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‘Wealth Creation Not Just For Our Stakeholders But Value Proposition to Customers’

10 Nov 2012

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Johnson Chukwu

An altercation between his economics and english teachers in secondary school when he was just 15, sowed the seed of his career path. He studied accounting because, according to his guardian counselor, accounting compared to english had more opportunities because it is a professional course. That pretty much settled it for Johnson Chukwu who today is the Managing Director of Cowry Asset Management Limited, an Investment banking. He seems every inch a fulfilled man with his firm now firmly established as a company of reckon in the investment and financial service sector. Chukwu who enjoys watching boxing as against football spoke with SHAKA MOMODU. Below are excerpts...


Give me a brief summary of your education and work history?
I studied Accounting at the University of Lagos and graduated with a second class upper degree. During my undergraduate years, I was a University of Lagos scholar. After my first degree, I worked for some years and subsequently went to Pan African University (Lagos Business School) for my Masters in Business Administration. In addition to the academic qualifications, I am a fellow of both the Institute of Chartered Accountants of Nigeria (ICAN) and Chartered Institute of Taxation (CTIN).


I started my working career in 1992 with the Nigerian Intercontinental Merchant Bank (now part of Access Bank Plc). In 1997 I left Intercontinental Bank for Diamond Bank where I had a three year stint.


I also worked in Guardian Express Bank Plc between 2000 and 2006 when the bank integrated with five other banks to form Spring Bank Plc (now Enterprise Bank Limited). I left Spring in September 2007 as a Deputy General Manager to take up the challenge of building Cowry Asset Management Limited into “the foremost Pan African Financial Services Provider of Global repute”.

Who influenced your career path?
What influence my career path occurred when I was barely 15 years of age, during my secondary school days. I went to the Staff room to remind our Economics teacher of his lecture time (when he didn’t turn up on time). When I got there, I saw him quarrelling with the English Language teacher. The Economics teacher who interestingly was a gaunt looking man was threatening to physically beat up the English teacher who on the other hand was a stoutly built person. On a balance, it would be almost impossible for the Economic teacher to beat the English teacher in a fight, yet the Economics teacher was so aggressive.


What struck me most was when he boasted that by the time they finish their fight, both of them would lose their jobs. And that he will get another job the next day because he is a professional Accountant while the English teacher will roam the street for years without a job. Out of curiosity, I subsequently went to our Guardian Counselor who was also our Vice Principal to find out why an accountant can get a job the next day while an English teacher will not. She told me that accountants can work in banks, Insurance companies, breweries, ministries and that every company requires an accountant, but that teachers work opportunities are limited. There and then I decided that I was going to be an accountant.

Fashioning a career in the Capital market must be pretty daunting and perhaps interesting, tell me about that?
A career in the Capital market has been daunting due to the fact that the market has been challenged for the past four year. But the attraction of the Capital Market for me is the uniqueness of each mandate. There are no two mandates that are exactly the same. Each mandate requires a certain set of knowledge and skills amongst others, which makes it imperative for a market operator to continuously develop him or herself so as to be equipped with the requisite skills to execute capital market mandates or meet customers’ demands.

How challenging was it, considering that Nigerian Capital market is largely underdeveloped?
The challenges stem from the fact that the Nigerian Capital market is still relatively shallow in terms of product offerings, number and type of tradable instruments, level of liquidity, number of investors, etc. Added to these is the fact that many Nigerian entrepreneurs are yet to fully appreciate the value that quotation on the Nigerian Stock Exchange offers them, hence their reluctance to have their companies listed on the Exchange. The capital market crash of 2008 also contributed in slowing down the market development as several companies that initially signified interest to be listed decided to shelve such move for fear that their market value will be depressed due to the unfair pricing of equities in the market.

Is Cowry Asset Management a stock broking house, an issuing house, or is it a combination of both?
Cowry Asset Management Limited is an investment banking firm registered with Securities & Exchange Commission as an issuing house, financial adviser, underwriter and venture capital manager. We have subsidiaries in Securities Trading (Stock broking) – Cowry Securities Limited, which is a member of the Nigerian Stock Exchange; Consulting – Cowry Consulting Limited and Real Estate – Cowry Realty Development Limited. In effect, we are a financial supermarket designed to meet the investment and funding needs of our customers.

How did you settle for the Cowry Asset Management?
The choice of Cowry Asset as my employer is not just because I was part of the founders of the company, but most importantly due to the work environment, the caliber of staff, the value system, the culture, the vision and mission of the company. For instance, the company’s core values which include; respect for the individual, team work, professionalism, service excellence, high ethical standard, social responsibility have led to the evolution of a unique social culture in Cowry that makes the work environment very friendly and at the same time very professional. The work environment encourages ownership spirit, and entrepreneurship


How did you come about the name Cowry Asset Management? Vision and Mission amongst others?
The name Cowry was derived from the nature of the company’s business, which is wealth creation and its primary geographical area of focus, which is Africa. When we conceived the idea of setting up a company that will be the foremost pan African financial services provider of global repute, we thought of the entire African continent as our market. Then we asked ourselves which objects have been commonly used as measure of wealth or currency in virtually all the nations of Africa. We realised that COWRY is the only object that has been used as currency in various African countries (and even beyond) at different times. We then felt that if we name the company COWRY, virtually all Africans can relate with the name as a source of wealth creation.


Our Mission statement which is “To create exceptional wealth for all our stakeholders” is for us not just a mission statement but a value proposition to those who relate with us as customers, workers, service providers, governments, host communities. Our ‘purpose of being’ is not just to create wealth, but to ensure that the wealth so created is appropriated fairly to our stakeholders in the form of highest possible returns on investment to our customers, taxes to government, corporate social investment to our host communities, salaries and wages to our staff, dividend to our shareholders.


The Stock market has been down for four years and this year marked a major turn around the all share index rose from 20,700 to 27,400 points.

What caused the crash and what is the reason for the current year turn around?
The crash in the Nigerian Capital Market was caused by a number of factors prominent among them were the availability of cheap credits targeting equity instruments, withdrawal of foreign portfolio investors from the Capital market in response to the global financial crises and withdrawal of credit lines granted for capital market investments by Nigerian banks in their bid to meet the repayment demands of their foreign credit lines providers. Other factors that contributed to the capital market crash was the high level of market abuses particularly the creation of bubble capital by mostly banks and some other quoted companies.


The major reasons for these year’s turnaround are the improvements in the financial health and earnings of quoted companies particularly banks, their previously undervalued share prices and the gradual decline in government bond yields since August 2012 occasioned by the inclusion of Nigerian Government bonds in JP Morgan Government Bond Index – Emerging Markets (GBI-EM). The decline in bond yields has made equity instruments more attractive than fixed income instruments hence the shift in investors’ preference from fixed income to equities.

The Nigerian Stock Exchange introduced Market Making/Market Makers this year and also increased share price limits from five to 10 per cent bandwidth, will this not create more problems than it intended to solve, say e.g. frighten investors whose one loss will be too huge considering the fragile recovery so far?


The increase in the Nigerian Stock Exchange circuit breaker from five to 10 per cent for stocks under market making is designed to make such stocks more liquid. The wider the circuit breaker/daily price movement band is, the easier it is for a stock price to achieve equilibrium during the trading day such that willing buyers and sellers will have enough offer and demand respectively to meet their trading needs. So instead of frightening investors, the increase in the daily price movement band for stocks under market making will rather encourage investors to invest in such stocks as they can always offer and sell them at market determined prices.

We are beginning to see a drop in their Third Quarter earnings results, for example UBA Quarter three dropped by N1.5bn compared to Quarter first and second quarter, and with current market dropping from 27,800 points to 26,876 points, I hope these will not start a repeat of what happened in 2008 when the market crashed, what’s your view?


The drop in UBA third quarter 2012 (Q3 2012) result is rather an exception and cannot be used as a basis to chart a trend in the performance of quoted companies in Q3 2012. If you look at the general performance of the banking industry in Q3 2012, you will realize that most of them reported quite impressive results for the Quarter, which were improvements over the preceding quarter. The likes of GTBank, Zenith Bank, Access Bank, Diamond Bank, Fidelity Bank, Sterling Bank, etc all reported very impressive results.


On the drop in market index from 27,800 to 26,876, I think that it can be largely attributed to profit taking. Some investors in the market have in the past few weeks recorded good returns on the portfolio and may be selling to lock-in their profit, hence the drop in index. I don’t think that there is any basis whatsoever for investors to be afraid of market crash at this time as most of the conditions that normally precede a capital market crash are presently not obtainable in the Nigerian market. Such conditions as availability of cheap credits channels towards an asset class (the capital market) leading to the building of a bubble in that asset class, stock prices not supported by earnings, frenzy buying by all and sundry, loose monetary policy, etc are clearly not the case in Nigeria at present.

What’s your projection for 2013 banks year end bearing in mind interest rates and CBN position that banks should bring down non performing loans to five per cent?


Bank’s performance in 2013 will be dependent on their ability to create quality risk assets. This is due to the fact that returns from federal government bond instruments, which accounted for a significant percentage of their income in 2012 would likely decline due to continuous pressure on bond yields. The challenge for banks is therefore to identify and book quality risk assets. On interest rates, I think that rates will trend southwards in 2013 due to reduced federal government borrowing and retirement of some FGN bonds. The limited number of quality risk assets and decline in the supply of alternative investment instruments will compel banks to moderate the pricing of good quality risk assets, hence a reduction in net interest margin. In effect, banks will in 2013 depend more on non-interest income to sustain or improve on their 2012 performance.

How possible is this for banks to comply with?
It is possible for banks to keep their non performing loans to below the CBN target of five per cent of their loan portfolio provided they can manage the pressure to grow their revenue even in the absence of quality risk assets. The shortage of quality risk asset and the pressure to meet profit targets are the factors that compel banks to book weak credits which in turn lead to non-performing loans. Luckily for the banks, they can now clean up their delinquent loan books by offloading them to AMCON.

How do you see the 2013 budget impacting on the Stock Market?
I think that the 2013 budget will have a positive impact on the capital market. For instance the expected decline in interest rates occasioned by more prudent fiscal management and reduction in stock of government debt instruments will encourage local portfolio managers like the Pension Fund Administrators to restructure their portfolios in favour of equities. This will lead to further rally in equity prices, which will in turn spur activities in the primary market. Lower FGN bond yields will also encourage more sub-nationals and corporates to seek for funds from the capital market through the issuance of state and corporate bonds.

How challenging has business been in the last few years?
I will say that the Nigerian business environment has been quite challenging in the fast few years. This was due to the fact that banks which should facilitate business transactions were instead busy de-risking and de-leveraging their balance sheets in their effort to save themselves from the global financial crises. Consequently, the supply of credit to the private sector has been extremely low, with the exception of few blue chip companies. Even when the credits were available, they were priced beyond the economic returns of most businesses due to the crowding out effect of Federal Government borrowing at rates sometimes above 16%. Fortunately, this trend is beginning to reverse in the second quarter of this year.

Who are your role models?
I don’t really have any individual I consider as a role model. This is because I recognise that God has wired each individually uniquely such that it is impossible to be someone else. That does not mean that there are not people I admire some of their attributes. For instance, I admire Nelson Mandela’ s tenacity of purpose even in the face of personal discomfiture and his ability to let forgive those that incarcerated him. In effect, I admire the good attributes of great people but there is no one individual that I will like to be like because each individual comes with strengths and weaknesses.

What is your favourite sport?
My favourite sport is boxing. I enjoy the courage, strategy, tactics, endurance/perseverance that great boxers exhibit. I also look out for the ability of the human mind to rise above the physical body in very difficult fights.


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