courage89: What is driving the stock price? Fundamental or speculation?

ekt_bear: heh.

I doubt I will ever invest in the Nigerian stock market again. Got burned very badly last time...between the rapidly depreciating currency and the lack of transparency, I don't think it a good place to put money.

Nigerian real estate is good though.

But I think my first preference going forward will be the US (and European possibly) stock market.

PointB:

I blame the bolded on Sanusi Lamido, who singled handedly destroyed the stock market with unguarded statement. The clown of a CBN Governor actually termed trading in stock - gambling!

bitty[b:
end]

Why blame Sanusi when Soludo was the one who created the fake bubble,[/b] and turned a blind eye at the malpractices happening under him? I don't really like the Sanusi guy - but Soludo and Ndidi Onyuike Okereke destroyed the Nigerian stock market.

I thank God I never invested in that bubble.

Investing in Nigerian stock market amounts to investing in real estate in Europe or America.

ekt_bear: The fundamentals are great. Rapidly rising sales, high profit margins, rapidly rising profitability. Low P/E.

Basically, iPhones, iPads, and to a much lesser extent iPods and Macbooks.

PointB:


How exactly did Soludo create the bubble? And what correlation does it have with Sanusi calling Capital Market stock trading activities 'gambling'?

How the Big Lenders Crashed the Stock Exchange and were Enabled by Dr. Soludo

Abdulmumuni Yinka Ajia

Janice Kew and Michael Patterson over at bloomberg.com recently did a story on the Nigerian stock exchange and how bank losses have had a profound impact on the exchange. According to the duo, bankers (otherwise known as lenders) may be holding as much as $10 billion in toxic assets which is estimated to be almost equal to half of the entire capital of the exchange. [See Story]

Now if you take into account that the lenders make up about two thirds of the Nigerian stock market, you will agree with me that as a regulator, Professor Soludo has not done a good job overseeing the banks and ensuring financial discipline. The state of the Nigerian bank is very precarious because of it.

Before I go into the disaster that is going on within the banking sector, let us first take a look at some of the reasons why the Nigerian stock exchange has moved from one of the best performing market to one of the world’s worst barely less than a decade! Perhaps, there are many reasons that led to the collapse of the exchange, I will focus on five critical areas.

Speculation: I know, most markets are speculative in nature but what was going on in Nigeria prior to 2008 was of the worst kind. A friend of mine who works in middle management for one of the so called big banks confessed to me sometime in 2007 that the insider joke is that the Nigerian stock exchange has broken all rules. What he wasn’t saying was that while this speculation was going on, the major lenders were not creating any real value within the economy which can ultimately boost the Naira and save the exchange from itself. This was a period, when the big lenders were just floating ridiculous IPOs, give it massive publicity and have unsuspecting Nigerians buy into their voodoo companies. Barely ten years ago, most of these new big banks were not even in existence. Today, they are unraveling. Posting bogus profits and fuzzy book keeping. Now lets examine the next reason why the exchange floundered terribly as it did.
Insider trading: the trading of a stock or other securities by individuals with potential access to non public information about the company. This is not only going on, the Securities and Exchange Commission has not been alive to its responsibilities. It has also been suggested that SEC employees may be conniving with some of these traders while the public bears the pains of the loss in value. Most of these insiders have continued to dump their stocks using non public information at their disposal.
Bogus balance sheets: here you will find the legally backed margin loans that allowed banks to delay booking losses. This lack of full disclosure has left investors unable to identify potential losses. In some cases, there have been rumours of outright falsified balance sheets to deceive the public. The Nigerian media have been (with the exception of a few outlets) enablers, they publish these false reports and do not engage in any investigative follow up to ascertain the health of these institutions. To round it up, these lenders are into free wheeling and shaky securities. All of these activities have put investor’s funds at risk. The last time I read, the pension fund is threatened. This is perhaps, the only retirement instrument most Nigerian civil servants have. How do you explain to a 65 year old man or woman that you have gambled away their fortune?
Now let us take a look at the disease within the Nigerian banking sector. And while we are at it, let’s examine the activities of the bureau de change.

Sometime in March, specifically March 21, Soludo arbitrarily curbed the lending rate at 22% and the deposit rate at 15% respectively. But you and I know that this is not going to happen. What will eventually happen will be a form of shadow banking, sadly it is already being practiced in Nigeria and this will only exacerbate it.

Presently, Nigeria has a law that requires the banks to notify some security agency or the other if a cash lump sum is being deposited at once. What the banks actually does is to have the customer deposit all the amounts in bits, in order to evade this legal provision.

This arbitrary lending and deposit cap will only give rise to one thing, back room dealing between the customer and the bank. You think that our banks are in a bad shape right now, that will push them to the precipice.

Then you have the bureau de change. I still don’t understand why the CBN has its own exchange rate and then you have the real market, where 80% of the foreign exchange transactions occur and the price is sharply different. Presently, there is about a N20 difference in the rate between the CBN and the parallel market. If you think N20 is insignificant, wait until you buy 1 million dollars @ N144 to a dollar from the CBN and take a walk down the street to the bureau de change and sell in the parallel market for N165 to a dollar. Tell me, what kind of business will give you so much instant return and at a very high percentage profit? So this is what is at stake. Why wouldn’t Soludo abolish the official rate and allow the banks to sell foreign exchange to anyone (with identification) at the market rate? The CBN should also be able to sell to the banks at the prevailing market rate minus one Naira (leaving a margin for profit). Soludo has refused to tow this line. Why? Because the status quo is beneficial to all of them (players within the Nigerian financial industry) you buy cheap from the CBN, you cross the street and sell high and you go to the bank smiling. In the process, you haven’t really created any value to the economy. While these financial tricksters line their pockets, the Nigerian economy and the general public bears the brunt of their nefarious ways.

And we also have cases, where lenders have written out huge loans without any significant collateral. It is risky behaviour and ultimately we are witnessing the unraveling albeit in a sad way. These kinds of behaviours have put genuine investor’s life savings in a toilet.

I am not going to even dabble into the activities of the illegal micro finance institutions that mushroomed between 2006 and 2007. Where was Soludo when all these illegal activities were going on? Nigerians lost millions of Naira to this fraud, the CBN responded a little too late.

This kind of behaviour is emblematic of the kind of leadership that Soludo has provided at his perch as Nigeria’s treasury chief. You can not be a regulator and at the same time parleying around with the same people you are supposed to regulate. Rather than consider him for a reappointment, Soludo should be allowed to go back into the ivory tower to finesse his economic theories (I would suggest to him to decide whether he wants to be a free trader or not), perhaps some day in the not too distant future, he can become the conscience of the nation like prize winning economist and Nobel Laurent Paul Krugman.

PointB:


How exactly did Soludo create the bubble? And what correlation does it have with Sanusi calling Capital Market stock trading activities 'gambling'?

ekt_bear: Apple Revenue Growth: 73.27%
http://ycharts.com/companies/AAPL/revenue_growth

Dell Revenue Growth: 2.16%
http://ycharts.com/companies/DELL/revenue_growth


lol

courage89: Why not? Are they not competing in the same market?

PC
Tablet
Server
Phones

Slow growth has never been a yardstick for determining comparable companies.
Its always about the competing products

ekt_bear: I agree, Apple shouldn't be compared with Dell or HP. Such a comparison is somewhat nonsensical...they've never been about selling commodity computers. They've focused on the higher end market, essentially "luxury" computers.

But anyway, computers aren't the biggest reason for their high growth.

So for a variety of reasons, they shouldn't be compared