In Conversation with…Gbite Oduneye, founder of Nigerian Capital Markets Forum

(a) You have been working in the Nigerian Capital Markets space for about 11 years now - what would you say has kept you attracted to the Market?

My mother introduced me to Capital Markets at a very young age. She strongly believed in the capacity of the Market to create and preserve wealth, and so back then, she was acquiring specific dividend paying stocks. 30 years on, she is still receiving dividends from the same Nigerian companies. As a child, I accompanied her to see her stockbrokers in Marina - the financial hub of Lagos at the time.  It was no Wall Street, but back then it blew my mind. Over the years, the Nigerian Market has proven to be resilient and I believe that with the current crop of CEO's and Market participants, it is just a matter of time before the Market reaches its potential.

Apart from my exposure as a child, my attraction stems from the capacity for tremendous growth, which the Market possesses.  In the last 5 years, we have seen better regulation, the addition of various investment products, improvements in the underlying technology that runs the Market, rapid growth in the debt markets and a general positive move in the right direction. The drop in oil price and the recession only reduced the momentum. With innovation, the introduction of better technology and the right policies, we should see rapid and aggressive growth in the market. 

If you believe in the potential of the Nigerian economy and the work going in to diversify and stimulate growth, and you follow the trends, you will realise that we are on the verge of a deepened market with better liquidity which would be positive for all investors involved. A more diversified economy should be better for the markets.

(b) Drawing from your extensive knowledge and experience of the Market, which (equity or debt finance) is the major source of corporate finance in Nigeria? Should Nigeria be rethinking corporate financing strategies?

Debt finance is currently the major source. The equity markets are not as buoyant due to the slump in the economy. Treasury Bills are giving returns as high as 18% and this has attracted capital that would otherwise have gone into equities. Investors seem to want to put their capital in a safe place that gives a high fixed return.

On rethinking strategies, I believe that the impact of interest rate liberalization on corporate financing strategies should be explored further. Efforts should also be made to absorb the likely increase in demand for investible funds. Measures to promote equity markets, raise corporate savings and encourage inflow of foreign capital are needed as complements to interest rate liberalization.

Reforms to fully integrate financial markets (both the money and capital markets) are necessary conditions not only to improve the effectiveness of interest rate policy, but also to synchronise the revealed benefits of liberalization. 

Policy makers also need to reduce interest rates to stimulate the economy – this will provide jobs, stimulate output and definitely increase confidence.

(c) Nigeria's economy is steadily pulling out of recession – how is Nigeria developing liquidity, building market efficiencies and market integrity? 

It was announced this week that Nigeria is officially out of recession with growth of 0.55% in GDP. This development comes after 5 consecutive quarters of negative growth. We have witnessed a rise in oil price as well as increased activities in the agriculture, manufacturing and trade industries. The CBN Investor Window Policy put in place in April 2017 created liquidity and starved off a banking crisis. We have also seen inflation drop slightly month on month. While we still have some structural problems, we expect stronger growth in the 3rd quarter.

Creative policies to tackle liquidity problems will further build market efficiencies and increase confidence. From the Q2 results, it is safe to say that confidence is slowly but surely returning to the market.

(d) What role(s) can the Securities and Exchange Commission play in stimulating growth in the Market?

One of the main objectives of SEC is to protect the fairness and integrity of the Market. SEC can further foster innovation, change laws to match practice, trends and the trajectory of finance; and do simple supervision and enforcement proficiently.

In other words, they should do more to create a conducive and attractive environment to encourage more private companies to list on the market. They should  seek to protect the interests of stakeholders by engaging market participants.

(e) What are the opportunities, challenges and implications of the Brexit on the Nigerian Market?

Nigeria – UK bilateral trade relationship is worth £3.8bn per annum, so any impact on the British economy because of Brexit will have some impact on Nigeria. The historical and cultural links between Nigeria and the UK, the English language which most Nigerians speak, as well as the strong educational and business links are constant features of the relationship.  However whether or not the UK will be looking to grow its market share by encouraging more inward and outward business from and into Africa, is a development which should be watched closely.

The UK will possibly scale back investment over time and may toughen immigration policies for Nigerians seeking to travel to the UK.  Nigerian may in return have to agree to new trade policies with Europe, in order to enhance the relationship. 

In the short to medium term, Brexit may have a negative effect but again, it provides enormous opportunities for the relationship between Nigeria and the UK to be deepened.

(f) Earlier this year, the Nigerian Stock Exchange and the London Stock Exchange Group renewed their Strategic Capital Markets Partnership Agreement – how successful was the initial two years of the Agreement? Are there any benefits of the partnership for companies seeking to invest in Nigeria?

The agreement was signed to promote dual listings across the two exchanges, as well as to ensure that companies with substantial interests and operations in Africa are accessible to both Nigerian and international investors. The agreement reflects the global investment community’s strong desire to be part of the Nigerian story, as we saw with the very successful Eurobonds and the dual listing of Seplat Petroleum.

The agreement reduces barriers to global trade and makes the Nigeria Market more accessible to foreign investors, which works well for both parties. An effective and transparent Market has the capacity to spur a nation to growth and development.

The collaboration is geared at encouraging seamless cross-border access between both Markets, deepen liquidity pools as well as encourage greater competitiveness for investors. It is also intended to encourage the emergence of larger Capital Markets that enable capital formation for businesses and government and promote diversity of products to meet the wide range of investors and insurers.

The renewal of the agreement cements the relationship between both exchanges.

(g) Four years down the line, the Nigerian Capital Markets Forum has continued to attract the support and attention of major players in the market – how have you managed to achieve this and what should attendees of the 2017 Forum expect?

The Forum was introduced to deepen the relationship between the investment community in Europe and their counterparts in Nigeria. There was no better place to host the event but the financial capital, London.

My driving force is to continuously attract capital from global investors into the Nigerian Market and to create partnerships to boost the growth of the Market, as well as provide value for investors. I get to promote a product I am passionate about and believe in - Nigeria. To present Nigeria in the best possible light is to give us a great chance to continue to boost investment into exciting opportunities in Nigeria.

The success of the Forum is based on partnerships with all the capital market operators. I strongly believe that we are only as strong as the partnerships and the relationships we create. The NSE, FMDQ, NASD and LSE have supported all our efforts to promote the opportunities of the Nigerian Markets.

This year we return for our 4th instalment at the offices of Hogan Lovells International. We will have over 20 speakers discussing Fixed Income, Private Equity, Investment Products and opportunities in the Nigerian Economy. For example, we have Tony Elumelu, Bola Onadele Koko, Austin Avuru amongst others sharing their expertise on how to navigate the Nigerian Market.

Co-authored by Ademola Bamgbose

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