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Rufybaba Profile picture
Rufybaba
@Rufyb
Investment Management | Economics | Finance
Jun 21 • 16 tweets • 3 min read
The reactions to this post have been very interesting. Thanks everyone. The common questions or comments I’ve been seeing from folks are:

☞ Why are PE funds not raising funds locally
☞ What is the solution?

I wish I had the answers, but sadly, I do not. But... ... we may need to understand a couple of things:

The underlying problem is the required return. For businesses operating in Africa, or, let’s say, Nigeria, the expected growth rate is high, and that's because of the risks or perceived risks.
Jun 20 • 11 tweets • 2 min read
Converting your Naira to buy USD and simply keeping it under your pillow should naturally deliver an average annual return of 12%–14%, thanks to consistent currency depreciation.

Now, if you invest that USD in the S&P 500, which has historically returned 11%–12% annually... ... your required return totals about 26% per year.

Over a 10-year period, this investment should yield 3x returns in USD. When you convert that back to Naira after 10 years, you’re looking at a 10x return in Naira.
Jun 18 • 10 tweets • 2 min read
Capital. A lot of it.

And they got lucky (but it was luck that they created or were prepared for).

Opay raised $500mm+ (or ₦200bn+) thus far to invest in their payments infrastructure. All the payment speed and functionalities we see today, owo lo pa. All the marketing done in prior years (which includes all the parallel trial and error businesses including oRide and the likes) were possible because of the significant capital they put behind it.
Jun 17 • 36 tweets • 5 min read
Cadbury is currently looking very good and attractive to me at its current price of ₦39 or ₦89bn market value. Image Cadbury Nigeria PLC is a player in Nigeria’s fast-moving consumer goods (FMCG) sector, best known for its iconic beverage brand, Bournvita, and confectionery products like Tom Tom, Butter Mint, and Eclairs. It is a subsidiary of global snack giant, Mondelez.
Jun 16 • 21 tweets • 3 min read
I like the CBN’s directive that banks with forbearances are suspended from paying dividends until they clear their ‘toxic’ assets.

Running a bad bank for a very long time is very easy... Image
Image ... If you have a deposit money bank, all you need daily is enough liquidity to pay customers who show up at your counter. The bank is good as long as customers get their money every day.
Jun 15 • 10 tweets • 2 min read
This scene really nudged me about something that I have always been telling my friends in the Nigerian pensions industry.

They often tell me how they are faced with limited investment opportunities in the Nigerian equities because of the poor liquidity... ... low market cap, and poor corporate governance of many listed coys. They are very correct. These fears are valid.
Apr 15 • 4 tweets • 2 min read
The Nigerian Sovereign Investment Authority is a sovereign wealth fund. SWFs are established for various purposes. We have:

☞ Budget stabilisation funds: set up to protect the budget and economy from commodity price and external shocks

☞ Development funds: set up to allocate funds to critical and priority infrastructure.

☞ Savings funds: set up to share wealth across generations.Image The NSIA was established in 2011 to manage excess funds from Nigeria’s sale of crude oil. The fund management is done through three funds, namely:

☞ Stabilisation Fund (investment managers include UBS Global Asset Management, Smith Graham & Co., Income Research + Management Lombard Ordier, Ninety One Global Strategy)

☞ Nigeria Infrastructure Fund (managed by In-house management team)

☞ Future Generation Fund (managed by a host of fund managers including Goldman Sachs, Helios, Alithea, Morgan Stanley, Vanguard, Actis, Africa Capital Alliance, Verod, Ingressive, CardinalStone, Ventures Platform, LoftyInc, Africa50)
Apr 2 • 4 tweets • 1 min read
As the global economy grows, and as the financial markets develop, creative solutions are implemented.

Even though the goods are public goods, we can still get the 'market' to provide them, but it has to happen under a very solid structure and partnership. Based on this, we have the PPP thingy which allows the free market and the government to partner. In this case, the government still needs to do a lot of heavylifting.
Mar 29 • 21 tweets • 4 min read
By now, everybody already knows about the superb FY 2024 results released by GTCO. The management demonstrated the strength of that performance by declaring a relatively high dividend. This was what investors wanted from Zenith but didn’t get. Image Over the years, the top two leading banks in terms of profitability, GTCO and Zenith, have always competed well, but GTCO edges out Zenith - which is reflected in the disparity of valuation multiples that investors are willing to pay for the two companies.
Mar 24 • 6 tweets • 1 min read
Since the president was sworn in nearly two years ago, the only two major policy moves I acknowledge are the FX harmonisation and fuel subsidy removal. Man is still living on that momentum. Meanwhile, we are still on the edge or somewhat very uncertain about the availability of FX and fuel and the stability of FX rates and fuel prices.

There is still nothing concrete about macro stability.
Mar 17 • 8 tweets • 2 min read
There are two types of goods: private goods and public goods. Private goods are based on exclusivity, which means if someone has not paid for them, they can be kept from using the good. Also, when one person uses a private good, it stops another person from using it at the same time. Examples include food, cars, and clothes.Image Public goods, in contrast, are not exclusive. You cannot stop anyone from using these goods, regardless of whether they’ve paid for them or not. Plus, one person’s use of a public good doesn’t stop others from using it too. Examples include national defence (which everyone benefits from whether they pay taxes or not), streetlights, roads, and bridges.
Feb 25 • 10 tweets • 2 min read
Financial Risk vs. Business Risk

Financial risk primarily deals with how you choose to fund your business, which essentially refers to your capital structure. This structure is the mix of debt and equity you use to finance your operations. While funding your business entirely with equity can seem appealing, it may present challenges when trying to scale or grow.
Feb 15 • 21 tweets • 3 min read
If you are struggling to get a job or you are unable to find your way in, despite applying to numerous jobs and being interviewed, the problem might be from the following: ➙ Limited industry opportunities: you are probably not looking at the industries with the most activities. Higher activities within a sector create a demand for labour. In Nigeria, only a few industries are thriving, and you have to adapt if you must remain here.
Feb 8 • 25 tweets • 4 min read
Dynamics of different finance areas

Investment banking is simple and straightforward. They are majorly in the area that concerns a company's capital structure. And by simple definition, a coy's capital structure is about its mix of debt and equity usage to maximise value..... Corporates invest for growth all the time, and doing so requires funding. The two broad sources of capital are debt and equity. To raise the required funding, corporates secure the services of investment banks.
Feb 4 • 4 tweets • 1 min read
I updated my list of currently undervalued companies, given their strong financial profile and future growth trend. These companies really trade at attractive prices, in my view, and they should deliver strong returns in the near to medium term. Image Liquidity is still an ish somewhat, but one can still get a decent entry in these names nonetheless, especially now that their momentum is relatively strong.
Feb 3 • 4 tweets • 1 min read
Industries with an obvious talent gap within the Nigerian financial market

➙ Alternative asset management: a growing industry, but many lack deep expertise in alternative investments

➙ Infrastructure finance & project finance: a complex area that requires deep knowledge ➙ Fintech & digital banking: many think they understand it, but they do not

➙ Actuarial science: a very sweet spot but grossly underrated
Feb 2 • 10 tweets • 2 min read
The developments are now live. It's not surprising that we are seeing Trump's recent moves. With these tariff announcements, the way I think about them, especially as they relate to Nigeria, is as follows: Image ➙ The types of goods subject to high tariffs will influence the expected inflationary pressures in the United States.
Dec 12, 2024 • 27 tweets • 4 min read
I know it's very common to think that the exchange rate drives domestic inflation, and that's partly true. However, it's actually the other way round. The starting point is inflation impacting exchange rate first, and then the exchange rate worsening inflation (depending on the structure of the economy).
Dec 11, 2024 • 14 tweets • 3 min read
The Naira is currently bad, true. And that's because the inflation rate in the domestic economy is in tatters. For as long as inflation continues to rise, the FX rate will suffer (I would do another thread to explain the relationship here). However, it is one thing for an asset to be bad, it is another thing for it to be priced appropriately.

The high FX rate at 1k level is justified, but what may not be justified is the magnitude of rise. At 1.6k - 1.7k, it's not the right pricing.
Dec 2, 2024 • 14 tweets • 2 min read
Value creation through growth can take several forms. Businesses typically pursue one of the following five growth strategies, ranked from the highest to the lowest source of value creation:

1. Launch new products in the market
2. Expand into an existing market
3. Gain market share in a growing market
4. Compete for share in a stable market
5. Acquire other businesses Organic growth through new product development tends to offer the highest return on investment because the growth potential is nearly limitless, while the risks are manageable. If early results are disappointing, future investments can be scaled back or stopped altogether.
Nov 28, 2024 • 6 tweets • 3 min read
In this video, where the hedge fund guys were talking, Bobby Axelrod wanted to take a short position (sell Naira) - and effectively long dollars (i.e., buy dollars) because he expected a devaluation.

A devaluation means that the price of USD (i.e., exchange rate will go up). So your trade is to buy USD.

A way to short Naira and buy USD is by borrowing in Naira and investing in USD. Say you walk up to a Nigerian bank to obtain a ₦400mm loan at 20% for one year. The details:

Loan amount: ₦400mm
Tenor: 1 year
Rate: 20%
Total amount payable after 1 year: ₦480mm
Exchange rate: ₦400/$1

You are effectively saying that you'd repay ₦480mm to that bank after one year.