Straight up Naija Shopping

I found my self shopping for personal items today, nothing much, just a little attempt to indulge myself. While this was going on, it then occurred to me its been over a year ago I actually went out into the "Lagos wild" shopping – for myself! The last time I did was before my last shopping which took place in Europe early 2006.

I am not someone who particularly enjoys going to the market, to be frank with you, shopping scares the "he-earth" out of me, for no other reason than not being able to give a name to what I want. I only know what I want when I get to see it. Interestingly, I found this problem to be same whether in a European country or in my own obodo country Naija. Whether it is walking into (or past) a Prada, Gucci or Louis Vuitton store in Paris or our very own Okoro & Sons Int’l (flanked on all sides by Iya Bisi and Mallam Sule sheds), I just never get to know what I want until something really tickles my fancy.

To be fair though I had a good experience shopping today. With exception to the hot weather condition and the numerous throng of people hurrying you out of their clustered paths, it was such homemade-fun shopping in “eko” today. Its amazing seeing how much enthusiasm is displayed by everyone trying so hard to make sure you empty your pockets on their wares. It may not be far from the truth that some of these guys have mystic charms that tells them how much you have in your wallet (pocket for some of us!) and makes them set their prices so spot on that you have just a little left to do “baba ke” for the private social security (popularly called area boyz!)-unless of course you don’t intend to go home with all your valued purchase.

Though bargaining is a common feature of our market here in Nigeria (I used to complain about this a lot until I benefited from such latent but honed skills when I visited East Africa last year, was quite easy for me to get good deals!). However, I noticed some slight improvement today as opposed to what I have noticed in previous years. In Europe I never had any reason to worry about the prices I saw on display, and after much of my purchase, I always found out that I got a good deal without haggling on prices. That was never the case here, you get to haggle for like 15-20 minutes and sometimes you actually still feel or get to find out you were ripped off by the seller (he or she obviously enjoyed the show…they do that everyday anyway with no specific intention of mischief, simply "catching" fun!).

But my experience today was a bit on the pleasant side. Of course, the haggling was still there (one of us would have become sick if it didn’t happen..you'll appreciate haggling when you enter some of our so-called "large stores" in the country now,and you meet with some robotic attendant who can't make a cut on the price simply because "we don't price here!"), but I must say the time spent haggling was much shorter and precise. Interestingly too, the seller was much firmer on his offer price. There was little shifting on price levels – after a while I had to put a check on myself, have I become soft in price haggling or is it that these guys have truly improved and are now more realistic in the margins they hope to earn? Abi is the power of the internet helping us to quickly decide as we are more able to easily identify the price range of goods thereby enabling us to come to quick concurrence when we hear a realistic price form the sellers. It’s not in impossible that in these days of Yahoo-Yahoo boys (please, I’m not saying our traders are yahoo-yahoo!), our traders may have taken advantage of the internet to gauge prices and that has probably soften their price pitching tone.

With seemingly booming confidence in the country and the fact that "spending" by you and I will be the only basis for increasing economic activity, getting good value for every penny(kobos!) spent , maybe someone out there can actually come up with an idea where adequate price knowledge for every day items will be readily available, and hopefully we can leave the "haggling" theatre for Nollywood to put on our screens.

I have to visit the place again next month...the thought of a possible haggling session... freaks me out!

N1,000,000 for your Use...For real!

I have a proposition for you today, and I sincerely hope you take it serious and take advantage of it. Remember those days when it's safe for you to keep away from your Nigerian banker friends? Yes, because the moment they know you have a job, they'll come after you asking for deposits, asking you to open all kinds of accounts, and you wonder how much you are earning that 3-4 banks are solicting for your widow's mite termed "salary". So it was rather interesting for me to have someone call me about 2-weeks ago (he still hasn't let off my case!) to "market" me vigorously to collect money from his bank....

I tried to convince him I didn't need the loan, considering it was too small to finance any "grandiose" ideas I have in this small head of mine, but after much "pestering" and for good old time sake, I was willing to take this loan and put it to some use. What is this loan all about?

They termed it a quick loan up to the tune of N1,000,000 repayable over a 12 months period. No need to open any account with them, all they require is your post dated cheque covering the 12 month period. In accepting his offer for this loan, I made some considerations which I'll like to share with us.

The interest rate (p.a) for the loan is put at 17%, a one time processing fee of 1.75% and a quarterly management fee of 1.25% represents the cost associated with this loan. Typically these are the rates similar to what obtains amongst banks if you intend to collect any loan facility at the moment. However, there's some side to the loan being offered that I find interesting; loan repayment is on a "reducing balance" basis. In essence what you actually pay as interest rate over the 12 months tenor period is only 14%. Comparatively with what obtains in the market now, this rate is relatively competitive. Furthermore the fact that I dont have to open an acccount with them to qualify for the loan is a major selling point I couldn't ignore. So all I have to do is write out 12 post-dated cheques and I'm fine.

Should you go for this loan? I will say a categorical yes! Ask your self a simple question, What can I do with N1,000,000 over the next 12 months that will give me over 14% returns? for those of you who are quite entrepreneurial, that's a slam dunk question...for those who are not, don't lose hope, you can invest this money in the stock market. This loan is far much convenient than accessing a "margin loan" which is more common these days being offered by brokers or some other banks.

For those who hate the mention of the word "debt", let me give you another perspective to look at this opportunity from. If this facility is accessed and you use it to buy non-money yielding assets like a sound system, Ipod, second hand cars etc. then you may be using the facility in a very inefficient way (unless ofcourse you are sure the prices of these goods will be greater than 25% of its current price in 12 months time!). However, if the facility is used appropriately, in a best case scenario, you can have returns over 25% having the facility yielding good money for you and paying itself. In a worst case scenario, where any stocks you put the money has a short to medium term bearish run in the market, you can take solace in the fact that you played the Cashflow game properly: having access to a lump sum N1m at current time and having to dole out small payments over time would have given you good time-value for the money: and remember the investments you have are still in place, only a matter of time, the return will dwarf the cost of the loan.

I will be taking the loan, and I'll put it in some stocks I intend to hold for medium to long term. I encourage you do the same. I'm not authorised to put the name of the bank on this blog (It will be too much freebies for them), however, you can contact my friend who works with this bank and discusshe will freely share his corporate identity with you. His name is Sola Olagunju and he can be contacted on 0805 245 9019.

As the months go by, I'll give you a feedback on how well the investments I'll use the loan for performs.

Enjoy!

Note: (I hear the quick loans are only accessible to people in some selected sectors of the economy, I however encourage you still go ahead and discuss with them, if they can work from 1st principles, then they should be concerned about your ability to pay focussing only on your cash-flow for the next 12 months.)

Soludonomics - "Redenomination" not "Revaluation"

I have never hidden my admiration for the Governor of the Central Bank of Nigeria (CBN), Professor Charles Soludo. From his banking consolidation announcement in 2004 to the recent announcement on the "re-denomination" of the nation's currency, he has proved to be a man who understands the tough choices and decisions that running an economy requires; Soludo has proved again and again a man who can deftly combine the intricacies and not too pleasant allure of criticised "academic" economic theory with a business minded approach to making pragmatic decisions meant to move our dear country forward.

So, is this a right decision? What exactly does this portend? How does this directly affect the populace? The truth be told, there is no "right" or "wrong" policy. Every economic policy has inbuilt in it trade-offs, and the potential for success and/or flip flops. The crucial point of note in any policy is the competence and quality of the executors and the institutional capability to adequately implement the tenets of the proposed policy. If the way and manner the banking consolidation was carried out is anything to go by, I believe Soludo and his team proved their mettle in handling the economic reins of the country: in that wise, I fret not!

Whatever judgment you may wish to put on the new re-denomination policy, throw away your bias and prejudice: The man said re-denomination not revaluation! In essence, we apply our knowledge of simple arithmetic i.e. if you are currently earning N100,000 and you spend it now to buy a car costing N100,000, re-denominations says, you will now be earning N1,000, and that you will be able to buy the same car for N1,000. Let's consider the potential benefits of this new policy from two key points: 1. Inflation Management and 2. Internationalisation of the Naira for the West African/African Currency Market.

Inflation in lay man terms focuses on the prices of goods and services: how prices rise and fall and at what rate these gyrations occur. Re-denominating the naira by taking off 2 zeros, potentially can reduce the rate at which the prices of goods and services in the economy can rise(however, I put a caveat on this claim, if there's poor or inconsistent implementation of supporting policies). One potential benefit is that price movement will most likely be in small decimal prints as opposed to big jumps in "rounding-off" changes e.g. why should the price of a product jump from say N20 to N25 and not steadily to N21 to N22.50k etc. These have been basic anomalies experienced in Nigeria for as long as I can remember. these little sensitivities guide price movement in developed economies and have been a key indicator in managing inflationary trend in most developed economies.

On the issue of Internationalising the Naira, partcularly within West Africa, I believe it's a vision long overdue. I have much been appalled by the lack of clout we stride the West African economic and political landscape. It's long overdue for the Naira to take it's rightful position against the CFA Francs used commonly amongst the francophone West African nations. With a growing Foreign Reserves, which is reportedly about 70-80% of the total Foreign Reserves of West Africa, the Nigerian currency is most suited to be the currency of choice along West Africa. If we don't sit up early enough, we could miss the opportunity to be the currency of choice to be bench marked against in the sub-region. So it makes sense for the country to carry out the re-denomination policy to a successful conclusion, as we wake up from our docile position in running the show not just in West Africa, but across the larger African continent. ascribing some real value to the naira is a significant starting point in a long walk, but a potentially "win" situation for Nigeria.

Notwithstanding the various criticisms levelled against Soludo, especially with respect to how the foreign reserves of the country could have been best utilised in the last 3-4 years; my opinion is that the strategy, as I have observed so far has been to put some form of stability and predictability to key economic indicators of the exchange rate and money supply suitable for an open economy (and private sector-led) which we have chosen to operate. The shrewdness in managing the foreign reserves thus far has achieved some level of predictability (ask the formal business sector of the economy, and they'll tell you so) and as accounted for some measure of success we have achieved. If our macroeconomic objectives does change, then clearly our national strategy to managing these reserves will be tweaked accordingly.

Indeed, just like the battered frame of the Nigerian citizen, the story of "Mr. Naira" has been a symbolic reality "Mr Nigerian" has been faced with. so whether you believe in the rationality of the pronouncement by the CBN Governor, it is indeed a great psychological boost to any human being to be told he is at least "near" equal to other human beings. So we have been told that Mr. Naira would be considered as close enough as Uncle Sam's dough come August 2008 (don't ask me why it is not N1 to $1, go and read George Orwell's Animal Farm!)

Stock Pick for July Ending 2007

I have spent the last few hours painfully going through summary indices of stocks. In a matter of days, I’ll have to place an order with the broker.

The fundamentals I have gone through have left me with very little conclusion to draw, so I’m torn between beefing up some of my holdings in two different stocks: one in the banking sector (GTBank) and the other in the insurance sector (Cornerstone Insurance).

The 6 months (June 2007) result for Cornerstone Insurance is quite impressive recording a profit after tax (PAT) increase of about 362% change compared with same period last year. The market price for Cornerstone closed shop today(July 30, 2007) at N4.04, inching up from N3.94 from last Friday's. GTB on the other hand with a reported 3 month period, has increased profit after tax by 66.14% when compared with same period last year; its closing price today is N32.95, down by some kobos from last Friday’s trade of N32.99. indeed both stocks have hovered around this price range in the last 1 month, with no particular spike in their prices.

So my decision would be what time range is my investment need for these stocks. Well, I have always considered these stocks as part of the portfolio of stocks I’ll like to keep for long term, so speculations only will not drive my drive decision for this month (medium or long term, I win!). Considering price differentials between both stocks, it is obvious I'll get more volumes purchasing Cornerstone as opposed to GTB, but really that shouldn't be the reason for committing my "hard" earned kobos!

But let's just assume that I want to pitch for a short to medium term play of these stocks, and my target return rate is say 50-75% ( I believe 100% is attainable, but let's not raise our hopes too much...ok?) in another 6-9 months, which of these stocks is more likely to give me this target? In essence, we are asking, is it possible to have GTB in the range of N50-N60 in 9 months time? Is it possible to have Cornerstone in the N6-N7 bracket in 9 months time? Well, considering the PAT of both companies mentioned earlier, it may not be so bad a pitch to make. While GTB's year high for 2007 has been N37.96, comparing with the price possibilities of its peers (Intercontinental, UBA and Zenith) in the market, N50 could be a possibility, N60 maybe a stretch for our chosen time period.

Cornerstone on the other hand has a year high of N4.99 from a year low of N0.90. So asking the stock to fork out additional N2-N3 gain in 9 months (some of its peers have attained such price levels this year already: Crusader 6.70, NEM Insurance 6.32, WAPIC 9.13, Great Nigeria Insurance 6.10 etc.) may not seem an impossible target considering an over 300% PAT rise for June 2007 result compared to June 2006...hmmm are you seeing where I'm leaning to already?

The truth be told, I'm a great fan of the GTB brand and stock, and always believe, you can never get it wrong investing in its stock as long as the management continues with its fundamental based style of operation and value creation. But in the light of the above mentioned (I hear an unsubstantiated rumour that they might be coming to the market for additional capital, let's see how that goes, of course, if they do, it's a "no-brainer"), I'll keep a tab on GTB for another month but pitch my tent with Cornerstone this month.

So I recommend we take a dive...Go for Cornerstone Insurance, medium to long term...you are fine!

Enjoy...

A Market Meltdown?...I'm not expecting doomsday! U?

That the Nigerian Capital market has been bullish over the past few years has not been in doubt, even the most sardonic of global institutions and observers have attested to the paranormal performance and wealth created on our nation's capital market.

The question that has kept recurring has been for how long will this continue? Is it sustainable? Are the good times really here? Have I missed out? Can I still cash in on the good times?....multitudes of questions been expressed in our various mother tongues. It is quite understandable that with the years of economic torture Nigerians have gone through, people want to be sure that someone, somewhere and somehow is not pulling imaginary strings in the market just to heighten their appetite in preparation for an eventual doomsday!

A reality of life (and not necessarily a sad one!) is that things happen in cycles, what goes up, they say "must" surely come down and indeed this has been found to be true of business cycles - of which our capital market is not immune to. Quite a lot of people have expressed fears and concerns about the sustainability of the upward swing of the Nigerian stock market. Some argue from the point of business and economic fundamentals; again and again, it is said how much confidence can we put in the figures reported by companies. Other argument stems from the rather bizarre non-correlation between stock prices of some companies and below par performance of the quoted companies - they just seem to move in opposite direction! Not to worry, I read Economics (and love it!), and have come to understand that the Nigerian culture and environment has a rather sophisticated way of responding to the "fundamental" laws of Adam Smith and Marx' ( I haven't exactly said we don't respond to the economic laws...so read my lips!).

While I do not intend to totally discount the claims and concerns of commentators/stakeholders (most more qualified than I am) about the fragile nature of the nation's stock market, I do not agree that we are teetering on the edge of doomsday. Oh yes, indeed there's some great imbalance in the market, with just one sector accounting for over 50% of the entire market capitalisation, it does raises some points for discussion. However, I'll choose not to discuss from a stance of trepidation...I see an opportunity...not only from an individual perspective, but from a national level as well. Let it be said, that the very sector that now accounts for such a great imbalance, some scanty years ago, accounted for less than 5% of the total market capitalisation. So what has happened...quite simple, a Daniel came to the scene for that sector and charted a clear vision and direction, of which all the participants were whipped into line and focus. Our earnest desire is that as the economic reformation drama of the country continues to unfold, the next scenes and actors will help shape clear direction and focus for other sectors that have lagged behind...I see that happening!

When we measure the depth of our capital market, using the market capitalisation as a percentage measure of our GDP, it is indeed obvious how much more distance we still have to cover. The percentage ratio as at 2005 figures is put at 25%; compare this with other stock exchanges' market capitalisation as a percentage of their country's' GDP like JSE (220%), London (145%), Singapore (220%), Spain (90%), Malaysia (138%) and Bombay (90%) and the gulf is obvious (my friend calls it a depressing statistic of which the scale of the graph has to be seriously tweaked for Nigeria to appear on a comparison chart!).

But wait a minute, what do you see? I see a massive opportunity for you and I as we play in this market. Let's assume that GDP growth for the country remains stagnant, the mere growth opportunity for the stock market to catch up with the GDP of the country leaves enough mouth watering opportunities for investors like you and I. But the truth is that we are a growing economy, projected to grow our GDP at an average of 5%, considering the base point we are coming from, I strongly believe the Nigerian capital market irrespective of any sector that dominates it, is here for a very long run - sorry to disappoint the haters...no meltdown in sight!

But what if...just in case the threat of meltdown is real...then you need to understand that "opportunities" do not disappear during meltdown (I'll spare you the economics of progress during meltdowns, but just to mention, all the countries who suffered Stock Market depression at one point or the other, are still the World's leaders!)...they become better enhanced... So my friend, stop bothering about "market" failure...there's value to be created in this economy...money to be made...and a nation to be built - Selah!

My Investment Philosophy

Is investing just about making money and securing a good/bright future? What should drive me when I invest? What really should be permanently etched on my mind? I believe these are some of the key questions anyone who intends to make success of investing (of any kind) needs to ask and deliberately find answers to. Whatever answers we find (and I hope we find the right answers!) should shape the pattern of our thinking when we commit our time and sweat to answering the deep questions that emanates from that "mild" but "needed" greed that aspires everyone of us to seek a better existence.

I see investments/investing within the larger context of life itself. If you are married, close to getting married or plan to get married someday, then you will understand the simple analogy we will use to set a tone for our investing activities in the days, months and years ahead. Investing can be likened to a marital relationship. The truth be told, when you choose to start investing for the purpose of wealth creation, you are announcing to your self the birth of a relationship. A relationship that will require a lot of care, patience and love. Any mindset lesser than this sets you on a guaranteed path of failure with your investments (be it time or money). Investing is treasure hunting, and you better have your heart in it! The whole essence of marriage is to value a "life" and to be valued back in return - you don't get what you don't give!

Investing should be about creating value: spotting a value creating opportunity, nurturing that opportunity, committing to that opportunity and then spreading that opportunity. Money (and lorry loads of it!) happens to be one of those things that you get splashed with in the process of enjoying your investing life (ask all the richest men of the world...they'll tell you the same). So does that mean I invest with the hope of not making money?....pleeease...I'm not crazy or some feel good lunatic! We all want to make money - The difference is in the "how?"!

I believe in staking investments with organisations for the sole reason that increasingly, these corporations have become greater agents of change than the governments of today. When you invest in an organisation(or start one), what you have indirectly done is provide the means for these organisations to effect these changes. If after investing in any company you complain against the Capitalist "west", you've missed the point...You just became one yourself, and the earlier you start enjoying that status, the better for your investing future. When you invest, you join with a large band of stakeholders, some known to you and others, you never even realise you are joined with in the same cause. I have come to admire some of the great investors of our time, ranging from the likes of Warren Buffet, Kerkorian, Soros, Fola Adeola etc. and how the various organisations they invested in have become massive agents of change. These guys staked something deep with the organisations they've been involved with, and for every dime of their wealth celebrated today by you and I, the value created by them has influenced our societies for the better.

I hope I'm not sounding off point here, because like I said in my last post, this is a journey - a long journey (no quick fix promises). Let's agree on our principles before we start...it will save us a lot of headache in the future and will bring us the returns we desire.

(it's getting close to that part of the month where I need to put some cash in the market, I will be ruminating on some basic financials of listed companies over the weekend to decide what order to give my stockbroker next week. So you can look forward to the recommendations I'll be giving in my next few posts!)

- Gbolade Shoyemi

Welcome to Investing

Now to the business of the day!

I'm so glad I finally connected my heart and hands to start posting on this blog. I've wanted to do this for a very long time; many times I've constructed in my head situations that would have been of immense benefit to all who will click on this blog, and as frequent as those times, brutally deconstructed the execution from same head.

This blog is largely going to be about investing: stock investments. No theory! Simple plain practical playing the Nigerian capital market; this will be our starting point, later into the future we will take a pitching point into the rest of Africa.

My approach on this blog will be simple. I wont complicate what is not...and what others try to make cumbersome , I promise to use plain laity language. I wont claim expertise where I don't have, and you will also find out I wont portray ignorance. I promise you no quick abracadabra, but indeed mind blowing consistency in wealth creating opportunities. It's going to be decent work, hard work, but as results unfold, you'll find out its also fun work!

I intend to listen to you, hear your opinions, and gossips(financial gossips!) if you have any. In return I won't hold back from you. In most cases, I will be putting out my neck on some bets and pickings, I'll make available some tools I use for playing in this market, some crude...and some, just plain genius - none of which I'll claim right to. I will let you know whenever I buy a stock, why I'm buying the stock, and I will advice you do the same. If I sell, I'll also let you know, basically, you will be privy to the way the game is played in my mind. we will experience some interesting time together as you will discover, the market "always" play to your advantage. we will see what others don't see and reap from what we've sown( I love miracles, but don't believe in magic!). We will make investment decisions together and we'll track over time measuring our expectations against actual performance.

I realise I have a gift...I know what is good on the stock market, I've given opinions and practical investment advice to friends and colleagues before now. Consistently, we beat the market. Some based on hard core data and analysis of fundamentals of companies...and some, just based on simple plain logic and common sense. And in some occasion, guts...a great God and a good heart gives performing guts! You will find out as we progress, we wont lack any of this!

Before we delve into the business of playing in the stock market and staking a future in it, on my next post, I'll share with us my investment philosophy...from that point we will understand the basis for the numerous investment decisions we will be taking.

I'm looking forward to this, and loving every thought of it!

I welcome you to my journey...ooops...I meant "our" journey.

Na me be dis....Gbolade Shoyemi

Smiling Fortunes!!!

My resolve has never been tested as much as it happened this night. It's unbelievable what happened to me. The very tool expected to give me expression of the thing I hold very dear, became an alibi to introduce some desperation to my feelings...you wonder what this ranting is all about?

I have spent the last 2 hours putting together a masterpiece introduction to this blog which I have been postponing for the last 2 years. It was wonderfully crafted (or so I believe), I was done with the editing, crossed all my "ts" and dotted the "is". and then smiled to myself...wow such a piece..all of a sudden NEPA(oops, sorry PHCN!) struck. I tried to quickly cut and paste the write up onto Microsoft word(apparently there was no need for that, the blogging tool actually saves your write-up as draft seconds after your nails get off the keypad...nope, I wasn't listening, some moments of madness ensued, these PHCN guys have taught me in the past, no risk is worth taking...in the clumsiness of a few seconds, my muscles tripped, the mouse became a gun, it wiped off my entire write-up...i calmed just a bit, but not enough...I reached for the "undo" key..don't know what happened..was it my eyes? was it the hunger I felt...really can't tell...when I fully realised what it was...the undo combination all returned a blank white screen....My people, I no fit cry!!!

I found myself torn between picking myself and working away from this wonder of our time and cursing it for my mild misfortune...then I noticed, the blink...that wonderful blink that entices a nerd to the screen just like the smile of father's first little girl entices him to come home early...calling for my attention and waiting for me to push the pads again...go on I can hear...Express your self again...I'm sorry it says...but if you turn away today, you'll meet me here again - even if it takes another 2 years! Then I retorted..."no be your fault, if to say I know, na paper I for write am put..all this shakara for no happen!"

The words don't flow again, not like when I started...but how for do?..This Blog, na tonight I go start am....