[INTERVIEW] Biz Interview: Ola Belgore of Meristem Securities Ltd. sees an even better future for the Nigerian economy - '...government has no business in business".
ABC interviews group business development head of Meristem Securities Limited of Nigeria, Mr. Ola Belgore (left), on the business climate of Nigeria.
Please introduce your company
Meristem Securities Limited (MSL) is a financial services conglomerate. MSL as a holding company has four plus one business units within it. The four units are full-fledged companies, which are; Meristem Stockbrokers Limited, Meristem Wealth Management Limited, Meristem Registrars Limited and Meristem Trustees Limited. The last unit is the Corporate Finance which is not yet a full-fledged company, hence my calling the structure a 4+1 units.
What is your position in the company?
I head the group business development of the organization. In this capacity I coordinate marketing and cross selling activities of units in Meristem. This arrangement enables us to offer our clients and prospects efficient and value-based services.
What are the most important developments in your industry in Nigeria?
The market was at its lowest around February 2009 with market capitalization of N3.99 trillion, but confidence is returning; today we are at over N10.34 trillion in market capitalization. The equities market between 2012 to date has gone up by 60 percent. But I think that what is more important to note is that this return has been broad-based. It’s not only the banking sector but also conglomerates, industrials and agricultural sectors. The interest in fast-moving consumer goods reflects the changes in the Nigerian economy, and that the world is increasingly recognizing the phenomenon that Nigeria is one of the fastest growing economies in the world. It has a rising middle class. And how do you tap into these opportunities? You tap into the opportunities through investing in the capital market.
The other significant development is that the macro-economic environment has been very supportive of foreign investors investing in this market. That has been particularly important in the capital market. Relative stability in exchange rate amongst other macro-economic factors are responsible for the continued interest of foreign investors in the Nigerian capital market. If exchange rate is relatively stable, investors will naturally come in because they are not worried about currency depreciation.
Comparing returns in Nigeria to other emerging and frontier markets shows that Nigeria is very compelling and therefore a good place to invest. And that’s why you’ve seen that over the last three years, foreign investors have basically been driving the investment in Nigeria. In the equities market, it was up to 70 percent in favour of foreign investors at some point in time; now it is about 50 -50. Regulation is also improving, creating an environment where investors feel safe about their investment. SEC is ensuring that operators are subjected to the highest integrity. This is also something we believe has contributed to the development of this industry.
Furthermore, prior to 2010 there was predominantly a focus on equities and primarily retail was the focus. In the last three years, we’ve had a significant focus on the bond market given the high yield it offers. We have a thriving fixed income market today.
The new leadership of the Stock Exchange has also brought in strategic changes that have led to the introduction of Exchange Traded Funds, market making ASem, etc. Soon we will have derivatives and other sophisticated financial instruments being traded here. All these initiatives will deepen and enrich the capital market making it more attractive to both local and foreign investors.
Another significant development is that in addition to the Nigerian Stock Exchange, the SEC has approved two new platforms: the National Association of Securities Dealers, NASD, which was launched in July, and the Financial Market Dealers Association, FMDA platform, which is also in the process of starting operations. What these two platforms will do is providing more liquidity for unquoted stocks and fixed income instruments.
What are the major challenges to operating in the Nigerian market today?
Efforts have been made by market operators, regulators, and governments, to strengthen the capital market in Nigeria. The question as to where we are today is a function of the strength and effectiveness of the regulatory framework on which the capital market is supposed to ride.
Since the boom days, however, the market witnessed a steep decline in trading volumes and overall market capitalization, a large part of the downward pressure on the market’s numbers has come from a fall in investor confidence. Under the then unregulated and unstructured margin lending regime, credit was freely available to anyone who cared to borrow to buy shares in particular, retail investors with little or no understanding of the risk of the market, especially Private Placements, were attracted into purchasing both registered and unregistered securities and got locked in as the bear market emerged. Expectedly, to a not-too-financially-literate investor community which was unaccustomed to big and prolonged market slides, panic and fear drove confidence to evaporation points. It is therefore a very tough task getting the same hurting investors, e.g. the retail end of the market, back to the beat.
Foreign investors still entertain doubts as to the efficacy and reach of the regulatory framework. The rising state of insecurity of lives and property in the country is also a cause for concern.
Another challenge we face as operators and investors is frequent government policies change. The implementation and enforcement of policies without sometimes analysing what effects this would have on all sectors of the economy as we saw with the increase of Cash Reserve Requirement(CRR) to 50% from 12% is also there.
What could the Nigerian government do to improve the business conditions in Nigeria?
What the Nigerian government can do is very simple; it should provide an enabling environment for business to thrive. Government has no business in business. It should provide adequate security, basic amenities and social infrastructure. The unbundling and sale process of PHCN is a major plus for this administration. Nigeria is endowed with both human and mineral resources. We have 34 solid mineral resources in commercial quantities across the nation and we are number 1 in 6 commodities in the world yet the growth of SMEs has been hampered by power and insecurity.
How do you look upon the development of the African economy at large and the Nigerian economy in particular?
With a working population of 500 million, collective GDP of about $2 trillion; the discovery of oil in Ghana, Tanzania, Uganda, etc., Africa is where the funds flow. Foreign Direct Investment is increasing year-on-year. It is also encouraging to know that it’s not only foreigners that are investing in Africa. Intra-African investment is growing by the day. With Dangote Cement, Nigeria has moved from a cement importing country to a net exporter of cement.
However, our leaders need to do more to remove the stigma of conflict associated with Africa. We need stable policies and democracies across Africa.
With the proposed change in the base year from 1990 to 2000, Nigeria’s GDP would increase by over 30-40% thereby making it the largest economy in Africa i.e. overtaking South Africa.
What is the latest from your company? Anything to look forward to?
One word: MERITRADE.
MeriTrade is a user friendly online stock broking platform which allows users to buy and sell stocks online through the Nigerian Stock Exchange from the comfort of their home, office, car, and even on the go. The platform defines stockbroking in an entirely different language and creates a world class experience, bringing your broker (electronically) to the comfort of your home and office.
I implore you to visit www.meritrade.com to have a firsthand experience of this platform. It’s not just new to Meristem but to the market at large.
Find this interview on Business News Nigeria.
