Amolegbe: Investors Should Overcome Fears of 2008 Stock Market Crash

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Mr. Olatunde Amolegbe was recently sworn in as the President and Chairman of Council of the Chartered Institute of Stockbrokers. He spoke to Goddy Egene, on his plans for the institute and other sundry market and economic issues. Excerpts:

What thoughts are upper most in your mind regarding repositioning the Institute?
The office of CIS president is a continuum, so I see it first and foremost, as an obligation to continue the good work laid down by my predecessor. Secondly, having been a principal officer in the last four years, I have definitely garnered sufficient experience to be able to construct an improved roadmap which will be gradually unfolded in the coming weeks and months. We are taking CIS to the next level in all aspects. Examinations, training and advocacy, but we also want to carry all our internal and external stakeholders along in everything we do. In more specific terms, we will put forth effective strategies to properly and adequately communicate the latent brand strengths of CIS to our external publics. Most people still do not know that a CIS-certificated stockbroker can do much more than trading on securities. We are the most skilled and intellectually equipped investment and financial experts you can find, and this applies everywhere in the world. The CIS training and examinations curriculum is one of the most rigorous, robust, and productivity oriented in the financial industry.

There are some banks in Nigeria today where a very high percentage of the top management is made up of CIS trained and certificated members. Secondly, we need to get the public, especially the younger community, to also know that CIS has a specialist / stand – alone certification system which gives our students that very important option, with significantly reduced learning time, albeit with the highest quality obtainable anywhere in the world. This covers fixed income securities dealing, commodity trading, financial advisory functions, market regulation, primary markets, etc. It is really comprehensive. For those who desire to cover the entire capital market space, our regular professional examination programme is still there and even much more improved in line with contemporary world class standards. The institute has always been a trailblazer in the use of technology. Recall that we pioneered the use of computer-based examinations and the current global environmental challenges have only justified our position in that regard.

In my tenure, we will significantly upgrade the availability and use of technology in all facets of the institute’s activities. Another very important area is our pursuance of the Chartered Institute of Securities and Investment (CISI) Bill, which of recent, appears to have been grossly misunderstood by some of our partners in progress in the financial system. One of the reasons the Bill has not been finalised is that we deliberately, from the onset, made it a point of duty to carry all key stakeholder groups along in pursuance of the Bill, which in itself was painstakingly crafted in the best interest of the Nigerian capital market (NCM) and the economy. The reality is that, for the lofty intentions of the original CIS Act to be achieved today, there is need to update its provisions holistically, bearing in mind also the general state of development of the NCM and economy. Economic and market advocacy is generally a priority area for my team. Having said all this, however, the fact remains that for my team, it is not so much a “transformation” as it is a “continuation” of the well thought out programmes that I was part of under my two immediate predecessors.

Given the challenging operating environment, many operators are finding it difficult to survive. In the face of this, what is CIS doing to support its members?
We fully understand the operational challenges that many of our members have been going through since the global financial crisis that hit Nigeria in 2008. It is the urgency of removing the observed environmental impediments and creating a more conducive operational terrain that the Principal Officers made advocacy work top on their working agenda in the last years. We have additionally, upgraded our Continuous Professional Development (CPD) programmes using the online, virtual format. As our members can testify, Council, a couple of years ago commenced a policy that ensured that every CIS member is able to attend at least one world class CPD every year without expending too much money.

We have initiated significant advocacy efforts to get all relevant stakeholders to make policy contributions towards injecting adequate liquidity into the equity market, so that both the primary and secondary markets can return to stability and growth. Even the Central Bank of Nigeria (CBN) and the banking system have a role to play in this. Working together with our partners, the Association of Securities Dealing Houses of Nigeria (ASHON), we have even developed a regulatory template that should enable capital market operators (CMOs) benefit from some of the liquidity privileges of the CBN, while improving on the current licensing regime in the market. We have been consistently advocating that the issue of recapitalisation be put at bay until sustainable stability is achieved in the market. That is another way of advocating for the good of the market and consequently our members.

It is obvious that the stockbroking profession is not being seen as very attractive at the moment due to stiff competition from other investment opportunities. What can the Institute do to make the profession more attractive especially to the young ones?
Contrary to the impression that some sections of the financial ecosystem are trying to create, there has always been competition, and a healthy one at that, in the financial system, and even the capital Market. The term “securities and investment” is more definitive of the work of CIS members than “stockbroking”; so, that is one area of misunderstanding that we have been trying to address. Even the narrow meaning that limits the scope to securities trading is in itself a very large, useful, and demanding area of the financial industry, especially when you consider the two markets – primary and secondary, and the gamut of fixed income, equity and derivative instruments – together, which most lay people do not usually take note of. Beyond that, what we are even letting the public know is the scope of stockbroking, in the context of the CIS curriculum goes far beyond securities trading and this is attested to by the CIS Education curricula, which covers virtually all areas of the securities and investment management business.

It is an all-round investment management and advisory experience and chartered stockbrokers can function productively in various business sectors, including manufacturing, oil and gas, banking, academia, and even very much so, in government. So, we have been engaging the youths extensively, to the extent of even instituting a national capital market quiz competition and debate which are now very popular in our tertiary institutions. In addition, to enhance the propagation of information to the public effectively, we have instituted a scholarship programme for financial journalists in Nigeria. Journalists have always been very dear to us and we see them as partners in progress as far as four capital market literacy drive is concerned.

The Nigerian Stock Exchange (NSE) is being demutualised, what are the implications for the exchange itself and other members of the capital market ecosystem?
Demutualisation is another global trend that our market has to be part of, and so far, ASHON has done a very good job of representing the stockbroker community in the engagements with the NSE. We believe that the arrangement is progressing well and our members will get a reasonably fair deal, through their dealing houses. Essentially, demutualisation will enhance the operational efficiency of the exchange itself and enable greater degree of business expansion, which should ultimately benefit the dealing houses and their individual representatives. Post-demutualisation we see the exchange becoming nimble and introducing new and exciting product and services which will be traded by our members .This has the potential to create new income lines for them and also provide additional multiple investment outlets for the investing public. We look forward to this period with great expectations.

How has the COVID-19 pandemic changed the operations of stockbrokers and what has been its impact so far?
The first benefit of the current situation is that everyone – brokers, investors, and regulators – now accept that technology is the way of the future. It is inevitable that most of the innovations put in place now will have to be sustained even after Covid-19. Issues like remote trading, e-payments, e-IPOs and so on will become the order of the day. At CIS we have gone full swing into online training, and similar innovations will soon be incorporated into our examinations. However, investment in technology can also be expensive, so we call on government and private organisations to support CIS with grants to help us keep pace with the rest of the world. Our Continuing Professional Development (CPD) curriculum has already been reformatted to take into account the current realities while our members have stepped up their skill acquisition in the area of technology. Please note however that we had always been prepared for this type of situation, as evidenced by the seamless transition to total remote trading during the lockdown.

Companies have been releasing their second quarter (Q2) results, what is your reaction to the ones so far announced?
The Q2 was basically a “lost” quarter due to the Covid-19 lockdowns which showed in the results of most of the real-sectors’ companies since they were not able to sell at the pace they used to. However, telecoms, pharmaceuticals and banking companies fared better as most people concentrated on caring for their health and also had to rely on telecom services in other to keep functioning. As the economy starts to open up my expectation is that things will start to return to normal. However, significant macro-economic issues still remain that could constitute a drag on company performance.

Based on the corporate results and the existing economic headwinds, how do you see the outlook for the second half (H2) of the year?
You will recall that the economy recorded a slight positive growth in gross domestic product (GDP) in the first quarter of the year and subsequently nosedived into negative zone (-6 per cent) in the second. I think it is most likely the country will return to recession in the second half of the year, but that is due to the global realities of the Covid-19 pandemic. Virtually all countries have had their economies negatively impacted by the environmental situation, so it’s not peculiar to Nigeria. The lockdowns of the Q2, coupled with the fact that the Covid-19 pandemic is still there, means economic performance will remain down facing in the second half of the year. Unemployment will worsen, inflation is likely to be slightly higher, and foreign exchange rate higher due to the situation with the oil market. The World Bank itself has predicted a worsened outlook for the rest of the year. However, we must remember that this is a global phenomenon. The critical action now should be to seize on the new opportunities that are emerging in the business world to position our organisations properly for the new world order.

At the CIS, just as we did during the last recession in 2017, we are already putting up a template to assist government with informed policy recommendations to return Nigeria back to growth at the shortest possible time. Our forthcoming national workshop, like the last one held in Abuja in 2017, will substantially address this issue.

No doubt the difficult economic environment, compounded by the COVID-19 pandemic may further weaken low patronage of stock market by investors, what will be your advice to investors at the moment?
May I remind our friends in the investor community of the time-honoured rule of stock investment, which is “buy low and sell high.” I will add another famous quote for investors; “be greedy when others are fearful and fearful when others are greedy”. Clearly, and generally speaking, this is the time to buy, and discerning investors worldwide are doing just that. However, please remember to always consult your stockbroker for proper investment advice. This is extremely crucial.

The Covid-19 pandemic will continue to impact on investment decisions for some time, which sectors of the economy are likely to be less affected and why?
Thank you. As we have seen, the entire business landscape in the world has been re-ordered by Covid –19. The travel industries, for example, have been severely and adversely hit by the pandemic. On the other hand, players in the technology sector are having a bumper harvest, so to speak. Nigeria is not an exception. I observed that the fashion industry has re-invent itself and is seriously cashing in, designing and supplying breathtaking face masks etc, while the entertainment areas that have to do with crowds have been negatively impacted. The pharmaceutical industry is obviously a beneficiary of the current situation, while banking may not be as fortunate. If you visit your stockbroker, you will get more detailed and precise investment recommendations.

Where do you want to see the institute at the end of your tenure?
I am positive that, by the grace of God, we will be able to take CIS to the next level. I will hope to leave behind a much more prosperous institute arising from the improved business profile and brand valuation that we are going to create in the next two years. When I was a youth, stockbroking was the profession of choice for ambitious young Nigerians, and there is no reason why we cannot return to that situation before I hand over. The latent value of the profession is there, but we need to convince investors to shake off the fear they have held since the 2008 global episode. By the grace of God, we will get there.

Can Nigerian securities dealers trade in other markets apart from Nigeria?
Absolutely yes! Records are there to show that our members find it very easy to get relevant jobs when they relocate abroad. We have members operating in financial markets in Europe and the United States, among other places. The Chartered Institute for Securities and Investment in the United Kingdom (CISI UK) saw the high quality of our members and decided to accept them into their Associate membership without further examination. We have strong working relationship with the CIIA in Switzerland also. So, generally, CIS membership is one of the best routes for any young Nigerian to forge an international career in the financial industry.