Jan 19 (Lagos) - While in a meeting of shareholders last evening in V.I. there were discussions around how Nigeria became the best performing stock market in the world. There was a point made by one gentlemen which must be shared here. We will keep him anonymous because of the nature of the man. If you see him you would think he is a small boy.
The gentlemen said that 10 years ago, many stocks were prices at 50 kobo levels and could not decline below that level until the stock exchange changed that rule and permitted stocks to fall below that level.
Then he spoke about the devaluation of the Naira over the past 10 years. He emphasize upon the fact that the devaluation of the currency is not merely a depreciation of monetary value, it is in reality a depreciation of a Country via its economic buying power. It is also a depreciation of every Company operating in that Country by default unless the Company is selling its products in foreign currency (crude oil) or is effectively able to increase its pricing to match the new levels that are required to achieve the similar value in terms of foreign currency prior to the devaluation. He called that re-pricing and it makes sense.
From there, he came to re-pricing of stocks. Coming back to 50 kobo levels, he emphasized again that 50 kobo of 2013 is really 3 Naira of today. That has been the level of devaluation and inflation in our economy. He provided examples of product prices from 10 years ago to today. Mentioned products like pasta, flour, rice, noodles and meat to drive the point and the numbers never lie.
So if these stocks which were 50 kobo 10 years ago, come to 3 Naira levels, they have merely re-priced themselves and there is actually no gain according to that investor. Yes the gain is there in terms of your money has increased, but on a International macro-level you have merely re-priced your portfolio.
His ultimate point of view was that this market has a long way to go and has a lot of legs. We may be just getting started. 100,000 all stock index is really 20,000 from 10 years ago if you take out all the new Companies that were listed and factor in the monsters of inflation and devaluation. He said he expects better entry points this year and will be watching those moments very closely and did not rule out 200k levels by 2026 in his opinion. He also expected many more Companies to start de-listing from the exchange unless they are re-priced properly to reflect their value.
Above was an opinion shared in a meeting of a very exclusive group of shareholders. But it was decided that this is something that needs to be expressed on this website.
That's something to think about. Have a nice weekend.
reporting for easykobo.com on Friday, January 19 2024 from Lagos, Nigeria