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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.”

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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.

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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.

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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

SEC Introduces Regulatory Incubation Program for Fintechs

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fintechs

By Modupe Gbadeyanka

A regulatory incubation (RI) program for financial technology (fintech) companies operating or seeking to operate in Nigeria has been introduced by the Securities and Exchange Commission (SEC).

A circular issued by SEC disclosed that this framework would be officially launched in the third quarter of 2021 and will operate by admitting identified Fintech business models and processes in cohorts for a one-year period.

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Participation in the RI program will encompass an Initial Assessment Phase and the Regulatory Incubation Phase.

The categories to be admitted into each cohort will be determined based on submissions received through the Fintech Assessment Form and communicated ahead of each take-off date.

SEC explained that the scheme was designed to address the needs of new business models and processes that require regulatory authorisation to continue carrying out full or ancillary technology-driven capital market activities.

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The RI Program has thus been conceived as an interim measure to aid the evolution of effective regulation which accommodates the innovation by fintechs without compromising market integrity and within limits that ensure investor protection.

It was disclosed that review of completed Fintech Assessment Forms will continue on an ongoing basis and those who consider that there is no specific regulation governing their business models or who require clarity on the appropriate regulatory regime for seeking the authorisation of the commission, are encouraged to complete the Fintech Assessment Form.

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Economy

NGX Suspends Trading on GTBank Shares Ahead of Delisting

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GTBank Branch

By Dipo Olowookere

In preparation for the eventual delisting of shares of Guaranty Trust Bank (GTBank) Plc from its trading platform, the Nigerian Exchange (NGX) Limited on Friday, June 18, 2021, placed the banking stock on a full suspension.

GTBank, a tier-one lender trading its equities on the exchange, intends to transform into a financial holding company (Holdco) so as to offer a wide range of services it is restricted to do.

Some years ago, the Central Bank of Nigeria (CBN) directed banks in the country to offload their subsidiaries not performing core lending services.

This was after many deposit money banks (DMBs) were delving into different business ventures, including insurance, stockbroking, asset management, amongst others.

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For the CBN, which regulates the banking industry in Nigeria, most of these banks were losing focus and were not supporting businesses that need funds to grow and then stimulate the economy in the process.

To address this issue, the apex bank asked banks to sell off their non-banking assets and this forced many of them to offload their companies not offering core banking services.

However, there was an opening for banks to still delve into other sectors within the financial and capital markets and this was by operating as a Holdco.

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A few of them towed this path, including FBN Holdings, Stanbic IBTC Holdings and FCMB Group.

Not wanting to be left out, GTBank is joining the party and to achieve this, it is delisting its banking arm, which is the popular GTBank from the stock exchange.

GTBank will now operate as a private company, while the new Holdco, Guaranty Trust Holding Company Plc, will now be a public company. The shares of this new firm will be listed on the NGX after the delisting of GTBank.

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Last Friday, the stock exchange informed the investing community of the latest development, announcing the suspension of trading on GTBank shares.

In the circular sighted by Business Post, the NGX explained that the rationale behind placing GTBank stocks on full suspension is to “prevent trading in the shares of the bank” in preparation of its “eventual delisting”

Before trading on its stocks was suspended on Friday, GTBank closed at N28.55 on Thursday after appreciating by 50 kobo or 1.78 per cent.

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Economy

DLM Capital Remains Best Structured Finance & Securitization Team in West Africa

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DLM Capital

A prominent developmental investment bank, DLM Capital Group, has emerged winner at the Capital Finance International (CFI) 2021 awards as the best-structured finance and securitization team in West Africa.

This award has been won consecutively in three years and affirms the group’s strong performance as a leading investment institution and asset manager.

CFI awards seek to identify the contributions of individuals and organizations that contribute significantly to the advancement of economies and truly add value for all stakeholders.

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DLM Capital Group creates bespoke business solutions for alternative financing and harnessing funds for growth.

The group focuses on four key sectors — consumer credit, agriculture, microfinance, and education with a mandate to reduce poverty and improve living conditions for Africans while mobilizing resources for the continent’s economic and social development.

“In the past three years, our portfolio management team’s performance has remained consistent, and our clients have benefited immensely from exposure to our solutions, including the NMRC securitization deal and the DLM Primero BRT Securitization,” said Head of Corporate Communications and Marketing, DLM Capital Group, Ms Chinwendu Ohakpougwu.

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“We are positioned to provide services to an expansive client base of retail, high net-worth and institutional customers.

“DLM Capital Group remains committed to constantly providing financial solutions that will enable our clients to make a difference, and we are honoured to be recognized once again as a reflection of the quality of support offered to our clients,” she added.

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DLM has won recognition in West African capital markets, acting as a sole arranger to over 80 per cent of structured finance transactions in Nigeria — and all the securitization transactions. It provides deal structuring, advisory execution and capital raising services across the Nigerian capital market.

The institution recently launched an asset financing scheme and is preparing a venture into digital banking under its subsidiary, Sofri.

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