Economy
Investments, Impact of Policies on Asset Management in Nigeria
Since the inception of asset management in Nigeria in 1991, its relevance to the economy, contribution to society and how it has enhanced the performance of Nigerian banks have been critically questioned.
With regards to its track record and its input to the development of the financial market, asset management, which can be described as a securitisation vehicle, has not done badly.
The present value of Nigeria’s assets under management (AUM) is estimated at N1.2 trillion. The fastest-growing fund in the industry is the money market fund, which is currently valued at over N800 billion.
This fund has immensely contributed to the development of the financial market and helped to improve the savings culture of many Nigerians.
In a recent interview, Mr Oladele Sotubo, Chief Executive, Stanbic IBTC Asset Management Limited, expressed his views on investments and the impact of policies on the asset management sector of the fund market and how its opportunities can be harnessed.
Mr Sotubo emphasised the need to urgently diversify the economy to create more broad-based investment opportunities. That way, corporate entities will be able to access the capital market more efficiently.
“When an economy is diversified, the impact will be evident on the number of financial instruments available for investment and also increase the number of companies participating in our capital market.
“Ultimately, all these will positively affect the tax revenue and by extension, infrastructural development of the nation,” he said.
Mr Sotubo stated further: “There is no denying that asset management has improved the savings culture of Nigerians.
“Commercial lending policies made by the Central Bank of Nigeria (CBN) affect the rates at which government instruments like the treasury bills and open market operations bills are issued and traded.
“In turn, this affects the investment space and return on investment yield is also affected by the rate of inflation.”
While highlighting the impact of key statutes and regulations guiding the fund market, Mr Sotubo attributed the successes achieved in the industry thus far to regulations instituted by the Securities and Exchange Commission (SEC), guiding the operations of asset management companies, thereby protecting the investors.
He stated that regulations issued by the SEC have enhanced professionalism while also promoting healthy competition amongst fund managers.
The impact has been very positive on the industry as there has been more collaboration between the operators and the regulators. The positive outcome is also reflective in the continuous growth of the industry.
In 2017, the CBN developed a regulatory framework for the establishment, licensing, regulation, management and supervision of licenced asset management companies in Nigeria.
According to Mr Sotubo, the CBN policy provides a framework for privately owned asset management companies in Nigeria that will be eligible to purchase non-performing loans or classified assets from financial institutions and specialised institutions.
The federal government in 2011 set up the Asset Management Commission of Nigeria (AMCON) to purchase non-performing loans from banks.
The upside is the de-risking in the banking sector as banks sold their non-performing loans to these companies.
There was also the development of capital markets in the area of structured alternative investments such as Asset-Backed Securities and Mortgage-Backed Securities.
When asked about the effects of the ravaging pandemic on the asset management industry, Mr Sotubo said the sector was not immune from the negative impact and economic uncertainties.
As witnessed in many sectors that were affected in various ways, there were drastic changes in business processes, the rise in digital and virtual activities as well as the transition to the new normal.
The measures of success in the fund industry will be gauged by how a business stays in touch and how customers are engaged. This simply means there will be more focus on digital platforms for client engagements and product distribution.
From Stanbic IBTC Asset Management Limited’s perspective, success will be measured in terms of positive customer experience and how well organisations support their clients in achieving their investment objectives.
Like every sector faced with risks, the Nigerian asset management industry is not a sacred cow. The key risk is the fast-rising number of unlicensed money managers and Ponzi schemes luring people with lofty promises of quick financial prosperity.
Their sole aim is to reap unsuspecting victims of their money and the associated risks have doubled, especially because these schemers can reach their victims through various digital platforms. People fall prey to the activities of plotters largely due to ignorance and in other cases, greed.
To negate and counter these devious activities, Stanbic IBTC Asset Managers churn out ways to educate the public, especially on its digital platforms. Also, SEC does a good job of coming up with actions aimed at checkmating these schemers.
On the notable developments the Nigerian asset management industry has enjoyed in the last decade, Mr Sotubo gave his view in comparison with the industry in other African countries.
According to him, the Nigerian asset management industry has witnessed its fair share of growth in the Collective Investment Scheme segment.
Citing the data from SEC in December 2011, the Nigerian funds market had 44 funds with the Asset Under Management circa N73 billion and 103 mutual funds with industry asset under management of N1.26 trillion by May 2020.
An AUM of N5 trillion would have been possible if there had been a national savings strategy. Even at the peak period of the COVID-19 pandemic, the capital market, including exchanges, depositories, stockbrokers and counterparties continued to operate via technology-enabled means.
Addressing the Finance Act 2019, which is aimed at strengthening the Nigerian asset management industry, Mr Sotubo agreed that it was a step in the right direction.
As much as there have been remarkable achievements in the industry, more needs to be done especially on the issue of multiple taxations for mutual fund subscribers with regards to withholding taxes and taxes generated by Collective Investment Scheme (CIS).
With the understanding that an efficient tax system will boost the growth of capital and economy, the Act will be reviewed annually and relevant authorities will be engaged on the subject.
Noting that the asset management industry and the fund market generally is highly competitive, the Stanbic IBTC Asset Management Chief Executive touted that his organisation has a strong brand that rides on the heritage of its parent company, Stanbic IBTC Holdings PLC.
He cited the proven track record of excellence in the fund market business. As reported in an article by Nairametrics, it was stated that Stanbic IBTC Asset Management accounted for 65 per cent of the total AUM of the Nigerian mutual fund industry in 2019. This identifies the firm as one of the strongest and most efficient asset managers in Nigeria.
Stanbic IBTC Asset Management has popularity and excellence in top sectors like investment banking, pension, non-pension asset management and stockbroking, which gives investors no doubt about doing business together.
Another edge is the parental heritage of Standard Bank Group which provides access to international capabilities in terms of manpower, technology product and related professional services.
The organisation has experienced and dedicated workers who are committed to attending to clients’ investment needs.
By Adedapo Adesanya
Seplat Energy Plc will revive hundreds of Nigerian oil wells laying fallow after completing the acquisition of Mobil Producing Nigeria Unlimited (MPNU) from ExxonMobil.
The company said it aims to lift oil output to about 200,000 barrels a day, a move that will help boost Nigeria’s oil production levels, as it aims to reach 2 million barrels per day next year.
The transaction, according to Seplat, “is transformative for Seplat Energy, more than doubling production and positioning the company to drive growth and profitability, whilst contributing significantly to Nigeria’s future prosperity.”
The completion of the Seplat-ExxonMobil deal has created Nigeria’s leading independent energy company, with the enlarged company having equity in 11 blocks (onshore and shallow water Nigeria); 48 producing oil and gas fields; 5 gas processing facilities; and 3 export terminals.
Recall that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in October approved the deal as part of a series of approvals, while it blocked Shell’s asset sale of up to $2.4 billion to the Renaissance consortium.
The acquisition of the entire issued share capital of MPNU adds the following assets to the Seplat Group: 40 per cent operated interest in OML 67, 68, 70 and 104; 40 per cent operated interest in the Qua Iboe export terminal and the Yoho FSO; 51 per cent operated interest in the Bonny River Terminal (‘BRT’) NGL recovery plant; 9.6 per cent participating interest in the Aneman-Kpono field; and approximately 1,000 staff and 500 contractors will transition to the Seplat Group.
MPNU adds substantial reserves and production to Seplat Energy; 409 million barrels of oil equivalent (MMboe) 2P reserves and 670 MMboe 2P + 2C reserves and resources as at 30 June 2024 and 6M 2024 average daily production of 71.4 kboepd (thousand barrels of oil equivalent).
Business Post reports that Seplat will be part of the payment this year, and will defer some to next year,
Speaking on the transaction, the Chairman of Seplat Energy, Mr Udoma Udo Udoma commended President Bola Tinubu for supporting this transaction and appreciated the support and diligence of the various ministries and regulators for all the work to reach a successful conclusion.
“We are delighted to welcome the MPNU employees to Seplat Energy. We are excited to begin our journey in a new region of the country, and we look forward to replicating the positive impacts we have achieved within our communities in our current areas of operations.
“Seplat’s mission is to deliver value to all our stakeholders, and we treasure the good relationships we have developed with the government, regulators, communities and our staff.”
On his part, the chief executive of Seplat Energy, Mr Roger Brown, described the acquisition as a major milestone, adding, “I extend my thanks to the entire Seplat team for their hard work and perseverance to complete this transaction.
“MPNU’s employees and contractors have a strong reputation for safety and operational excellence, and I welcome them to the Seplat Energy Group.
“We have acquired a company with one of the best portfolios of assets and related infrastructure in a world-class basin, providing enormous potential for the Seplat Group. Our commitment is to invest to increase oil and gas production while reducing costs and emissions, maximising value for all our stakeholders.
“MPNU is a perfect fit with our strategy to build a sustainable business that can deliver affordable, accessible and reliable energy for Nigeria alongside attractive returns to our shareholders”.
By Adedapo Adesanya
The National Pension Commission (PenCom) is projected to close the year with over N22 trillion in pension assets impacted by challenges like inflation and monetary policies.
This is according to PenCom Director-General, Mrs Omolola Oloworaran, at a press conference in Abuja on Thursday.
She said as of October 2024, the Contributory Pension Scheme (CPS) had 10.53 million registered contributors and pension fund assets worth N21.92 trillion.
Speaking at the conference-themed Tech-driven Transformation Shaping the Pension Landscape, which showcased PenCom’s strategic commitment to innovation, she said that the numbers reflected the agency’s unwavering commitment to fund safety, prudent management, and sustainable growth.
She explained that the pension environment was impacted by the wider economic challenges facing the country, noting that the sector battled multi-year high inflation, Naira devaluation, and the lingering effects of unorthodox monetary policies by the Central Bank of Nigeria (CBN).
Business Post reports that the apex bank hiked interest rates by 875 basis points this year alone to tackle persistent inflation which peaked at 33.8 per cent as of October.
She said that these challenges eroded the real value of pension funds and impacted contributors’ purchasing power.
“To address these issues, the commission has initiated a comprehensive review of its investment regulations.
“It is focusing on diversifying pension fund investments into inflation-protected instruments, alternative assets, and foreign currency-denominated investments.
“The goal is to safeguard contributor savings and ensure resilience against future economic volatility,” she said.
She restated the commission’s commitment to expanding pension coverage, particularly through the advanced micro-pension plan designed to encourage participation from the informal sector using technology.
“This initiative will make it easier for everyday Nigerians to save for retirement, aligning with our vision of inclusive growth and financial stability for all.
“The backlog in retirement benefits for retirees of the Federal Government’s Ministries, Departments, and Agencies (MDAs) will soon be settled.
“The federal government recently disbursed N44 billion under the 2024 budget to settle approved pension rights.
“We are collaborating with the Federal Government to institutionalise a sustainable solution to ensure retirees receive their benefits promptly, eliminating delays,” Mrs Oloworaran said.
She said that PenCom’s technology-driven transformation aimed to make the CPS more accessible, reliable, and sustainable.
“From data management to seamless contributions and regulatory supervision, we are paving the way for a future where the pension industry serves all Nigerians effectively,” she said,
Mrs Oloworaran also said that the e-application portal for pension clearance certificates has replaced the manual processes and enhanced the ease of doing business in the sector.
“Since its deployment, 38,528 pension clearance certificates have been issued. This initiative ensures compliance and secures the future of Nigerians working in organisations that interact with the government,” she said.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange closed flat on Thursday, December 12 after it ended the trading session with no single price gainer or loser.
As a result, the market capitalisation remained unchanged at N1.055 trillion as the NASD Unlisted Security Index (NSI) followed the same route, remaining at 3,012.50 points like the previous trading session.
However, the activity chart witnessed changes as the volume of securities traded at the bourse went down by 92.5 per cent to 447,905 units from the 5.9 million units transacted a day earlier.
In the same vein, the value of securities bought and sold by investors declined by 86.6 per cent to N3.02 million from the N22.5 million recorded in the preceding trading day.
But the number of deals carried out during the session remained unchanged at 21 deals, according to data obtained by Business Post.
When trading activities ended for the day, Geo-Fluids Plc remained the most active stock by volume (year-to-date) with 1.7 billion units sold for N3.9 billion, Okitipupa Plc came next with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc was in third place with 297.5 million units worth N5.3 million.
Also, Aradel Holdings Plc remained the most active stock by value (year-to-date) with 108.7 million units worth N89.2 billion, followed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.5 million units sold for N5.3 billion.
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