Can the Nigerian Stock Exchange consider a temporary closure of the stock market, until we get clarity on coronavirus. Of course that would be a nightmare as you will lock many out of their assets. Yes, a mother may like to sell 100 shares of her Dangote Cement shares to pay hospital bills. Not having the market open may create a huge challenge for that “special bank account” in the family.
That noted, what is happening in NSE is confusing. After GTBank went to the mountaintop with N232 billion ($645 million) profit before tax in 2019, most expected the bank to see massive market appreciation. You know what has happened? GTBank is seeing the opposite, losing close to N100 billion since it reported that great number. The paralysis is huge and you cannot understand what investors are looking for!
Wema Bank is now worth N19 billion ($52 million) while FCMB goes for N30 billion. Unity Bank stays smallest at N5.3 billion. I have noted in the past that Wema should evolve to ALAT because as ALAT it has a better chance in the market. If ALAT is the new Wema, it will command at least $100 million in the market, well above the current $52 million investors have put on Wema bank.
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ALAT is the first step for Wema Bank. In the next few years, depending on its progress, ALAT can be divested from Wema Bank, to allow it to compete more aggressively in the African market without being tethered to a bank and the associated regulation. The regulation is important and there is nothing wrong with that: banks like Wema Bank take customer deposits, unlike most fintechs, and should be regulated. So, ALAT can become an operational arm of Wema Bank while the bank remains a dumb pipeline, typical of most traditional banks today (i.e. not much intelligence due to lack of deep insights), to support what that modern banking named ALAT does. Perhaps in 10 years, Wema Bank may even simply change its name to ALAT if this new modern banking solution evolves into its future.
Nigeria could lose half of the market share by the time this virus is through. We may need to have circuit breakers to protect some assets. Of course, executing that may be near impossible as some, like the mother above, may prioritize having access to $100 today than a promise of $400 in three months.
We hope we will not have another 2009!
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When panic and fear enter the room, reason and good judgment naturally take flights via the windows; that’s what is playing out at NSE.
The problem is that no one knows what the problem is, but investors are confused and in panic mode, and therefore clear thinking has become an afterthought.
The world’s bravest and most respected people are those who can remain calm in the face crisis and hysteria; they are pure breeds of course…