Cordros Capital Limited is a leading Financial Services Company and is licensed as Brokers/Dealers by The Nigerian Stock Exchange (NSE) and Securities & Exchange Commission (SEC).

Cordros Capital offers a broad range of services to a diversified client base that includes private clients, small businesses, financial institutions & corporations and high net worth individuals”.

(Source: Company’s Official website)

In this interview with PETER OBIORA Online Editor at InvestAdvocate, Wale Agbeyangi, Managing Director/Chief Executive Officer of Cordros Capital Limited, (Member Nigerian Stock Exchange) in Lagos Nigeria reviews the year 2011 performance of the Nigerian Capital Market and outlook for year 2012.

Other issues discussed include how Market Operators can address the issue of lack of Market confidence on the part of investors, the Central Bank of Nigeria reforms and its impact on the Market, the NSE seeking forbearance on Margin Loan by Stockbrokers, pressure on Telecoms Companies and other Firms operating on the other interest sectors of the Nigerian Economy, and Nigeria emerging an investment destination to Foreign Investors among others. Excerpts:

Review of the Nigerian Capital Market in year 2011

The Market went down to as much as 17 to 18 percent (17-18%) last year, and the Market does not exist in isolation. There are so many reasons with what has happened. One is the Banking crisis, throughout last year; the Central Bank of Nigeria (CBN) was busy trying to solve the problem with the Banking Sector. Throughout last year, we saw Asset Management Corporation of Nigeria (AMCON) also trying to provide buffer for some of the Banks.

So the Market was brought down by a lot of crisis in the Banking Sector and without a Banking Sector, it is difficult to have a thriving Stock Market in Nigeria.

Secondly, 75% of the volume of trade in the Stock Exchange was from the Foreign Investors based on the statistics released to us $3.125 billion; equivalent of 75% of the value of transaction in year 2011. These are the ones captured; there are the others that are not captured; so we are talking of well over 75% Turnover value from Foreign Investors.

Also, do not forget that in year 2010, it was more than that; I think we had about $5.0 billion. The decline can also be attributed to the crisis in the European Market; the Greece problem, the potential danger in Spain; banking crisis in Europe and America; so a lot of investors who hitherto would have found this Market a good place to do business held back. Of course, the continued lack of confidence in the Market by Local Investors is also a very major concern to some of us who are Operators and why we believe it’s going to take some time for this Market to come back.

To a large extent, I still believe that this Market provides a veritable opportunity or avenue for Investors; especially long term Investors. Therefore, if you are an investor who is not looking at six months or one year; just like a typical Nigerian Investor who wants to double his investment in that short period of time. But for an Investor who is looking at a good return on his investment over a long to medium term period, I think this Market provides that very good opportunity at this particular point in time.

EDITOR’s NOTE:

“From the 2011 Market Snapshot in the NSE’s 2011 Market Review and 2012 outlook, Market Capitalisation of Equities declined from N7.92 trillion ($53.40 billion) in year 2010 to N6.54 trillion ($43.06 billion) in year 2011 indicating a decline of -17.42% in the review period” .

How can Market Operators help in addressing the issue of lack of confidence in the Nigerian Capital Market?

The Nigerian Stock Exchange, Market Operators and the Stockbrokers Community have mapped out a lot of strategy to combat the seeming lack of confidence in the Market on the part of Local Investors. We believe that we need to embark on massive investors’ campaign, education and training. We are starting the first leg in February 2012 in Lagos Nigeria. We are going to visit all the six geo-political zones of the country; appealing and sensitizing investors on the value inherent in investing on a long term basis in the Nigerian Capital Market. For a start, we have been instructed to bring 10 of our most important clients; especially the Local ones to an Investors Clinic and we would continue doing that from time to time. Even on an in-house level, we have been told to engage our clients so as to make them see the value of investing in the Capital Market. Also, people will see various Television adverts, drama and aggressive marketing campaign in the media any moment from now; this is to stem the tide of lack of confidence investors have in the Market over three (3) years ago.

Don’t you think that the CBN’s reforms will scare foreign investors from our Market in year 2012?

I think for investors who are looking at value, and are in for a long term, the risk that they see, provides a bundle of opportunities for them, the risk that you see, to some is an opportunity. Remember the crisis in Libya, when everybody was running away from Libya, some investors that went there during the crisis; when their Market had collapsed made so much money thereafter. There were a lot of crisis in the system, but that actually presented a bundle of opportunity for valued investors; we are very close to a lot of them and we know what is going on.

As I speak with you, we have just signed a client from one of the North African countries and this is the first time we are going to have such a client in our Firm. There are investors who see Nigeria as a bundle of opportunity. However, whatever happens here is not strange, other Markets are also struggling the way the Nigerian Market is doing and I don’t think it’s really a major crisis.

What percentage of valued investors has taken position in the Nigerian Capital Market since the downturn started?

Like I said earlier, last year alone, 75% of the trade that went through the Market came from Foreign Investors. They are mostly long term and we think they will do so much more this year. If you consider the effort we have mapped out to get Foreign Investors, more will definitely come to the Market, also the efforts we have put in place to sensitize the Local Investors, I believe year 2012 portends a window of opportunity for everybody.

NSE seeking forbearance on Margin Loan by Stockbrokers

It will be a welcome development because it will offer a lot of Stockbrokers the opportunity of liquidity they do not have. I believe the modalities will be worked out by AMCON, Federal Ministry of Finance, the CBN, NSE and the Brokers representatives.

On National Association of Securities Dealers (NASD)

I think it’s just another Market where Over-the-Counter (OTC) stocks will be traded. You know we do not have a Market for trading Over-the-Counter; just like the Private Placements. Some of the good Companies like MTN, WAMPCO, Consolidated Breweries and so on, there will be a Market that Traders will go in to trade those stocks; I think that is what the NASD is all about.

FACT CHECK:

“An association of over-the-counter brokers and dealers that establishes legal and ethical standards of conduct for its members. NASD was established in 1939 to regulate the OTC market in much the same manner as organized exchanges monitor actions of their members. One major advantage to membership is that members sell securities at wholesale to other members but at retail to nonmembers. See also Rules of Fair Practice, Uniform Practice Code.

What actions should I take if I feel my broker has acted inappropriately?

Inappropriate actions by a broker should be reported to the office manager. If nothing is done to solve the problem, a complaint can be filed with the firm’s compliance department or the National Association of Securities Dealers. Information about filing a complaint with NASD can be found on the organization’s website, www.nasdr.com”.

Source: George Riles, First Vice President and Resident Manager, Merrill Lynch, Albany, GA

The pressure on Operators in the Telecoms sector and other economic interest sectors to list on the Nigerian Bourse

We cannot force them to come to the Market, it is not possible, there has to be incentives that will encourage some of these Companies to come and list in the Market. We must map out these incentives and push same to them rather than all these talks that these Companies must list. They came to the Nigerian Market on their own, so if they find our Stock Exchange attractive to list; all well and good, they will list.

However, the opportunities must be there, the cost of listing in the Market must be as cheap as possible; the Authorities may probably give them some tax incentives for them to list.

A lot of these Companies took the risk coming to Nigeria to invest; when Nigeria was a place where nobody really wants to come in and invest. We shouldn’t envy their success. What I find wrong in what a lot of Nigerians mounting this pressure are doing is that they envy the success of some of these Companies.

Some others came to Nigeria, and they didn’t do well and ran back. Some went to Ghana and other West African Countries; because the Nigerian Environment wasn’t conducive to them. We shouldn’t envy their success; but rather we should try to encourage Nigerian owned Companies to also come and list. Do not let us bother ourselves envying their success; that’s the perspective I am looking at it. These Companies are also owned by people; WAMPCO have been existed for sometime now and investors of the Company probably enjoyed not less than 12 to 15% dividend yield per annum and nobody has bothered them to list.

These Companies came to Nigeria under all odds and made it and they have employed so many Nigerians, there are so many employment opportunities that came out from the investments of these Firms. Take for instance all the boys we see in traffic selling recharge cards, what would they have been doing? But these Companies have made success of their ventures and have employed a lot of Nigerians; so we shouldn’t envy their success. We lost the opportunity; because what we should have done was when we were selling the licenses, we should have stipulated that within five (5) years or thereabout they are in Nigeria, they have to list; but we didn’t do it. Now we have that opportunity in the energy sector; before they start selling all those Refineries and Power Distribution Companies, the Bureau of Public Enterprises (BPE) and the NSE should come together to work out the details.

EDITOR’s NOTE:

“On Monday November 28 2011, the Capital Markets Committee of the Nigerian House of Representative in a Statement titled “Listing of Economic Interest Sector Companies on the Nigerian Bourse” and made available to www.investadvocateng.com affirms that there is every need to get Telecoms operators in Nigeria Listed on the Bourse of the Nigerian Stock Exchange.

“This sector, with a starting Market of less than a Million in 2000, now caters for over 90 million users.  These telecommunications companies make huge profits from Nigeria and are mostly not listed on our Market” the statement said.

Apart from the Telecoms, pressure is also mounting on other economic interest sectors for its Operators to list; these includes; those in the Energy Sector, Power Generation and Distribution Companies”.

Is Nigeria and other sub-Saharan African Countries a new investment destination at this period following the financial crisis in Europe?

If you look at what is going on in Europe, the window of opportunity for investors you cannot find it there again; even in Asia, the return on investment is going down. Therefore, Africa looks like the next place; especially sub-Sahara Africa. With the Telecom and infrastructure opportunity in sub-Sahara Africa; so this place looks like a good investment avenue for a lot of investors coming from Europe; I will not doubt the fact that it could be one of the reasons why they also look at Nigeria as a good economy to come to.

Your reaction on analysis by Analyst that business will be tough in Nigeria

I agree with that, but I have told you about risk, there is a country risk, Nigeria has a country risk, you either choose to invest here or elsewhere. We have new ventures coming up, Intercontinental Hotel is in Nigeria right now, we have so many new ventures coming up, we see the Hospitality Industry thriving. You take the risk, no venture no gain.

Why are Firms delisting from the Nigerian Stock Exchange?

The development is worrisome, it is not something that one should be trying to justify; but the number one thing is that the Market is free for you to come in an exit. One of the reasons why a lot of company list in the Market is because when they need to raise funds in the Market as a quoted Company, the window of opportunity to raise cheap funds is there; but that is no longer the case for a lot of the Companies.

The cost of raising funds in the Nigerian Market is almost higher than the cost of accessing funds outside the Country. A lot of these Companies are tightly held by Foreign Owners; Nigerian Bottling Company as the case may be is tightly held by their Foreign Owners, the same thing with Pinnacle Point Group; Pinnacle is a South African Company. So a lot of these Companies when they are tightly held, the liquidity is not so much here in Nigeria, they can raise a lot of cheaper funds abroad and if they do not want to continue paying our listing fees on a regular basis, they would look for an opportunity to delist; which I think is worrisome. The challenge is for us to be able to find more Companies who want to list. If we have three that has delisted, then we should look for about 20 quality Companies listing; that will really cushion the effect of those ones that have delisted.

Removal of fuel subsidy and its effect on the Nigerian Capital Market

It is not just a subsidy issue; I think we should just look at some of the constraints that we have seen in the Market for sometime now. We should also look at the Security issues bedeviling Nigeria. This is a serious disincentive   for any investor. If you have observed what has happened in the Market when we came back from the strike, there has been serious downturn, very tiny volume traded. A lot of investors want to be very sure that there is security of lives and properties. A lot of people are been very careful and if we continue with this crisis a lot of investors would not want to invest in the Market; coupled with the removal of the fuel subsidy; the cost of running business by most of the Companies will go high and if they are unable to carry the cost, it means that their profit will go down and what is available for shareholders, will also go down and it will affect the Market.

On Complaint resolution, as a member of the Investigative Panel, what is the number of cases has been investigated and resolved?

The Panel has been very aggressive, in combating issues of infraction in the Market at different levels. The NSE and Securities & Exchange Committee (SEC) and other Capital Market Operators are beginning to have zero tolerance for infraction; I think the sky is the limit for us to be able to combat these issues. We want to go to a level where there will be zero tolerance on infractions and I think we can get there. Also, the Stock Exchange is very serious about Operators setting up Compliance Units. From time to time there are checks without prior notice to Operators. About three times last year, SEC and the NSE visited our Offices to check our books to ensure that we are complaint with the rules and I believe with constant risk management polices of many companies, cases of infractions will be forgotten.

EDITOR’S NOTE:

“The NSE’s 2011 Market review shows that on the 2011 Broker-Dealer regulation, 80% of complaint resolution was achieved”.

Outlook for year 2012 in the Nigerian Capital Market

Just like I said, the Market will continue to be witnessing some of these challenges that we have seen, we are hoping that from the second quarter, a lot of the security issues would have been sorted out; but I believe to a large extent, even with all the challenges we will be facing, before the end of this year, we will witness a lot of recovery.

Outlook for Cordros Capital in year 2012

Last year, with the support of our clients and in year 2011 marking our fourth year in business, we were ranked the 10^th biggest Broker in the Market in terms of value of transactions, we traded well over N32 billion worth of shares and that ranked us as the 10^th biggest Broker in the Nigerian Capital Market within four (4) years and we are hoping to continue in that stride with the support of our client and to continue to improve on our ranking going forward.

Apart from Equity transactions, we are also an Issuing House licensed by SEC; so we have a lot of Corporate Finance Advisory work, we are currently advising Government and multinational Companies. We are also in the Fixed Income Market, trading on Fixed Income Securities like Bonds and Treasury Bills. And we have been very active in all the three aspects of Investment Management and Investment Banking. We want to strengthen our position in year 2012, we want to increase our distribution network aggressively and we with the quality of human resources that we have, I think we are going to do a lot better than we did in 2011.

On Barceló’s and its OTC Window

Yes people have been taking advantage of the OTC; I have done well over 10 million units worth of Barceló’s shares in the last 60 days; trading it through their Legal Adviser. And we are also going to explore the NASD another window of opportunity for investors to trade the Barceló’s shares; because we are very careful of the situation in the Market and so a lot investors have been approaching us not list those shares; because they do not want to see diminution in the value of their investments; so we are careful of that and in year 2010, the Company paid dividend and in year 2011 we also believe to a large extent that Barceló’s will pay dividend; we are watching the Company closely because we are very close to them, we are watching their growth strategy and expansion plans. They are expanding rapidly in the South East and South South and also some part of the South West.

EDITOR’s NOTE:

Food Emporium International Limited, Barceló’s, between September 22 2008 to October 03 2008 sought to raise N750 million by way of Placement 300,000,000 Ordinary Shares of 50k @ N2.50/share.

End