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Home Blog Page 6529

This Week in Nigeria Capital Market (13-17/01/2020): Devaluation, Inflation, Stock Market, Yields

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Why you must preserve your wealth: lessons from Dangote

“As of March 2019, he had an estimated net worth of US$10.6 billion. Dangote is ranked by Forbes magazine as the 100th-richest person in the world and the richest man in Africa, and peaked on the list as the 23rd-richest person in the world as at 2014” Wikipedia

Within 5 years he dropped from 23rd to 100th, what happened to King Dangote?

Nigeria happened to him. Inflation happened to him; average inflation rate was 8% in 2014 as against 11.40% of 2019. Devaluation happened to him, with N155 naira you could buy $1 in 2014 but now you need N306 to buy the SAME dollar. You must have read somewhere recently that Dangote wants to open an office in New York, you wonder why?

“In Africa, you know we have issues of devaluation, so we want to really ‘preserve’ some of the family’s wealth,” Dangote told Bloomberg TV’s The David Rubenstein Show.

The word ‘preserve’ takes us to one of the functions of money as a store of value. A store of value is the function of money as an asset that can be ‘saved, retrieved and exchanged’ at a later time, and be predictably useful when retrieved. More specifically, a store of value is when Naira retains its purchasing power into the future.

Put simply, in 2014 when dollar was N155, you saved N155 in your piggy bank with the goal of contributing towards your Masters program in the US in 2020. It’s 2020 now, with joy you retrieved the N155 from your piggy bank, alas! you need N306 to buy a dollar now. Naira just failed you in its function as a store of value. Yes, you saved it, retrieved it but you could not exchange it for the same amount of dollar because it lost its purchasing power to devaluation.

Inflation also decreases the value of money. As inflation increases, it becomes harder to place a value on money, thus it becomes more difficult to use it as a store of value. In the last 5 years, Naira has consistently failed in its function as a store of value.

  • Now you understand why Dangote dropped from 23rd to 100th.
  • Now you understand why Dangote wants to preserve his wealth in the US.
  • Now you understand why CBN wants Banks to recapitalize, N25 billion was worth $161 million in 2014, the same N25 billion is now worth $82 million now.
  • Now you understand why a lot of businesses have closed shop in the last 5 years, their capital was eroded by devaluation and inflation.

To grow and preserve wealth in Nigeria is a daily struggle. Like Dangote, you must find a way to preserve your wealth. Talking about growth, let’s take a ride to the equities market.

Equities Market Update

The equities market got off to an impressive start in 2020 after a disappointing 2019. In just 12 trade days in 2020, the All Share Index (ASI) has gained 10.34% and currently ranks as one of the best performing equities markets in the world (we are actually the best!). You would recall that the same Market declined 14.60% in 2019 and 17.81% the year before.

This positive performance of the equities market is driven majorly by falling yields on treasury bills, opportunities for high dividend yields and some specific corporate announcements. The stocks that have benefited most from this performance are:

If you had invested N100,000.00 or N1,000,000.00 in the shares of MTNN on 30th December 2019, by now you will be boasting of growth in wealth by 21% to N121,000.00 or N1,210,000.00 excluding transaction charges. 21% in less than 21 days is the most prolific investment outcome anywhere in Nigeria at the moment, a very decent premium of 9.2% above inflation rate which is now 11.98%.

Like any investment option, the equities market comes with its own risk but the interesting thing here is that these stocks are driven by some sort of fundamentals that forms the basis of your investment. As an example, Zenith is driven by the possibility of a high dividend yield, Dangote driven by the corporate announcement of a share buyback and many more.

Generally, the buzz in the market is fuelled by stranded funds in the money market as a result of crashing treasury bill yields.

Treasury Bill Yields Continue to Fall

Two T-bills primary auctions have been held this year, on each occasion, the returns on T-bills have dropped further leaving billions stranded. I mean that stranded in all sense of it, please follow this real-life conversation.

Mr. A (Investor): I have transferred N2 billion to your corporate account, kindly help me place it in a fixed deposit at 11% for 360 days.

Bank/Fund Manager: Thank you for the transfer, however, we will return your money before close of business today, the maximum we can do is 2%.

At the end of the day, the billions are stranded and Investors confused desperate for investment options. Interestingly, these are not bedtime stories, this kind of conversation is now the norm in most finance houses.

At the current average yield of 3.997% (across the 3 tenors) and inflation rate at 11.98%, the return on treasury bills will come in negative at -7.129%, clearly, you cannot grow your wealth with T-bills.

The biggest beneficiary of the stranded funds is the equities market, if I cannot find where to fix my money ‘lemme’ just buy shares. These actions create buy activities in the equities market, and as you are aware the equities market thrives on buy, buy, buy…

Like a Stockbroker, have a fabulous weekend.

Ndubuisi Ekekwe Invests in SpicyAuto for In-ad Vehicle Marketplace and Genuine Parts

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I have made strategic investment in SpicyAuto.com. SpicyAuto  is a in-advertising online car marketplace which runs on aggregation construct where buyers and sellers come into equilibrium within a supply-demand framework. Simply, you pay a small fee to advertise your car for buyers to purchase. The extremely brilliant team has built a growing company, validating most of their hypotheses. With the arrival of our team, we are going to expand the playbook. Yes, SpicyAuto.com will soon be selling genuine auto parts, bicycle parts, etc from original equipment manufacturers. The new playbook will eliminate  the use of fake equipment parts in your assets, if you shop from SpicyAuto. I want you to visit SpicyAuto.com to buy not just cars, vans, bikes, trucks, etc but genuine parts.

Spicyauto Limited (RC 1522919) is an online car marketplace committed to becoming the most loved and trusted marketplace on the web. We tirelessly pursue these goals by offering a superior experience, creating transparency for everyone, providing rapid delivery and stellar customer service. We offer a trusted, reliable and cost-effective online marketplace for the widest range of quality vehicles in Nigeria. We do not sell cars directly but offer a state-of-the-art advertising medium for users to buy and sell their cars, vans, bikes, trucks and other vehicles. For car dealers, importers and individual sellers we provide a huge reach of serious buyers. We host a dedicated community of people who love cars, while still supporting even the first-time buyers in their purchasing decisions.

SpicyAuto has Buyer Assist program (on beta testing) which does many great things as noted below: “The buyer-assist program is designed for potential buyers who don’t want to go through the stress of shopping around for vehicles. We help you find just the right car as well as provide you with inspection report. We even provide vehicles insurance at affordable rates including helping you with vehicle registration and change of ownership.”

 

The Aggregation Construct

 

Lessons as Oyo State Ties Teachers Promotion to Students’ Exam Success

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The Oyo State Government has announced that public schools teachers will henceforth be promoted based on the external examination performance of students. This was contained in a statement issued by the State Commissioner of Information, Wasiu Olatunbosun, on Wednesday.

The new arrangement has been communicated by the Chairman, Oyo State Post-Primary Schools Teaching Service Commission, during a session of interaction between school stakeholders in Saki Zone Oke Ogun.

“The promotion of teachers will no more be business as usual as the Governor Seyi Makinde administration has concluded plans to award excellency, based on measures of efficient and productive input by teachers to make their students excel in external examinations.

“You can see that our government is a listening one, we are here today to have some feedback, tell us which area we need to improve as government and I can assure you that era of unpaid salary has gone forever as this administration will continue to make prompt payment of salary its priority.

“In the last promotion that we did where over 800 teachers got promoted, there was no report on the beneficiaries, everybody was just moved together at the same time, though we believe our teachers are noble, good and hard-working but we may have some bad eggs who are lazy and might have sailed through without been qualified and the hard-working ones will be feeling cheated.

“This is why we are contemplating that at the end of every year, there must be reports on our teachers’ conduct and activities; teachers that are sanctified to be good and efficient need not to wait for a general promotion, they will be promoted and honored as at when due,” he said.

This development has disrupted the promotion norm in public schools in Oyo State, and set a precedent that may stir such rules in public schools in other states, or even in higher institutions.

Examination failure by students in all schools in Nigeria has been attributed to students’ unseriousness with their studies. The teachers have always had little or no blame to bear whenever there is mass examination failure, which in real sense is an evidence of the measure of education given and the impact it has on the students.

In 2018, out of 11,307 candidates that sat for West African Senior School Examination (WASSCE) between January 29 and February 12, only 1,937 of them (17.13%) obtained a minimum of five credits and above including mathematics and English. The story did change in 2019 but by 8.5% only. The head of WAEC’s Nigerian National Office, Isaac Adenipekun said that only 3,102 candidates out of 11,892 obtained a minimum of five credits and above on subjects involving mathematics and English. That’s 26.08 % of success and over 70% failure in the minimum credits required from compulsory subjects.

A further look at the result showed that 8,782 candidates, representing 75.15% obtained credit and above in two subjects, 7,332 or 62.74 percent obtained credit and above in three subjects, while 5,850 or 50.06 percent got credit and above in four subjects.

The 17.13% success rate of 2018 and 26.8% of 2019 are more of an indication of a system failure than students’. The previous years were not better, and the teachers have always been exempted from blame.

In the higher institutions, the trend is the same. The number of students who excel in their studies are remarkably getting intimidated by number of those who fail. That has seen malpractice and sex-for-grade businesses rise significantly in the campuses. Lecturers would even threaten to fail students over little differences or refusal to oblige to sexual advances.

But in real sense, the mass failure should be a shame of the teachers instead of the students. In developed countries, teachers resign when their students massively fail their courses because it seen as indication of ineffectual teaching.

The approach adopted by Oyo State Government appears like a solution to the lingering lackluster attitude of many teachers in Nigeria toward their teaching profession. But it may also breed further corruption in public schools. In a bid to get promoted, the teachers may likely rely on exam malpractice to ensure that their students pass. And if not checked, there will be successes in results while the failure will lie in the capabilities that quality education should impact.

Infoprive Is Looking for Partners To Setup Cybersecurity Center of Excellence

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I joined the Board of an amazing cybersecurity firm this month. Infoprive engaged my Practice about two years ago to lead some strategic redesigns. That relationship deepened that they invited me to join the Board, plus more. We are working on some really amazing things and we are confident that Africa’s digital assets would be properly protected through innovations and technologies under the domain of Infoprive.

To startups, small and large businesses, Infoprive would like to help you get the necessary protection (and industry certification) you need as you grow.  We made history in Nigeria when a few years ago, we worked with Venture Garden Group (VGG)  for it to become the first private equity and venture capital firm in Nigeria to receive  ISO/ IEC 27001 certification.

In our design centers in Victoria Island and Yaba, we are building digital security solutions of the 21st century, and where necessary striking strategic partnerships with companies in U.S., Canada and Australia. I am looking for partners, universities, governments, military &  law enforcement, companies, etc who want to engage Infoprive to deploy a Cybersecurity Center of Excellence. Yes, if you have contacts, let us work together. We operate on three capability cores: Capacity Building, Asset Protection and Incident Response. The result is predictable: totally sustainable homegrown system.

Contact my team; we want to serve you.

Ndubuisi Ekekwe Joins The Boards of Infoprive and eSentry

Nigeria’s Dry Season Farming and the Need for Tech Inclusion

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Rice farmers in Nigeria are bracing up for the dry season farming as the Central Bank of Nigeria (CBN) is set to mobilize one million rice producing farmers for the 2019/2020 dry season farming, under its Anchor Borrowers’ Programme (ABP), according to AgroNigeria.

National President of the Rice Farmers Association of Nigeria (RIFAN), Alhaji Aminu Goronyo who revealed this to newsmen, said that arrangements have been concluded to see to the mobilization of the farmers nationwide.

In his remarks, “The major preparation that we started is that the CBN invited RIFAN last week; met with us and gave us the nod to quickly identify the participating farmers and also gave us the go-ahead to do everything possible to achieve more production in the dry season that is already in place.”

According to Goronyo, the CBN Governor, Godwin Emefiele had given the go-ahead to consider at least one million farmers for the dry season farmer, which by extension could produce five million metric tons of rice.

The RIFAN President also debunked the claims that the farmers could encounter problems as regards to the availability of quality seeds and fertilizers, stating that there were more than enough fertilizers and seeds in all the production areas.

Goronyo further revealed that the association has signed an MoU with the Cross River state government on the provision of seedlings. In his words, “In Cross River, we have signed an MoU to work with Governor Ayade who has a seedling factory that has enough to cater to all the farmers that are going to transplant during the cultivation period. So we don’t have a problem with fertilizer and seed.”

He also stated that the CBN has provided the necessary suppor, especially in those two areas, adding that there are major companies that supply agrochemicals for the control of weeds and herbicides.

In line with the directive, Goronyo disclosed that he has begun a tour of the rice-producing states across the country, to motivate and mobilize farmers to meet the five million tons target.

“I’m on a tour to all the producing states. I started touring Sokoto, Kebbi, and will be going to Zamfara, Taraba, Cross River, Ogun, Ekiti, Ebonyi and Anambra, virtually all the producing states.”

He further advised farmers to give rapt attention to their agribusinesses, adding that the border closure is a big opportunity for farmers to capitalize on and harness for effective production of rice, and to ensure there are enough paddies for millers across the country.

However, the need to embrace technology in Nigeria’s agricultural infrastructure cannot be overemphasized. The high success rate of farmers in many countries has been as a result of deployment of innovative tools that has significantly curtailed environmental shortfalls. Stakeholders have advocated technical partnership to as a means of attaining food security in Nigeria.

Nigeria is currently the highest producer of rice in Africa with 4.9m metric tonnes, according to USDA. But the deficit is still high and the demand gap wide as the consumption need is scaling over 7m metric tonnes.

Dr. Alfred Dixon, the Director of the Development and Delivery Office of the International Institute of Tropical Agriculture (IITA), said for effective dissemination of agriculture research outcomes, there is a need for the intertwining of multiple linkages and collaborations across all agricultural value chains.

Popularly dubbed the “Father of Cassava”, Dixon emphasized the need for strategic partnerships to support the influx of innovation in order to bolster agriculture productivity. This, he pointed, will enable farmers to meet the target of feeding the population.

The IITA Director who made the charge while presenting his contract review seminar titled, “Scaling up and scaling out of agricultural innovations at IITA – Duo for systemic change”, stressed that while “scaling out” entails linking with the private sector, the farmers and the markets, “scaling up” involves working with governments and policymakers.”

Citing the need for the government to create the right policy environment for the adoption of the new technologies by farmers and other stakeholders, Dixon said: “Just having agriculture productivity or increase in agricultural production will not necessarily lead to an increase in income for farmers unless it is linked to the markets. When you have all that, you still need the policy environment. You need the private sector that is, the processors, the agro-dealers, the farmers. And you also need the government to give you the right policies and the powerful backing.”

Dixon, who also doubles as the Project Leader of the Cassava Weed Management Project (CWMP), which now operates under the African Cassava Agronomy Initiative (ACAI), said that the IITA cassava projects have been able to reach millions of farmers because of the linkages made with several stakeholders, including government agencies.

He also stated that ACAI is disseminating its research outcomes using strategic partnerships in addition to technologies like the Akilimo application, the Six Steps to Cassava Management Videos, radio programs, Viamo’s 321-service, Cassava Matters website and many more.

On scaling up innovations, Dixon called for an increase working relationship between Research for Development (R4D) and Partnerships for Development (P4D), adding that “both contribute to sustaining agricultural transformation for scaling up and scaling out of agricultural innovations.”

His words: “We need R4D to do the science, P4D to do the scaling. We have multidisciplinary teams. All of them have to work together to link to the policymakers, that is the government, for the scaling up. We have to link to the NARS also for scaling up. We need to link to the private sector for the scaling out and also to the development investors for scaling up because we need the resources to work.”

Dixon, however, advised that future projects must consider sustainability and exit strategies before project design and implementation activities.