Nigeria is in dire need of private equity to de-risk the economy, writes Sola Oni

Mr Olutola Mobolurin,  past President of Chartered Institute of Stockbrokers (CIS) does not talk often. But he is highly respected in the Nigerian Capital Market for being daring in expressing his opinion on any issue. His body language carries a high image of self esteem. This probably earned him the accolade: the Lion of the Capital Market. Who will dare the tiger?

In the early 90s when I was reporting the market for The Guardian, Mobolurin, the founder of Capital Bancorp and current Chairman, NASD PLC was in the pantheon of stockbrokers whose analytical argument on the trading floor of The Nigerian Stock Exchange (now NGX) could elicit share price movement upward or downward. Other stockbrokers in the same pedestal include Messrs Oladipo Aina, Mike Itegboje, Henry Olayemi, Dipo Williams- they were all past presidents of the Institute and a host of others. It was the era of the Call-Over or Open Outcry, a manual trading system where  stockbrokers haggle on share prices. Everyone must defend his basis for share price movement to win the heart of the Chairman of Call-Over. We journalists of those days benefited a lot from the daily classical arguments on the floor.  

In 2018, Capital Bancorp PLC, clocked 30. With this unique milestone in a harsh operating environment and singular efforts of Higo Aigboje, the Chief Executive Officer of Capital Bancorp and his right-hand Staff, Mobolurin could not escape my engaging exclusive interview on his views on the Nigerian Capital market, the economy, and the way forward. Mobolurin, an Apostle of Investment in his 2018 crystal ball, succinctly analyzed the market trends and four years after, his views do not only remain timeless, but specifically relevant to the current situation in the Nigerian Capital Market and the upcoming general election. The septuagenarian has always believed that Nigeria is in dire need of private equity to de-risk the economy, a euphemism for calling Hedge Funds to rescue.  Excerpts:

Optimism about the Nigerian Capital Market: “Today, valuation is down for most companies. This is always the best time to buy. However, don’t go into the market by throwing a dart on a list of companies that wherever the dart falls that is the company you will buy. Study the market. The market may be undervalued. Not every company is undervalued. There are still companies that are overvalued based on prospects into the future. If you have lost money on a company that has a future, buy more to reduce your average cost of holding. This is because, when it bounces back, you will still make more money and I believe that this market will bounce back.

Stark Reality of the Stock Market: “My hope is that we would get our politics right and we would get our economy right. We need to become a more productive economy, and everybody will prosper. However, everybody must understand that the stock market is not a savings account, if you want savings that you can fall back on in an emergency; stock market is not for that. Go and buy a savings bond or a similar financial instrument. You can trade that at any time. Even government securities fluctuate in prices so you may lose money. Go and put some money into your savings account first. The stock market is for long term investment for a person who wants to make legacy investment. The market still represents the best way. But you don’t invest in the stock market and go to sleep because fortunes of companies change. The winners in 1977 are not the winners today. You need continuous monitoring. If you are not a professional investment adviser, get one. You will be glad you did.

Moment of Truth on the Nigerian Financial Market: “The financial system needs an overhaul. We need to look at it holistically and decide on how it can best be structured to serve our economy. The system is not serving our development needs. Our system is not fit for purpose. The Germans after World War II evolved a system that served their rapid economic growth. We are imitating developed economies and we are doing it poorly. We are not saving enough, and we are not channeling the right kind of capital in the quantum needed to entrepreneurs to trigger the kind of growth that will transform the economy.

Government’s penchant for Loans: “Loading businesses with loans do not make for rational financial structure rather, we may just be over-leveraging companies and increasing the risk of business failure. AMCON portfolio, I am sure is full of companies with inadequate risk capital. There are other ways we can channel savings into medium sized and large enterprises. We need to get capital into the hands of those who have ideas. Like I always say, let us enable a thousand flowers to bloom. We cannot satisfy the consumption needs of 200 million people because of importation and expect to prosper.  We must get this economy back to work. There are too many things we can produce that we are not. All those with ideas should not be hampered by only lack of risk capital. No bank will lend to a business with no risk capital. We were talking about where we can get savings.  Let us reduce some of these redundant taxes and put them into venture capital or private equity funds which will drive enterprises and increase the tax base. It will strengthen the banking system because the more equity you have in companies, the lower the risk of that business failing and the higher the possibility that the business shall pay back the bank loan. In essence, we can set up enterprise funds that would de-risk the economy.”

Oni, an Integrated Communications Strategist, Chartered Stockbroker and Commodities Broker, is the Chief Executive Officer, Sofunix Investment and Communications

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