The pandemic gives, and the pandemic taketh away

In two days, billions of dollars have been wiped out

Jan 21, 2022

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“It is so early in the morning but I want to thank you for this article that you put in your newsletter from like 2 weeks ago. It was such a good and wholesome read.” - Nkem

If you missed last week’s newsletter, catch up here. Today’s KPI is pretty simple: share the newsletter!

If you follow me on Twitter, then you know that I have long-term faith in Jumia; in fact, I’ve mentioned a few times that I believe they will eventually crack e-commerce in Africa. It’s not going to be an easy road to profitability, but I want to be able to say ‘I told you so,’ if and when it happens. So, last year, I decided to put my money where my mouth was, so I picked up a few Jumia shares. It’s been largely uneventful so far, except for this week when $JMIA lost almost half its market capitalization.

But fear not, for it’s not just Jumia that’s feeling the heat. The market is red this week and everything from equities to crypto is having a rough period. Some US stocks like Peloton and Robinhood, have lost over 80% and 60% of their value compared to a year ago. And heavyweights such as Apple and Tesla suffered some declines in the last few days. That led to a 10% drop in the tech-heavy NASDAQ index yesterday, which means that we’re now seeing price corrections–financial nerd term for when an asset, crypto or stock, drop by at least 10%–after over a year of incredibly high prices.

Like everything since the pandemic, it’s not clear how long this rout will last. But in the meantime, crypto is taking some serious knocks and social media bulls are quiet. The dip is dipping and at this point, there’s no telling what the bottom is. In particular, bitcoin, which currently hovers around $38,000, has fallen to its lowest level since July 2021 against the news that Russia is proposing a ban on cryptocurrency. Where’s Bitcoin going from here? To the moon or to $36k? As many crypto experts and forecasters will tell you, it could go either way (How do experts get away with nonsensical statements like this, by the way?).

At this point, long-term readers of the newsletter must be confused. When did Notadeepdive start concerning itself with NASDAQ or Bitcoin prices? The answer is the Nigerian Stock Exchange is witnessing a stark contrast to this general decline in asset prices. Share prices of Nigeria’s publicly traded companies recently hit a 13-year high. Such an odd feat considering that Buhariconomics has caused the economy to plunge over the last seven years. Three straight days of solid gains saw the market rebound to its 2008 level–right before the Great Recession which changed a lot of things. What’s driving the recent Nigerian Exchange rally amidst a global sea of red?

“Beyond the number of investable companies increasing in the market, nothing particularly good has happened,” said a leading market analyst I spoke to. The record all-share index only means the market is recovering and returning to pre-recession levels, he said. . His argument is easy to follow: the Nigerian Exchange has not been able to convince Nigeria’s most exciting companies to become publicly listed. The New York Stock Exchange and London Stock Exchange remain more favoured destinations.

The returns of the Nigerian Exchange since 2008

Initial Public Offerings (IPO), which put the shares of exciting companies in the hands of individuals, are hard to come by in Nigeria. MTN Nigeria’s IPO was forced, BUA’s IPO was by a listing by introduction and GSPECPLC generated very little excitement. In contrast, there were 1058 IPOs in the US last year, compared to Nigeria which has had no IPOs since MTN Nigeria’s in 2019. So while the Nigerian stock roars again, there’s nothing exciting about it; making this moment a mere footnote in the history of the local bourse.

While we’re still talking about Nigeria and commerce, how about a look at Nigeria’s commercial capital and its 17-year journey to a light rail service?

How many trains does one state need?

It was Leo Tolstoy, the Russian writer, who once asked, “how much land does a man need?” That question came to mind recently when the governor of Lagos state, Babajide Sanwo-Olu shared that the state had bought two from Wisconsin trains for the Lagos Metro Rail project. I took a jab at the purchase on Twitter but the issue requires more than 280 characters. My cynicism isn’t misplaced since the Lagos Rail project was flagged off 17 years ago— a time when Nigeria’s youngest millennials were still excited about Biker Mice from Mars and Care Bears cartoons.

There’s also the small fact that Lagos state governors have a history of buying trains and spending huge sums for a project that is still not functional. In 2011, under the Fashola administration, the state government announced it had bought refurbished trains and cabins for the Metro rail project—at the time, Fahola insisted that the trains, which were 15-year old, were perfect for Lagos. Where are Fashola’s perfectly fine 15-year old trains? Your guess is as good as mine.

A few years later, under the Ambode administration, the government spent over 100 million euros for trains on the same rail line, bringing the total cost of the uncompleted project to around N100 billion. The incumbent governor, Sanwo-Olu has continued with this familiar pattern, initially promising that the project would be delivered in 2020 and operational by 2021—he missed both timelines. He now expects the project to be completed by Q4 2022, just in time for his re-election campaign perhaps. When you consider that Fashola, who bought trains and postponed the completion of the Metro Rail five times, couldn't deliver it before he left office, you see a bit of a pattern.

TL;DR: Get on with your life and don’t hold your breath waiting for the completion of the Metro Rail project.

The Signal

Today’s Signal may seem like something straight out of a Dan Brown novel since we’re talking about angel investors a.k.a angels. But there’s no demonry to be seen here— angel investors are high net worth individuals who fund startups at the early stages, often with their own money.

Todd Vernon classified angel investors into four broad classes. The family investor, relationship investor, renowned investor and idea investor. What all angels have in common though, is that they often invest small cheque sizes that they can afford to lose. And in recent years, Angels are also investing their time, network, support, and strategy to help founders get businesses off the ground.

Some angels come together as Syndicates to fund companies with high traction. Like any other investment, the founder will need to provide a deck, investment amount to be raised and valuation of the company which angels go through before making a decision.

Join this class of investors on GetEquity to invest in high growth startups. To learn more about investing in Africa’s best startups, download GetEquity now.

Take our quick survey and let us know if you’ve changed jobs in the past two years

In God we trust, all others must bring data.

I’ve followed a fascinating conversation this week about the patterns of job change in the Nigerian job market. I thought it would be useful to have some data to follow the conversation, so please take this quick survey and also share it with your network.

The results will make for a great Sunday discussion.

What I’m reading

A dam in Syria was on a ‘no-strike list.’ The US bombed it anyway

Russia's Mark Zuckerberg" has built a social media giant defined by its counter-positioning.

This is by no means a new article, but I stumbled on it recently and loved it: The Complex life and death of Ken Saro-Wiwa

The (not-so) secret second life of your Amazon returns

Ideas so bad he was shown the door: TikTok’s marketing chief has been fired after a series of bizarre campaigns

Editing by: Abubakar Idris

What am I getting up to this Friday? Work and lots of it and pretty much through the weekend. Drink a beer for me if you find the time to flex this weekend!

See you on Sunday!

Notadeepdive