Emeka Ucheaga Advisory

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...

Dear Speculators, The Nigerian stock market has moved steadily in one direction since July, 2014 and this direction is not up! The downward spiral in the market is now only a few months away from clocking three years, yet when you stretch the time horizon backwards, things haven’t been rosy either. The stock market All Share Index currently sits at the same level it was in May, 2004, that is now 13 years ago! In English, that is over a decade of zero growth in the broad market. Another similarity between 2004 and today is that the Nigerian ec onomy was in a recession in 2004 and is currently experiencing a recession in 2017 that started in 2016 . Interestingly , the All Share I ndex is currently less than half its level in March, 2008. Whereas most W estern stock markets have already recovered losses sustained during the global financial market meltdown in 2008. In dollar terms, the market is down over 60% since 2004. Not to say that stock market investing is a bad...

Dear Speculators, In 2015, the wide variation between the official exchange rate and the parallel market was a major source of economic concern for Nigeria, a country frequently described as an import dependent nation (I have my reservations on describing Nigeria as such but I choose not to digress from the discussion at hand). During this period, the continuous fall in oil prices reduced the foreign exchange earnings of the country. The Dollar was scarce in both the official and parallel market, leading to a rapid rise in the dollar rate in the later while the Central Bank was left to defend the peg in the former by depleting the external reserves. Whereas, the easier alternative would have been to devalue and stabilize the exchange rate at a new and fairer level to reflect the prevailing economic fundamental. Fast-forward to mid-2016 when the Naira devaluation was overdue and the Naira had greatly depreciated in the parallel market, the Central Bank decided to float th...

Dear Speculators, My rational nature constantly forces me to believe that other humans are alike and will deliberately take rational decisions at every opportune moment. However, the irrationality of some may bias the opinions of others which eventually lead to a rather nonsensical conclusion to a simple and clear event. We have learnt once again that the ideology which resonates best among the populist do not depend on the soundness of the message but how it aligns to their innate desires. Maybe I'm a sucker for the status quo or I'm more inclined to prefer certainty to uncertainty but we will have to wait and see the ensuing consequences to this shocking decision. I congratulate Donald Trump and his "deplorables". I hope for their sake they do not regret this decision in similar fashion as most Nigerians do with Buhari. Americans are smart?? We might have overstated their intelligence. The broad sentiments in the global markets may be negative as inve...