So, I was reading the Daily Nation online last night and I came across an article on the recovery that Kenya's robust economy is expected to have this year. At first, the points the author made were very reasonable and made great sense. However at this point, I hadn't put on my thinking cap on. The more I read on, the less sense it made. Let me just give some of the few points the author makes in his op-ed and give my two cents.

 The first one is that an improved global economy will lead to a somewhat trickle effect that will see Kenya's economy improving. That through increased commodity prices we are likely to see better incomes for our farmers. However this goes against what the data tells us. You see, Kenya has always been a net importer of goods i.e. we import more that we export. Therefore we will continue buying high and passing the high costs to "Wanjiku" so much for global recovery. Already cement prices are likely to see upward pressure due to higher global oil prices. The opinion that a better world economy leads to a better Kenyan economy should be put under a spotlight and thoroughly scrutinised.

Another point he makes is that due to low inflation, we are likely to see lower real interest rates and thus easier access to credit leading to a more robust economy. In my perspective this argument does not hold it's fair share of water. Historical data in Kenya from 1963 does not support any significant relationship between inflation and interest rates. Banks take their operating costs and the costs of handling loans into consideration when deciding on their interest rates and not so much inflation. Classical monetary economic theory does not apply in Kenya and thus don't be misguided to think so. People should understand the reality of Kenya's economy before quoting theory, this is the height of intellectual dishonesty. Therefore in my humble view, we are not likely to see much change in the interest rates unless banks reduce their operating costs and credit information sharing (credit scores) is implemented.

The last point I would make is that he argues that the stock market has bottomed out, i,e reached it's trough and now it can only go up. It could be that the NSE All Share Index (NASI) as well as the NSE-20 Share index will see an improvement, but reasoning that just cause it's been down it will be up is like saying "just caused I tossed heads in my first throw, I will toss tails in my second", it doesn't make sense.

In conclusion, when I read that the author of this op-ed was the former chairman of the Nairobi Stock Exchange, it all made sense. The "conflict of interest" alarm bells were as loud as they could get. It took me back to an advertising feature that I read on the plane to Johannesburg early last year proudly proclaiming an impending market boom on the basis of a two day rise of the index, can someone say "DISHONESTY". When people are serving their own self-interest lies can be told. The aforementioned people want to drive business into their firms because brokerage and asset management have really suffered the last couple of years. They will therefore write very "convincing" articles targeted to the naive reader about the better prospects for the economy laced with the "now is the time to invest talk. Ignore such and if you are to get opinion of where the economy is going, go to KIPPRA or the IMF not a stock broker.