In the last two years the Nigerian stock exchange has attracted unprecedented interest. This was largely as a result of the banking industry capital raising exercise that saw several banks approach the market for fresh funds. The banks spent millions in advertisement which led to increased awareness among the public of the benefits of investing in the market.
The market posted a gain of 74.7% in 2007. However, it appears such a gain will not be repeated in 2008. At the end of the first quarter of 2007, the NSE All Share Index gained 31% compared to 8.7% at the end of the first quarter of 2008.
Already there is a talk of a crash. Whether there will be a crash or not is difficult to call as this depends on so many factors. Although a correction, not a crash is a possibility as most stocks are currently overvalued.
On the other hand, we might see a modest gain during the year of between 15-20%. Unfortunately, a 20% growth might not satisfy most investors as they have been spoilt by the spectacular growth in 2007. These investors have ignored the performance of the market in the last couple of years in managing their expectations.
2004 – 18.5%
2005 – 1%
2006 – 37.8%
2007 – 74.7%
The growth in 2007 is clearly an exception and cannot be repeated year in year out. Investors will do themselves a favour by lowering their expectations to a more modest 20% annual gain. Anything extra should be seen as a bonus.
The market posted a gain of 74.7% in 2007. However, it appears such a gain will not be repeated in 2008. At the end of the first quarter of 2007, the NSE All Share Index gained 31% compared to 8.7% at the end of the first quarter of 2008.
Already there is a talk of a crash. Whether there will be a crash or not is difficult to call as this depends on so many factors. Although a correction, not a crash is a possibility as most stocks are currently overvalued.
On the other hand, we might see a modest gain during the year of between 15-20%. Unfortunately, a 20% growth might not satisfy most investors as they have been spoilt by the spectacular growth in 2007. These investors have ignored the performance of the market in the last couple of years in managing their expectations.
2004 – 18.5%
2005 – 1%
2006 – 37.8%
2007 – 74.7%
The growth in 2007 is clearly an exception and cannot be repeated year in year out. Investors will do themselves a favour by lowering their expectations to a more modest 20% annual gain. Anything extra should be seen as a bonus.
2 comments:
This is very insightful but have you considered the fact that it might also be possible that the oil companies are reluctant to become development partners with the govt? If this is the case, then they really are not interested in a permanent solution to the power issue - it is none of their business (this might be the mindset that have gone into the various TAM done by them on the refineries). You will agree that there is money to be made from the power issue. Why then do these companies wait for govt to just 'mobilize' them as contractors? Instead of going for the profit margin? Why is it that the same companies that are integrated energy outfits (with investments in solar, wind, hydrogen etc. power) confined themselves only to the simple task of finding and mining crude oil in Nigeria for over 40yrs now? How is it that it is only AGIP that was able to deliver an IPP and what was their funding arrangements?
For ur info there is not much money to be made in power. The margins are much better in other businesses. Just check out the performance of European power companies.
AGIP has still not been paid the money they spent on their power plant. The SPDC/TOTAL/AGIP Joint venture power plant will come on stream by the end of the year. Infact they are currently testing the plant. For ur info government have not paid their share of the cost.
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