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Investments, Impact of Policies on Asset Management in Nigeria

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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.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

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Economy

NGX Group Gains 10% to Lift Stock Market by 0.26%

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NGX Group Shares

By Dipo Olowookere

The nation’s stock market rebounded by 0.26 per cent on Wednesday after going down by 0.71 per cent on Monday, which was the last trading session as the exchange was closed on Tuesday for a public holiday in Nigeria.

Investors were in high spirits yesterday when they returned to the market and this reflected in the level of activity as the trading volume rose by 47.47 per cent to 499.5 million stocks from 338.7 million stocks, the trading value increased by 25.16 per cent to N5.1 billion from N4.1 billion, while the number of deals grew by 2.25 per cent 5,998 deals from 5,866 deals.

Business Post reports that when the exchange closed for the day, FBN Holdings was the most traded equity with the sale of 147.6 million units valued at N1.8 billion, followed by eTranzact, which transacted 105.2 million units worth N215.6 million.

Furthermore, Access Bank sold 27.9 million units worth N266.0 million, Transcorp traded 22.3 million units valued at N22.8 million, while GTCO recorded a turnover of 20.6 million shares worth N612.9 million.

It was observed that the market closed in the positive territory as a result of the growth posted by the Nigerian Exchange (NGX) Group Plc as its share price went up by 10.00 per cent to settle at N21.45.

GlaxoSmithKline rose by 6.87 per cent to N7.00, NPF Microfinance Bank gained 5.85 per cent to trade at N1.81, Coronation Insurance grew by 4.17 per cent to 50 kobo, while FBN Holdings appreciated by 3.83 per cent to N12.20.

On the flip side, Prestige Assurance was the worst loser as its value depreciated by 8.51 per cent to 43 kobo, Consolidated Hallmark Insurance fell by 8.33 per cent to 55 kobo, Academy Press also dropped 8.33 per cent to 33 kobo, Cadbury Nigeria lost 5.88 per cent to sell for N8.00, while Union Bank went down by 5.66 per cent to N5.00.

In all, a total of 21 stocks closed on the gainers’ chart while 18 stocks finished on the losers’ chart, indicating a positive market breadth and investor sentiment.

However, three of the five major sectors of the market closed bearish with the energy, consumer goods and banking counters losing 0.39 per cent, 0.24 per cent and 0.20 per cent respectively, while the insurance and industrial goods sectors rose by 0.58 per cent and 0.04 per cent apiece.

At the close of transactions, the All-Share Index (ASI) improved by 105.04 points to 41,249.71 points from 41,144.67 points, while the market capitalisation expanded by N54 billion to N21.526 trillion from N21.472 trillion.

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Economy

Naira Appreciates to N414.07/$1 as Bitcoin Hits $66k

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bitcoin nigerians

By Adedapo Adesanya

The Naira appreciated against the US Dollar at the Investors and Exporters (I&E) window of the foreign exchange (forex) market by 0.16 per cent or 66 kobo on Wednesday, October 20 as trading returned after the Eid-el-Maulud holiday break.

At the close of business at the midweek session, the local currency was sold for N414.07/$1 in contrast to N414.73/$1 it was traded on Monday, according to data obtained from FMDQ Securities Exchange.

During the second trading session of the week, a turnover of $334.97 million was recorded as against the $172 million achieved at the preceding session.

This indicated a $162.97 million or 48.7 per cent rise in the value of transactions yesterday and because of the anticipation of pressure on the Nigerian currency, FX supply was made available to traders and this supported the growth posted by the domestic currency during the trading day.

But at the interbank segment of the market, the Nigerian currency maintained stability against the American Dollar as it remained unchanged at N410.89/$1 on Wednesday.

Meanwhile, at the cryptocurrency market, Bitcoin (BTC) rallied to an all-time high (ATH) of $66,000 yesterday as optimism surged for greater mainstream acceptance in the wake of the successful launch of the first exchange-traded fund for US investors.

In a Naira equivalent, the most popular digital coin in the world was sold for N37,004,384.99 after it rose by 2.8 per cent.

On October 19, 2021, the Proshares Bitcoin Strategy ETF (BITO) was launched. The bitcoin exchange-traded fund is the first ETF ever to be approved in the United States and it’s based on bitcoin futures markets.

This development, Business Post gathered, triggered a renewed interest in the cryptos and caused Litecoin (LTC) to rise by 9.3 per cent to N117,992.99. Dash (DASH) went up by 5.9 per cent to sell for N111,892.63, Tron (TRX) grew by 4.7 per cent to trade at N58.70, while Ripple (XRP) appreciated by 4.4 per cent to trade at N635.00.

Further, Dogecoin (DOGE) was 4.2 per cent higher to sell at N150.96, Cardano (ADA) saw its value rise by 4.1 per cent to N1,305.81, Binance Coin (BNB) made a 3.4 per cent gain to trade at N205,395.75, while Ethereum (ETH) rose by 1.7 per cent to trade at N2,203,900.99.

However, the US Dollar Tether (USDT) went down by 0.4 per cent to sell for N565.49.

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Economy

Oil Prices Continue Ascent as US Crude Inventories Drop

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oil prices cancel iran deal

By Adedapo Adesanya

Oil prices showed no sign of slowing yet again on Wednesday as a drop in crude inventories in the United States supported the market amid a supply crunch in the energy market.

Brent crude rose by 80 cents or 0.94 per cent to trade at $85.88 per barrel and the US West Texas Intermediate (WTI) crude added 91 cents or 1.1 per cent to sell at $83.87 per barrel.

A week after it reported a sizeable oil inventory build that pushed prices lower for a while, US crude stocks fell by 431,000 barrels in the most recent week, the Energy Information Administration (EIA) said, as against expectations for an increase.

At 426.5 million barrels, inventories remain below the five-year average for this time of the year.

On its part, the American Petroleum Institute (API) noted a build last week which was estimated at 3.294 million barrels, above analyst expectations of a 2.233 million barrels build.

Crude markets, in general, remain supported on the back of a global coal and gas crunch, which has driven a switch to diesel and fuel oil for power generation.

The switching from gas to oil could account for the demand of 500,000 to 600,000 barrels per day, depending on winter weather and prices of other sources of energy, a move that has supported oil prices.

However, China’s National Development and Reform Commission (NDRC) said it plans on arresting the high energy prices, a move that could push down oil prices.

The commission said it would bring coal prices back to a reasonable range and crackdown on any irregularities that disturb market order or malicious speculation on thermal coal futures, according to foreign media.

The possible Chinese intervention sent the key Chinese coal futures plunging early on Wednesday.

In entirety, the market is highly bullish as supply has tightened especially with the Organisation of the Petroleum Exporting Countries and allies (OPEC+) maintaining a slow increase in supply rather than intervening to add more barrels to the market, just as US demand has increased.

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