The Managing Director, GTB Asset Management Ltd., Mr. Nicholas Nyamali, discusses a wide range of financial issues, especially how to invest without getting one’s fingers burnt, with SUCCESS NWOGU
The Federal Government has inaugurated the Sovereign Wealth Fund board. Do you think the fund will benefit Nigerians?
The idea behind the Sovereign Wealth Fund is a great one. Looking at the way it has been practised in other countries such as Indonesia and Malaysia, it has been a success. There are reasons to have challenges in our country. We are a federal state; so, the concerns expressed by the state governments, I think, have some merits in them. However, I believe that the federal and state governments will find a means of resolving them and allow the fund to operate. Now, if the fund is allowed to operate without government interference, I think it will be a great idea for the country. But having said so, it is important that we recognise that the issues brought up by the states need to be resolved amicably.
What are the issues raised by the state?
The states are claiming that the money that is meant to be pooled into the SWF from excess crude, don’t belong to the Federal Government; rather, it belongs to the Federation Account, and should be shared directly between the federal and state governments, as provided for by the laws of the land. That is really the thorny issue and there is merit in the point. There are two options: the FG can reach an agreement with the states that:‘that we all agree to put aside a certain amount from the excess crude for the future of the country.’ Alternatively, the FG can help by putting its own share of the excess crude fund into the SWF.
How can Nigerians maximise the investment opportunities in the country?
I think Nigeria is a great country to invest in. I know it sounds a bit far-fetched trying to convince the average Nigerian to believe that with the recent experience we had in the equity market. But when asked to provide evidence, I usually tell my friends, ‘Look at the number of foreigners that are coming into the country.’ Go to the airports and major hotels, you may ask yourself, ‘What are the foreigners looking for in this country if there is nothing interesting?’ ‘Why would a man get out of America, the UK or Europe, for instance, and fly to Nigeria?’ There must be something they are coming to look for.
Those are the investment opportunities that exist and it appears that many Nigerians do not believe that these investment opportunities exist and therefore, they pull back. One way we think Nigerians can benefit from these investment opportunities is by looking for trusted investment advisers, like ourselves, to guide and inform them about the existence of opportunities and to trust their judgement in taking these opportunities. I know several personal friends, who are averse to equities. But looking at the equity market in the last eight months, I think it has been the best investment opportunity so far. It has performed better than the fixed income market, the property market and those who have stayed away have missed out on this opportunity. There are investment opportunities in this country across all asset classes and if individuals are not comfortable making the right decisions, then our recommendation has been and will remain, ‘Look for an investment adviser you can trust to manage your investments.’
How then do we guard against the repeat of the crisis that rocked the stock market recently?
The stock market of 2007 and 2008 was a classic case of individuals entering into investment environment that they did not understand. So, let us understand what happened in that season. There were a lot of margins that were going on, so margin loans were coming out from the banks. But bankers are not 100 per cent investment advisers. They are financiers, providing financing. So, individuals took loans and went into the market without proper guidance and advice from professionals.
Of course, the outcome of that is what we have seen in the market. I am not saying that the advisers were all perfect (at that time). There were few advisers who might have done something inappropriate. The basic message is simple, ‘Your funds in the hands of a professional is a 100 times better than in the hands of an individual who is insufficiently informed or not technical capable of managing the funds.’
The problem in our country is what I call self-help. Individuals fall sick, rather than go to the doctor, they go buy the medicine. People want to reach an agreement with a friend, they agree to terms without legal advice, and it has always led to problems. People get wrong medical attention; they take wrong decisions legally because we have not learnt the habit of getting professionals to do work for us. This is the same thing that is coming up in the investment environment. There are individuals who are investment professionals, whose daily job, full time responsibility, is managing investment. I believe that if Nigerians learn to trust these individuals, we will find that the incidents of 2007 and 2008 will not repeat itself.
How relevant have you been in providing financial services to Nigerians?
As a company we are out to help Nigerians, particularly the retail investors, in their desire to build investments that will see them through the long term. We have several services that we provide. But our services are all investment-centric. We provide the investment knowledge; investment services in terms of execution to brokerage, and act as brokers to people who want to buy good equities, fixed income and commodities of real estate assets.
We also provide services as fund managers where we take the responsibilities of managing for people. This is different from brokerage. A broker simply carries out the instructions of the client, but the fund manager helps him to make decision on what to buy. So, we do not only provide services as brokers, we also provide services as fund managers. We also provide trust services and one of the interesting things about trust is that as individuals grow older and start thinking of transferring their assets to their beneficiaries, our trust service will enable such persons make such arrangement easily.
How do we guard against fraud in financial institutions like some investors wrecking some organisations or even some managers of funds misappropriating funds available to them?
I think there are two levels of checks. The corporate laws as defined statutorily recognise temptations and possibility of fraud and therefore are designed to mitigate them. But obviously those systems have been breached. Auditors are there to check accounts and give valid reports, not just to management but to the shareholders. Shareholders are there to check the directors who should check the management. For the financial services industry, regulators are also available to check. I think if each of these layers of checks and balances function effectively, we will curb the incidence of fraud. Regulators need to do their work well, and I also believe that a very strong way of curtailing fraud is to sanction individuals. Abroad, if an individual is found guilty of some level of indiscretion or malpractice within his professional body, he is sanctioned heavily. But we have not seen similar levels of sanctioning in this country. If an individual knows that he will be severely sanctioned if he or she does wrong, there will be less chance of people being involved in fraud.
Source: Punch
