive momentum” backed by the ongoing expansion in the manufacturing sector, the Organisation of the Petroleum Exporting Countries (OPEC) has said.

Consequently, the organisation in its Oil Market Report, January 2011, said although dependent on government-led support, world economy growth in 2011 has now been revised up to 3.9 per cent from the previous projection of 3.8 per cent.

“World economic activities were stronger than expected, resulting in more oil usage,” it said.

Growth for 2010 was also revised up to 4.5 per cent from 4.3 per cent. The report said the United States economy, which grew by 2.8 per cent in 2010, is now forecast to grow at 2.6 per cent in 2011.

“The deceleration in Japan’s economy remains more pronounced, dropping to 1.5 per cent in 2011 after growth of 4.3 per cent in 2010. The Euro-zone, which is forecast at 1.5 per cent in 2010 and 1.2 per cent in 2011, is expected to continue its two-speed growth pattern, with Germany taking the lead. China and India still face signs of overheating and continue to be challenged by high inflation. The forecasts for China and India remain unchanged at 8.8 per cent and 8.0 per cent for 2011, respectively,” it said.

Meanwhile, Nigeria’s government is targeting economic growth of 10 per cent in 2011. Sanusi Lamido Sanusi, the Central Bank governor, said that financial market conditions in advanced economies have been “more stable” than in the preceding two years, while some emerging economies are been confronted with “challenges posed by large volatile capital inflows.”

Major driver

However, Mr. Sanusi, at the Monetary Policy Committee, on Tuesday, said the provisional data from the National Bureau of Statistics indicated that the nation’s real Gross Domestic Product (GDP) grew by 8.29 per cent in the fourth quarter of 2010, up from 7.86 per cent recorded in the third quarter. He said the overall GDP growth for 2010 was estimated to be 7.85 per cent, compared to the revised growth rate of 6.96 per cent recorded in 2009.

While manufacturing sectors around the globe have continued to boost economic performances, Mr. Sanusi said the non-oil sector remains the major driver of overall growth in Nigeria, “with agriculture, wholesale and retail trade, and services contributing 2.39, 2.04 and 2.08 per cent, respectively.”

“The outlook for 2011 is projected to be generally favourable in view of the continued improvement in the international oil market and emphasis on the development of the non-oil sector,” Mr. Sanusi further said.

Analysts at Financial Derivatives Company Limited, a business consultancy firm, said, “A likely driver of higher inflation (in the economy) is the election spending which will intensify as the impact of the spending hits the market place. Another factor that is expected to contribute to higher prices in 2011 is the expected 64 per cent increase in the minimum wage.”