The economic cost of SCOK Ruling

Kenya's Supreme Court Bench in session

 Kenyans, especially Jubilee supporters, saved the Kenyan economy by restraining themselves after the Supreme Court nullified President Kenyatta’s election.

The world feared an outbreak of violence and investors quickly rushed for the exit door, offloading Kenyan stocks and other debt instruments in droves.

The Kenya shilling felt the pressure, losing 35 cents to the US dollar.  

The Nairobi Stock Exchange’s market capitalization shaved off kshs 92 billion in a single day! While the  was shaved off Kshs 357 million in its forex value.

 The bourse, a barometers of a country’s economic health, suffered a massive off load with all blue-chip scripts suffering a battering. It had to halt trading for an hour when the battering hit the red line.

 In a single five-hour trading day, a total of Shs 1.64 billion was traded. This is, in normal times, the exchange’s turnover in a week. An average of shs 547 million was traded every hour on Friday.

  In the forex market, the shilling which had been gaining since Uhuru was declared President, was also battered. It shred off 35 cents against the US dollar after the ruling.

It opened at 102/75 buying 102.95 selling Friday morning but slumped to 103.10 buying 103.20 selling. Kenyan debt stock overseas also bled. On that day alone Kenya’s forex reserves were shaved off kshs 356 million. The country’s daily turnover is slightly more than US$10 million.

Kenya’s $2 billion sovereign bond maturing in 2024 fell 1.33 cents, reports said, it’s lowest since mid-August. The 2019 issue fell 0.75 cents to 102.75 cents.

 Things only calmed down when the President, drunk as most puritans said he was, addressed the nation, saying he accepts the ruling although he differs with it. His call for peace calmed the markets. And his tour of Burma market removed the uncertainty completely.

 In Jubilee strongholds which were under close watch, the people were shocked but went on their business as usual- no disturbance of any kind. That entrenched the calm in the market.

The Nairobi stock exchange is capitalized at Kshs 2.3 trillion, slightly under a third of the country’s national wealth of Kshs 7.2 trillion. It is therefore a barometer of Kenya’s economic health and a good pointer to the mess, a poorly thought out ruling- whatever its merit- can inflict on the economy.

 Without going to the merits of the ruling, the judges, including the Chief Justice, for all his alleged wisdom, did not consider the implication on the economy, their ruling would have. In just a few hours after the ruling, Kenya lost billions in the value of its stocks and foreign exchange!

 The ruling will also slow down economic growth in the fourth quarter, due to ongoing campaigns for an election to be held within sixty days. It will also cost the tax payer another Kshs50 billion in preparation for the election.

This is a triple economic injustice on Kenyans whose will was sabotaged by the Supreme Court.  First they lost in terms of the country’s wealth, which loss shall never be recovered, they also will lost in terms of tax money that will be squandered on the election. And finally, they lost their sovereign will.

 The uncertainty continued into Monday’s trading because of NASA’s objection to IEBC conducting the election. However, now that the date has been set. It is expected the markets will cool down saving the economy further haemorrhage.