On Nov 21, 2019, I will be speaking in the National Assembly – the Nigerian parliament. You know in my speeches, I have been making a case that Nigeria MUST get to $3 trillion GDP by 2030 (from sub-$500 billion today) if we want to equilibrate on our population growth, and avert pockets of nano-conflicts. Behind the scenes, I have written roadmaps on how we can architect that redesign. This presentation is part of moving to the next phase as the committee I am working is bringing university vice chancellors, business leaders, public sector leaders, etc for a day to examine how to architect growth through industrial reforms.

My optimism in Nigeria is unbounded because we have a solid capability firmware to build an operating system of unconstrained growth which will be felt across industrial sectors! Just think about it: if you put liquidity velocity in all farmlands in Nigeria, you will reduce severe poverty by more than 29% overnight as assets which are dead will suddenly have value to serve the owners! 

Yes, those poor people in villages holding large farmlands will become richer. Doing that requires a new roadmap with technology under a governance system which the National Assembly must design and empower by law.

There needs to be new ways to use legislative policies to unlock latent opportunities and unleash growth in this economy.

I wrote about the Nigerian Banking Market Cap Paradox a few days ago. This paradox is thus: banks continue to break revenue and profit records but are yet to see decent bumps in their market caps.

Our largest bank by market cap, GTBank, had fallen from N1.3 trillion to now N741 billion even in a time it has been declaring massive profits and growing revenues. Simply,  there is no reason why that should happen. But it is happening due to market perceptions. Look at those numbers; it is only in Nigeria that a bank will deliver such, and yet nothing great happens on its stock (see the figure). Tell me, if massive profits do not deliver the glory of market cap bumps, what will?

Godbold Promise on LinkedIn has done the real professional work needed on the numbers to understand what is happening here. Read his full thesis below.

After reading a post by Ndubuisi Ekekwe today, I decided to run a 2 year analysis using #powerbi on the Nigerian Stock Exchange index and also on all the banks listed in the Stock Exchange to really understand the stock price performance over a 2 year period.

The result of the Analysis are as follows;
*The NSE index sheds 16.2% in 2019 against 14.0% decline in 2018. The index started flattening from Feb 2018 after then the index hasn’t recovered, it has been flattening till date.

For the Tier 1 banks, almost all the Tier 1 banks lost price momentum YoY save Access Bank.

There performance is as follows:
* Gtb dips by 23.7% in 2019 against 9.2% decline in 2018.
*Access bank increased by 7.4% in 2019 against 23.9% decline in 2018.
*Zenith Bank dips by 26.2% in 2019 against 7.6% decline in 2018.
*UBA dips by 24.0% in 2019 against 22.3% decline in 2018.
* FBNH dips by 33.3% in 2019 against 6.8% increment in 2018.

It happens that all Tier 1 banks relatively performed poorly YoY and 4 of them were worst performers save Access Bank from Jan 2018 to 25th Oct 2019.

This analysis still leaves us with same question by Ndubuisi Ekekwe which is; despite large profit, why are these banks losing price momentum.

The link to the dashboard is in the comment…

On what is happening in the sector, here are some comments from the LinkedIn thread.

1. One thing you should know is that investors are not only concerned about the huge positive numbers but also look inwards as to what’s contributing to those numbers. In a case where the drivers of the profit are not sustainable, then huge sell-offs will ensue and share price starts declining. Maybe you should check the financials and see if banks huge profits is as a result of an increase in SPREAD in their core business of financial intermediation or as a result of other factors investors feel that are not quite sustainable in the future. That maybe the only reason to justify why there’s a share price decline despite posting huge PBT on their comprehensive income statement.

2. Very apt! There are so many factors beyond financial performance that should be considered. E.g. Corporate governance framework, including but not limited to, controls around the eported numbers & Risk Management procedures, country risk (political & market)- as investors aren’t only Nigerians etc.

3. See, why an investor would buy MTN Nig shares and not Airtell or GTB is simply the same reason why an American investor would buy a Fitbit share now that Google has acquired the company and not before the acquisition. Last generation of investors invested based on the present state of the company… that was the generation where banks and other heavy assets companies did good, but this current investors are concerned about potentials, tomorrow’s state.

4. I had postulated the arrival of MTN. Yet, it is not clear.

Gojek is South East  Asia’s leading on demand multi service and payment platform. It was founded in Indonesia in 2010 by Nadiem Makarim, Kevin Aluwi and Michaelangelo Moran, to fix the friction in the supply of ojek (motorcycle taxis) by their operators and demand (consumers), after noticing that riders would wait endlessly in Jakarta to get customers who would need their services. The founders leveraged aggregation construct  to connect drivers and riders in a convenient manner, and later used the double play strategy to add courier delivery services which later scaled to currently offer more than ten services, meeting the daily needs of Indonesians.

With over 3,000 employees running its operations in Indonesia, Vietnam, Singapore, Thailand and the Philippines, it is Indonesia’s first unicorn and startup company worth $10 billion. Gojek is the only company from South East Asia included in Fortune’s 50 Companies that Changed The World in 2017 and 2019.

As a homegrown startup it was able to be a category king by navigating local regulations and designed features into its app to suit local service providers and their consumers.

Gojek’s product line includes:

• Go Pay: The fourth biggest ewallet service ranked behind Indonesia’s top lenders Bank Mandiri’s E-Money, Bank Central Asia’s Flazz and Telkomsel’s T-Cash. It controls about 30 percent of all electronic money transactions in Indonesia, leveraging innovation to deepen the National Cashless Policy by Indonesia’s Central Bank.
• Go Ride: The pioneer motorcycle hailing service in Indonesia with more than 1 million drivers.
• Go Car: Car hailing service.
• Go BlueBird which enables its customers to hail BlueBird taxis in the Gojek app without fixed charges.
• Go Food: Instant food delivery service with over 250,000 vendors across Indonesia
• Go Food Festival: Go Food’s double play offline food court chain which sells food and beverages from its merchants and has opened in major cities in Indonesia, becoming the most networked food court chain concept in the country.
• Go Mart which offers grocery shopping from supermarkets available on the Gojek app.
• Go Shop allows customers to purchase goods from shops not listed in GoMart.
• Go Send: On demand courier service to deliver items and documents with no distance limits within one delivery zone.
• Go Box: On demand service for haulage of large items with pickup trucks, single axle trucks and single axle box trucks.
• Go Tix: Offers entertainment ticket vending on the Gojek app.
• Go Med: App based medical delivery service in partnership with Halo Doc.
• Go Massage: On demand massage services
• Go Glam: On demand personal hairstylist, nail care, waxing and facial services.
• Go Auto: On demand autocare services
• Go Pulsa: Phone airtime top up service which uses sister service provider Go Pay as only means of payment.
• Go Bills: Allows its customers to pay PLN electricity bills, purchase PLN electricity tokens and pay B PJS insurance premium
• Go Points offers  token for each transaction to Gojek users which they can redeem with rewards from the app.
• Go Pertamina: An on demand fuel delivery in partnership with state owned oil company Pertamina to provide last mile delivery of fuel to consumers.
• Go Play and Go Studio: This is it’s latest venture into provision of online video content and a streaming platform to its subscribers.

Gojek has over 3,000 employees including 210 engineers in its three headquarters in Jakarta, a data science lab in Singapore and an engineering team in India. It has begun an expansion programme across South East Asia which will increase its partnership network of over 1,000,000 riders, 125,000 Go food merchants and 30,000 Go Massage, Go Glam, Go Clean and Go Auto service professionals.

According to a recent research by Survei Angkatan Kerja Nasional 2016 Semester 1 Gambaran, the average income of full time driver partners on Gojek (3.48 million rupiah monthly) which is 1.25 times higher than the average minimum wage in Indonesia (2.8 million rupiah per month) while the average income of driver partners (3.31 million rupiah) is higher than the professional employees in general (3.10 million rupiah for those in the transportation sector, 2.34 million rupiah for employees in the industrial sector and 2.66 million rupiah for staff employees). Temasek Digital’s Youtube channel states that Gojek contributes (9.9 trillion rupiah $732million) annually to the Indonesian economy.

Due to the impact of Gojek on the daily livelihood of millions of Indonesians, it’s founding CEO Nadiem Makarim was recently appointed as Minister of Education and Culture by President Joko Widodo to help transform Indonesia to a knowledge economy by redesigning the learning process to inspire its young ones to evolve as critical thinkers with on demand skills to create similar success stories.

Considering the fact that Indonesia is an archipelago of about 17,000 islands, Gojek should introduce on demand ferry services to deepen access to transportation across the country. It should also collaborate with Lion Air for air ticketing services on its platform  and integrate diaspora remittance features into GoPay for Indonesians and citizens of other countries within its operations to send money for their loved ones and launch in Malaysia which has a tech savvy population, Brunei, Cambodia, Myanmar and Bangladesh within the next one year to serve the ASEAN and South Asian markets.