For a financial institution that grew from a mere asset management subsidiary of Guaranty Trust Bank Plc to become a financial supermarket, business has been good for Investment One Financial Services Limited. The company’s sojourn in the past 10 years has, however, not been without its challenges, especially operating in Nigeria, which is a peculiar investment climate. In this interview, the Group Chief Executive Officer, Investment One Financial Services, Nicholas Nyamali, speaks with Kunle Aderinokun and Bamidele Famoofo, about how Nigeria remains the preferred investment destination, the ease of doing business, benefits of investment and the role of technology in the company’s success. Excerpts:
What is your view about Nigeria’s investment climate?
As an organization, we view Nigeria as a country with significant potentials. The human capital, agrarian environment provides opportunities across the investment space. We also recognize that there are challenges…macroeconomic challenges, infrastructure, challenges in the social sector but as financial people we believe the principles of risks and returns will always show you the direction to go. And the opportunities outweigh the risks in Nigeria. In our view, Nigeria still remains the investment premier destination in Africa. The population of about 200million cannot be found anywhere else in a single country in Africa. There is an emerging middle class with a growing consumption capacity. So whether you are coming as a direct investor yo produce goods and services that people can consume or whether you are coming as portfolio investors in the power or transport or somewhere else you hope to develop. So an investment destination we still think Nigeria is the best place in Africa.
How would you react to a recent report from the World Bank that says the future is bleak for Nigeria in terms of economic growth?
I think the World Bank is doing its analysis based on current statistics and there is basis for the some of the factors they have put into consideration, for instance, the current Debt to GDP ratio, the assessment of the political risk, the ease of doing business, the issues of corruption among others. These current state of things do not give confidence for the future but we believe that while this analysis may have some elements of accuracy that we cannot deny based on the facts, if you look long term, and like l did say, based on the analysis of risks and returns, you would conclude that despite the risk both short term and like you may say, bleak, the returns opportunity despite the bleakness of the future outweighs the risks.
Yes, the outlook might appear bleak according to the World Bank but the returns opportunities still outweigh the risks. Please, this is not t view to say that there are no challenges; the government is trying to improve ease of doing business as doing business in the country is tough. Foreigners need to have assurance on property rights, the economic direction of the country, institutionalization of government policies….that is a big issue that l hear when l have to talk to foreign investors. Foreign investors want to be sure that the decisions that form the basis of the policies that informed their coming into the country to do business today, remains valid in another five years when there is a change in government.
Those are the challenges people have and we do not imagine that the assessment of the World Bank is not right but may be because we are Nigerians; we look beyond the challenges and we ask ourselves the question like if l am a producer and l want to go to Africa, which market represents the ability to consume what l want to produce?….. I was in a conference in New York and the editor of an economic magazine was speaking on the analysis of Africa as an investment destination, he concluded that as unpleasant as the situation may be, Nigeria still remains the best, basically looking at the issues population. Yes, we have social challenges in the country, for instance, the insurgency in the North Eastern part of the country and he said, ‘forget about that and focus on what l would call the Lagos economic zone which means the people in Lagos and its neighbourhood which mainly is Ogun State and a bit of South East, those who buys the goods sold in Onitsha and Aba. They actually take their value from the goods and services sold in Lagos.
The population in that space is much as 50million and it is as big as the population of South Africa and Ghana. If you disregard the rest of the country and focus on what we call the economic zone i.e parts of the country that benefits from the economic activities that takes place in Lagos. You cannot ignore such a population and the economic activities that take place in that space. So, from the producers perspective there is no equivalent to Nigeria in Africa. You may argue that fantastic things are happening in countries like Botswana and Rwanda but how many people are there. The population in those countries can’t match Lagos State alone. What can you produce that Lagos can’t consume? And then if you go beyond things like production, for instance you are in the power sector, ….l agree that the current arrangement do not give you as an investor the courage to come in, but if argues that if anyone will come into with a different approach like the modular system, the opportunity abounds.
Solar is an example where you provide the panel and inverter at the back attached and you have the market. But if you put up a power business in South Africa, that business does not exist there because there is already power but it is not the same thing in Nigeria because there is no power. You go to other countries where power is stable there is no opportunity for you there because the power system is already efficient. What we call deficiencies in our country are actually opportunities. We call them problems but investors call some of these problems opportunities.
But l agree that if you look at the macro to the political environment, investment is difficult here but these are the challenges we must tackle. But the fundamentals of investment is economic, population, the degree of deficiencies in the system. These are things that give opportunities for investors.
Please talk about the ease of doing business?
Ease of doing business is the term that describes the factors that foreign investors will consider before they come into a country to do business. By the time this present administration came into power it looked at how the country of Georgia was able to improve significantly how business is done in that country and the office of the Vice President was charged with the direct responsibility to improve on ease of doing business in Nigeria. Now you can go online and register your company in Nigeria, that is clearly a significant change that we can see. But l think ease of doing business goes beyond the practical step like l want to start a company. Furthermore, you can get Visa on arrival in Nigeria, some give them credit for improving things. But l thinks the aspect that is still missing and which we must something about very urgently is the perception of the country in the international community. No matter how good the economy of a country is or the level of improvement it records in ease of doing business, her perception overrides every other things.
The investor in most cases would not bother to check the realities but what he uses to make decision is his perception. I was in a Conference sometime in Europe where the talk was about the challenges that limits investment to Africa. Nigeria was used as a case study and the conclusion was that Nigeria is not a good place to do business. They cited corruption and the report of Transparency International on the country as their proof. I reacted to this as a Nigerian and l simply asked the about 300 persons at the Conference whether they have visited Nigeria at any time. Nobody. Not even one of them has done business with a Nigerian. So l asked how they came to the conclusion that Nigeria is not a good place to do business and they simply said it was based on report and not practical evidence. So there is an image if the country that has been polluted. While that image may not change overnight, once it is created, it perpetuates itself even it is not founded on reality.
People have a view of the country that represents a lot of negativity and a lot of investors hold that view and they translate it to their colleagues. So the perception story is one thing that must be given a serious attention as part of effort to improve ease of doing business in the country. The past governments from 1999 until the inception of the present administration have made attempts to improve the image of the country and l think this present government must restart that process very urgently through direct engagements and also using government agencies and public relation experts to work on changing the negative perception of the country in the international community. Until we do that we are dealing with a situation that is hindering people from seeing some the changes that have occurred in recent times. This is not to say that there are no challenges but what l am saying is that the views are significantly not in line of the realities on ground today.
Investment One celebrated its 10th anniversary recently. How did the journey start and how far have you come?
Investment One started as GTB Asset Management, a subsidiary of Guaranty Trust Bank. The journey started with a conversation with the late Managing Director of GTBank, of blessed memory, Tayo Aderinokun. And the background to that conversation was that GTBank has sold its stake in ARM (Asset Resource Management Limited). At the same time, the investment environment, the stock market was booming, this was around 2006 and 2007, and GTBank was not present in the investment space. They had AXA Mansard what was then known as GTB Assurance in the insurance space but nothing in the capital market space. Talking to the CEO of the bank at that time, the conversation was there will come a time when the average Nigerian in an emerging middle class will need a professional firm to help them manage their investments. Let us start a company now that will present quality service to these Nigerians in the future, so that the average Nigerian ( and he defined it by saying the professional, the middle class and even the house wife) can find a firm they would trust to help them manage their investment.
He also said we will change the investment landscape just as GTBank has been a catalyst for change in the banking space. So we started this company very clear in our mind what we want to do – the average Nigerian will find a partner to help them manage their investment. Our mission is to help our customers to achieve their investment goals, and we have built on that in the last 10 years. We started in 2008 which was when the stock market collapsed. So we are starting operation when things were going in the opposite direction but we persevered because it was an operation to take a short term opportunity presented by the booming market at the time the stock market was booming. But as the market recovers and stabilizes over the years we kept to our mandate. By 2010, when the Central Bank of Nigeria came up with the policy of Holding Company, GTBank decided not to go for the Holding Company structure but divest from its subsidiaries.
We did a management buyout and we changed the name of the company to Investment One. We made up our mind to transit from an asset management company to a financial services company. From doing asset management we have moved to offering a range of ten (10) services which includes pension, wealth management, venture capital, real estate business. We also have a financial house. We are the middleman between investors who want to invest in stock and the stockbrokers. Our current business as a financial services house is to connect investors to the different asset classes for investments. But l need to also to be clear about the types of investors.
We service foreign investors who need local assets in which to invest their money. We also deal with local investors who want access asset classes in foreign markets. You can stay here and we assist to buy stocks or other fixed income instruments from foreign markets. We won’t to go through the process of opening an account and the likes to get your investment done. We also have investors who sit outside the country, institutional investors who want to access assets in the country. We provide that connection.
How profitable has your business been in the last years and what challenges have you faced?
As a company in the last 10 years, the success story l would announce is that what we’ve set out to do we have been to achieve. Five years down the line we looked back to what we set we were going to do in line with our five years rolling plan and we found out that we have been to achieve the goals we set. We manage over a N100bilion for over a 100 thousand customers. Those were significant achievements in the 10 years space that we have done business. Has it been worthwhile? I guess it has been. Of course, there has been challenges in the economic environment. In the past few years, some of the challenges we had was customers who have saving for a long time coming back to say ‘you know what?, l need to pay school fees.’ Because the economy is not doing well they are selling assets to meet their daily needs. So rather than maintaining the culture of saving, they are selling assets.
That was a painful experience but that was the reality on ground at that time. We have invested a lot as company to educate Nigerians on the need to save and how to invest their money. We organize classes to train staffs of companies. We do it with cooperatives and also in Universities in the western part of the country. One of the core classes focus on the value of compounding. You make a one-time deposit of N1million with an investment manager who gives 20-25 percent returns. If you leave that for between 20-25 years, you will end up with about N264million. You don’t need to save as much as N10, 000 or even N1, 000 per month. With the new products we are coming out with, you can save as low as N100 every month through a direct debit and over years, you would be shocked what you will get from that.
We teach, encourage and set up to make it work for you. Another challenge was the effect of recession which made assets value to go down which makes it difficult for the asset manager to to find the right investment that will yield the kind of income which the investor wants. We believe in the fundamental principle that investment is a long term thing. The economic situation poses challenges today but we look long term. For instance the prices of properties are depressed in Lagos today but at the same time, there are whole numbers of young people who have finished youth services and have come to Lagos for jobs. They will need accommodation, and that tells you that in the long term there are opportunities in the market to make money but sometimes customers don’t have the patience for long term. So, we have had challenges from the environment, customers and occasionally structural, infrastructural.
But over the years we have weathered the storm and today we use technology to offer better services to our customers. Also, when we bought the pension license in 2013 at the time of recapitalization, we had a meeting and we were told there will be an open window. We entered the pension space with a clear understanding that we will go in and help investors who want to invest long term. That open window has not applied in the last five years. And so you find out that as a business you invested in a space which does not materialize. That has stunted our growth rate in a way because we thought we could do better in the pension space where we can pull hundreds of customers which can translates to some millions of funds we manage. But notwithstanding, as group we have exceeded a N100billion and a hundred thousand customers.
I heard you advocating technology as the driver of businesses in the future. How have you leveraged Fintech to drive your business so far?
Let me start with the use of the word Fintech. Fintech as you know is the intervention between finance and technology. It’s a platform which you can use technology to deliver financial services. We see countries like Kenya using M-Pesa to do far more in this aspect compared to any other country. In Nigeria, we have seen a lot of changes in this direction too. May be we forget events too soon. You would remember the days of tally number in Nigerian banks, where you pick a tally and wait endlessly to be attended to in the bank but technology has changed that. You don’t queue in the banks anymore. There were days when you go to the exact bank, where your account is opened to do transaction because there was no on-line-real-time. I remember Friday used to be the busiest day in the banks in those days because everybody was rushing to withdraw cash that would be spent at the weekend, but today, ATM means you don’t need to get to the bank before you get money. Even more significantly, sometimes, we don’t see the change in the values.
For instance, people don’t carry cash anymore, but simply put their money in the bank and carry cards, which has to a long extent curbed the menace of robbery on traders. These are what Fintech has brought clearly in the industry today. Now, it has gone beyond you carrying your card, but with just a code and with your phone, you can do money transfer without approaching the ATM. So, we are becoming cashless.
The second value that l see is not just improving the processes, but also extending the reach. For us at Investment One, your question is what we have done with technology and how it has impacted our business? Let me say we have done several things. We were the first to introduce what we call a trading simulator. It was a programme we developed with the intention of aiding our investment education outreach. We encourage students and workers. This system can ask you to trade on the stock exchange with real time prices and stock movements without using real money. As l register, it may decide to give three million naira asking me to decide how to invest. So, when you make investment decision and at the end of the day, you lose money, that tells you that is not how to make investment decision. We have realised over the years that those, who win in this game are those who are patient. Those who go in and out are not able to outperform those who waited over a period of time. That game has taught investors how to make investment decisions while some may just choose the option of going for an investment manager rather than do direct investment.
But we have gone beyond that. We have also gone to the level where we use Fintech to reach more customers and deliver to them better trading experience. A few years back you must call your trader when you want to buy shares from the stock exchange, but now the market has extended trading time and also allows people to trade remotely. But we have gone beyond that too. Investment One has what we call Easy Trader. It is an application thatpermits customers to trade shares directly on the exchange without the assistance of a stockbroker. We have created platforms on your system to help you fund your account instantly. So, in five minutes you can fund your account, and immediately you are buying and selling shares from the floor of the exchange on your mobile phone. When we observed that this was only available to customers who have smart phones and data, we created a system that will allow you buy and sell shares through USSD code. So, text message trading was introduced to allow you trade with sms on the exchange without making any request to our traders. Our system is automated and converts your text messages without human interference. The sms goes into a code and links your account with us and buys for you or sell on our internal trading machine with the exchange. We have taken customers experience to a different level where your willingness to buy and sell is at your own convenience. Our mutual fund business also usesthese applications successfully.
What stands your company out amongst its peers?
I will use the word trusted partnership which means we are out to help you achieve your investment goal as our customer. We are not in business to make money…l know that sounds awkward. But we believe if we help you succeed, in the process, we will make money. If you don’t succeed, in the long run we would lose. If customer believes that they can find an investment manager who has their interest at heart, the confidence to invest would be more and that is what we have come to offer to the market. People need someone they can trust, if you provide the trusted partnership they have the confidence to put their funds in your hands. A lot of people are not ready to trust their hard earned money into the hands of other people people of the problem of trust. So, everybody wants to do their own things by themselves. But what we are gone out to do is to provide that trust. Maybe we have not gone out enough to communicate this to the people. Perhaps we have not shouted it loud enough but Investment One is out to help our customers achieve their investment goals. The goals you set for yourself we will help you achieve it.
You are here at 10, where do we expect you to be in the next five to 10 years?
In the next five to 10 years, this company would have gone through a significant transformation. We would become a technology company selling financial products. It shows the extent to which we see technology playing into what we would do in the future. It does not change our mission or our business model which is investment but it changes how that services would be delivered. It will enable us reach younger people and more people outside the country. It would provide convenience for the customer. We want to be in the leadership in the country to the extent that we have seen technology drive businesses across the globe.