The Managing director of Capital Bancorp Plc, a leading member of the Nigerian Stock Exchange (NSE), Mr Higo Aigboje, recently spoke to journalists on plans to unfold investment opportunities in the Nigerian capital market to local and international high networth and retail investors.
Given the developments in the stock market between 2006 and 2008, will you say that stockbrokers were professional enough in giving advice to their clients?
The crisis in 2007 made investors to lose interest in the capital market but those who stayed in the market after the crisis and have sought for good advice from stock brokers, have enhanced their wealth. From early 2006 to 2009, there was serious blame in the Nigeria and global capital market. In Nigeria, there is enough blame across board, with one or two brokers not professional enough but they are in the minority though. There are also blames on the regulators, saying they are not as strong as they should be. All these have been addressed with the reforms of both the Securities and Exchange Commission (SEC) and The Nigerian Stock Exchange (NSE), in terms of new operating standards, capital requirements and code of conduct. A lot has happened. For us, it is about looking forward to the future.
What kind of capital market should we look forward to, post recapitalisation?
There are two key issues the stockbroking houses face right now, bothering on capital requirement and minimum operating standards. My take is that right now, we have over 200 stockbroking firms; after the September deadline, we will still have up to 150 stockbroking houses and what we will have will be stronger stockbroking houses, better capitalised firms and firms with strong technology, strong process, competent and capable staff. The industry will be better in terms of operators. Investors in my view, will not lose any money or investments because the regulators, SEC and NSE, already have contingency plans to ensure that there is a smooth transition for those that choose to exit from the market. For the investors, they can go to their stockbrokers with more confidence with the firms being able to deal with challenges of the present times. So, for us, this is a very good time to be doing this because we have scaled the old challenges; not only us but a lot of our contemporaries have also done that. We have dealt with the issue of capitalisation; we are dealing with the issue of minimum operation standards and we will be ready when the deadline comes. We have an in-house committee that deals with all of these.
The stock market is for everyone; we have products that allow investors to invest with as low as N1,000; it is an on-line product. There are also various asset managers in the capital market who have different funds through which an investor can enter the market. There are opportunities for those who want to buy directly through the market and those who do not want to go directly or who feel that what they have is too small. A lot of stockbroking firms have on-line trading platforms though we are one of the first to have it, there are mutual funds to cater for investors with little funds, there is enough within the system to ensure that nobody is left out. The market caters for the institutional local investors, foreign investors, domestic high networth individuals (HNIs) and non-domestic HNIs. Everybody can be accommodated using different tools and infrastructure of the market.
Won’t the recapitalisation make the market tilt towards oligopoly, where we will have few stockbroking houses dominating market activities?
Just like what we have in the banking system, there was a time we had up to about 100 banks, then we had banking consolidation and people expressed fear of oligopoly and we ended up with 25 banks. Now, we have about 23 banks. What people have found out is that there was no oligopoly, rather, this has led to bigger and more efficient banks. This is what the stockbroking houses will experience with fewer houses, as competition will be fierce because customers will also demand for better services and if you are trying to be rigid, they will go to where they will get better services. They will be looking for service, value and good advice. There will be no oligopoly, the investors will ensure that they demand for services and are already doing that. Average investors are a lot wiser now. There is now more transparency and accountability, so it is difficult to do anything that will result in the market being an oligopoly. Like in any market, there will also be a few strong operators but we will always have our niche and everybody will find their level and rest on their strength and that will give the investing public the choice. Mutual fund is one of the ways to invest in the market. Mutual fund will increasingly become a very key part of the market. For instance, the stock market of Brazil, which has the same demographics like our’s, has up to 5,000 mutual funds. In the next few years, we will see more mutual funds in our market to cater for the small investors and even large and institutional investors.
Dematerialisation of certificates is still a major issue in the market, which discourages investors. What is the regulator doing about this?
There is still a wide gap but it is positive between where we were in 2009 and now. If you invest in today’s market, if there is an IPO, there is nothing like a certificate any more. If you have a stockbroking account, they will credit the investors’ CSCS account immediately and the day the allotment or listing is being done, transaction can be carried out on the stock. When a company declares bonus, it is credited to the investor’s account immediately; there is no more share certificate and if it is dividend, it is credited to the investor’s bank account. This is the power of technology; now we have e-dividend, e-bonus, e-IPO and so on. I was in this market when it took an investor about a year to be a beneficiary owner of the shares bought, when CSCS was introduced, where within three days, you became the owner of the shares and I am still in the market now when we are talking about e-IPO. When Seplat did its IPO, all their investors’ accounts were credited without issuing share certificates and when it declared dividend in dollars, it was also credited to the bank accounts of its investors. All an investor needs to do under the present circumstance is to give some information through the forms filled at the time of purchasing shares either directly through the stock market or through e-IPOs.