Emeka Ucheaga Advisory

Dear Speculators, One thing for sure this week is that the monetary policy committee will not be short of hot topics to discuss during the upcoming meeting. From big global events in developed markets like the surge in the euro since Macron's victory in France to political uncertainty in Britain as the parliamentary elections draws closer and finally to Trump's row with the intelligence community that is weakening the dollar. Some more interesting topics like the possibility of a second impeachment of a Brazilian President in less than two years and military unrest in Ivory Coast that is driving up cocoa prices will also be on the table. Troubling news closer to home is the current crude oil price spending more time below $50 than above it as OPEC tries it's best to manage the oil glut. Still none of these issues rocks the monetary policy boat as much as the proposed 2017 budget of 7.44 trillion Naira currently on the President's desk. Why? The government pl...

Dear Speculators, The value of Naira has changed, the price of crude oil has appreciated significantly from January last year but nothing really has changed in the way Nigerian government carelessly plans and budget for the year ahead.  A budget is too important to be built on a shaky foundation. The 2017 budget is far too important considering the current economic recession in Nigeria. Keynes strategy of an expansive fiscal policy during economic slowdowns seems to be the country's favoured approach to pulling the economy out of recession. It's a goldilocks strategy considering it pushes Nigeria further into debt at a time when the cost of borrowing in the country is too high but the benefit of increased spending in the country is too important to ignore. Budget estimates for 2017 will see Nigeria spending beyond N 7.4 trillion, a 21 percent increase to last year record spending which was still unable to prevent the country from entering a recession. Crud...

Dear Speculators, It's a happy New year for Nigerian banks. After getting hammered for most of 2015 and early 2016, the NSE banking index is now up 22.42 percent year-to-date and up 29.62 percent in the past one year. Why the renewed interest in banks? How about increasing supply of foreign currencies to banks, higher than usual interest rate, higher earnings expectation following the economic recession but most importantly, grossly undervalued bank stocks .  Currently most bank stocks are selling at a huge discount to book value even with the rapid stock price growth in the past year. The fall in the stock price of the banks was technically right reflecting the change in the economic fortunes of the country but fundamentally wrong in how low bearish investors were willing to sell these stocks. At least now that investors are realising the value opportunity in banks, there is hope that in the not too distant future bank stocks will be trading closer...