I Love Being A Nigerian

I confess that  it is not entirely for altruistic reasons that I make  this statement.,
It is a trite saying that anything can happen in Nigeria. At different fora I have heard people say that Nigeria is on the verge of collapse because they make the mistake of comparing us to other countries. Most of these people focus on the problems and despair but I see the opportunities and challenges it presents and 'count it all joy'.
Nigeria,in having so much problems and defying so many principles provide ample opportunity to make money legitimately. (That is why in spite of the incessant hostage taking by my ijaw brothers, foreigners still throng the shores of this nation).

For me some of the most important principles that Nigeria defies are capital market principles.  I will be sharing my views on some of these principles through this blog.
The first principle I will look at is the bonus issue.
In theory a bonus issue is supposed to have no effect on the shareholders wealth as the effect of the increase in number of shares held is supposed to be offset by the proportionate price markdown.
In developed economies bonus issues have been found to result in an insignificant  gain in share price. This is attributable to the fact that bonus issues usually bring the share price to a more reasonable trading range and therefore improving the chances of further capital appreciation as more investors can afford the shares.

However  does not apply in Nigeria.
Nigerian shareholders hold bonus issues sacrosanct.
Even renown stock brokers and security analyst place a lot of importance on bonus issue. One expert had been predicting price gain for WAPCO on the basis of their rumoured 1 for 1 bonus.  The share price rose from a modest N49 to N80 and would have definitely breasted the N100 mark if  the company had met the expectations.
Alas the share price has fallen to N65 per share as at 27th of February 2007. The principal reason for this is that the company did not declare a bonus issue.
In the recent past companies like First Bank , Ecobank and Nigerian Breweries  doubled their shares prices within months of the release of the news of bonus issues. The share price increase were not as a result of the expectations of earnings potential as the woeful performance of Nigerian Breweries' share price has shown but due to the Nigerian shareholders love for the bonus issue.
The bonus issue trick was also used by Transcorp to deliver a return of 223%  to the investors of  the private placement of Transcorp. ( An initial investment of N6 per N1 share yielded 2 shares of 50kobo each valued at N9.71 per share)
All this makes Nigeria the only country , known to me, where the size of a good cake can be increased cutting it into smaller pieces.
Damn, I want  a piece of the action.  Dont you?.



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