All Hail the Nigerian Bank

They are massive, shinny and fat. They are our banks, making up a significant percentage of our stock markets. Oh how eager investors are to pump their money into the banks. The stock market is a sophisticated phenomenon. It is so enticing to a bored investor pool and our brokers in dark suits have an easy task of selling us and funneling our money into them, after all, where else would we put our money?

What everyone forgets to ask is this, what business is the bank into?

Ok, so this is how it works, you probably know this already, but like me you’re so caught up in shuffling your money around between you and me in a zero sum game. You take my money today and I take yours tomorrow, and we both take Nigeria’s oil money, well, not all of us, maybe the powers that be and somehow it trickles to you and I when we make a sale or buy during a trade.
Our Nigerian banks make their money in one way; one is from oil revenue that they funnel to the citizens. The government deposits money, pays its people and the people deposit their money and then the bank balloons, then the people use their money to buy the bank shares and then it balloons some more and then the banks lend money to brokers who then buy their shares and then it balloons even more….

You get my point?

If our banks are to make real money they need to invest in Nigerian infrastructure and other tangible goods. A lot of you are well traveled, so tell me, what country have you been to, that you consider successful that lacks infrastructure? We cannot get into the service business before we have infrastructure. All the self proclaimed developed nations started with infrastructure, railroads, roads, water, electricity…those were the things that moved goods at the right price to the right place and kept factories running at a sustainable pace, pumping out goods at a sustainable price, while the people tagged along.

If you get my point call your broker tomorrow and ask him or her to tell you what the P/E ratio of your bank stock is. Ask him to tell you if it is overvalued or undervalued. Ask him to defend his answer. Make sure it makes sense.

Request the annual report and actually read it. See what the companies that are in your portfolio create for the economy. If it is not tangible, slowly back away. Unless the service it provides is for tangible goods producing clients. No service for service companies.

And then finally, ask your bank to go and finance a road, or look, wait, how about a refinery, or maybe an electric grid?

Until you do that the price of my bank stock will go up when your broker comes to buy it from me for you and offers me a good price, and then it will go up when your broker borrows money from the bank and buys it back from me and then it will go up when…