In a conversation with @AfroVII on her podcast, the Spot earlier this year, I said that a good place to invest money in Nigeria despite the looming recession at the time, was in banks and agricultural companies, especially the ones who engage in commodity exports like Okonmu Oil. Now, to first eat my humble pie, I did use First Bank as a reference which turned out to be a terrible call as shortly after, they publicized a loan portfolio that was a walking disaster and the stock has been side ways most of the year.
However, the overall call was quite on the money. Okonmu Oil went on to show an over 150% increase in its revenues and profits after tax sometime in the middle of the year, leading to a year to date return of around 55% on their stock. At the same time, a number of banks have reported their unaudited earnings and while a number of them have had top and bottom line declines, those of them who had exposure to the FX markets (my premise for recommending them) saw increases in their revenue and profit numbers. The 5 that led the pack were:
My favorite bank until last year, GT Bank showed the biggest increases of the lot. It’s profit before tax (PBT) increased 53% to N140.84 bn. In dollar terms, accounting for devaluation however, that increase only translates to a 16% increase to $309.5m. Still,a year on year increase in profits of 16% isn’t bad at all, especially during a biting recession.
The remaining four followed the same pattern of significant increases in naira terms and modest increase to modest decline in dollar terms: Zenith Bank with the barest increase to $266m, Access Bank with a mild decline to $158m, UBA with a slightly deeper decline to $138m (which surprised me considering how active they were in the FX markets), and Union Bank with a negligible $27m in profits.
Now mind you, I translated all these bank profits (and the non-included revenues) to dollars to give me an apples to apples comparison since I live in the States. All of them recorded increases in naira terms so the more useful check for someone who lives in Nigeria is if their returns exceed the rate of inflation since FX conversions are pretty meaningless for you, for the most part.
Anyway, this was something to think about. None of these constitute investment advice. Do your own homework and come to your own conclusions before you decide where to put your money.
It’s just useful to know that somewhere, regardless of general economic conditions, money is being made. That , I think is one of the fun things about investing.