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Nigeria: Ogungbesan – Retail Investors Critical for Market Development

The Chief Executive, Stanbic IBTC Stockbrokers, Titi Ogungbesan, in this interview speaks about activities in the Nigerian stock market.  brings the excerpts:

The Nigerian Stock Exchange (NSE) posted an unusually strong performance for 2020, closing the year with a 50 per cent gain. This was in spite of the forced economic lockdown due to the coronavirus pandemic, the economic recession, the volatile oil market, massive unemployment, and so on. Such bullish performance was last seen nearly 20 years ago. What will you say was responsible for such a remarkable performance?

The major driver was liquidity from investors that were seeking higher yields as returns in the fixed income space remained very low. Estimated dividend yield levels in the 4th quarter were much higher in the equities market than the yields in the fixed income space and this made the market very attractive for investors. We also note that activities were driven predominantly by local investors. The All-Share Index (ASI) gained +50.03 per cent in 2020.

The year had started out on a bullish note but around March, it turned due to the double impact of the significant dip in oil prices and the accelerated spread of the coronavirus worldwide. Nigeria, like many other countries, went into lockdown and this affected many businesses and their operations. By the end of the 3rd quarter, the ASI was slightly down and most of the ASI’s final performance was driven by activities in the 4th quarter alone.

The NSE’s Brokers’ Performance Report for 2020 showed that Stanbic IBTC Stockbrokers Limited had the best performance by value and one of the top five by volume of transactions. Stanbic IBTC Stockbrokers accounted for about N219 billion or over 10 per cent of traded value. How did you achieve this?

Our primary focus as a business remains offering value to our customers and providing excellent services to them. We have a team of highly experienced professionals who are dedicated to delivering excellent services to our clients and our Client Value Proposition remains the core of our business. We would not have been able to achieve this result without the support of our customers. We are also able to leverage on our franchise strength both in-country as part of Stanbic IBTC Group and also as a part of Standard Bank Group. Stanbic IBTC Stockbrokers was also recently awarded Best Brokerage House in Nigeria for 2020 by The European.

How do you see the demutualisation affecting the market and particularly your operations?

The move by the NSE to pursue demutualisation is one that has been hailed by the broker community as a positive one and the steps that have been taken by the Exchange so far are highly applauded. The announcement of the CEOs is a signal that the Exchange is still committed to the completion of the demutualisation and this is a positive indicator for the market. We believe that this will aid in improving efficiency in the market as well as for brokerage firms.

At the maiden edition of Retail Investors’ webinar hosted by the NSE last year, the CEO of the exchange, Mr. Oscar Onyema, said the Exchange is committed to facilitating conversations that will expound on the retail investment opportunities available in the capital market. How important is the retail investment sector to Stanbic IBTC Stockbrokers’ operations?

We see the retail segment of the market as critical to the operations of Stanbic IBTC Stockbrokers and this is becoming more evident as their activities contributed to the performance of the NSE last year. For us, retail customers are a core of our business and in line with this belief, we have invested heavily in technology to make the market more accessible to them. As a testament, we launched our Stanbic IBTC Mobile App last year to facilitate easier access to trade and we continuously seek ways in which we can help that segment achieve their investment goals. We believe that retail investors hold a major key to growing the Nigerian capital market.

We have witnessed the government’s strong desire to diversify the economy from over-reliance on the oil sector, as recently captured in the Economic Recovery and Growth Plan. How strongly involved is the market in the diversification drive and what has Stanbic IBTC Stockbrokers’ contribution to its attainment been?

In a bid to boost economic growth and achieve its diversification goal, the government has highlighted six priority sectors – agriculture, manufacturing, services, solid minerals, construction and real estate, as well as oil and gas. In line with the fiscal authority’s drive, the monetary authority also continues to support this diversification agenda by providing targeted policies to spur growth in these sectors – particularly in the agriculture sector. In accordance with this drive, the capital market is very involved in the diversification plans of the government. As capital is a major requirement for achieving the set objective of diversification, the market provides an avenue to raise long term capital via equity and debt. Companies that are operating in these critical alternative sectors to oil are given platforms to raise capital and have brokers lending their expertise to their capital raising plans.

One critical factor is the fact that there is ample liquidity in the market now, with asset managers, pension funds and retail clients that are seeking investment outlets. This therefore presents a good opportunity for some of these non-oil sector companies that do require long term funding for capital expenditure, scaling and so on to access the capital market. In recent times, Information and technology companies have been willing to take the dive into the equity market. As a company, Stanbic IBTC Stockbrokers is the number one stockbroking firm in Nigeria in terms of transaction value of over 10 per cent market share; and when it comes to capital raising, we pride ourselves as the best executor in the market. We are able to mine our customer base to raise capital for these companies. The Exchange also organises regular sessions that highlight opportunities in the various sectors and how to partner to achieve the objective.

With the inclusion of the stock trading feature in Stanbic IBTC’s all-round Super App, how has leveraging digital technology, innovation and expertise helped to improve efficiencies in your operations?

The inclusion of the stock trading feature in Stanbic IBTC’s Mobile App has allowed us to bring the stock market to the fingertips of our clients. We were also able to leverage on the strength of the Group to deliver stockbroking services to the clients of the Group. With the use of the app, clients can place their orders independent of the input of any person and this has greatly improved efficiency.

For the first time in years, domestic investors, in 2020, consistently outperformed their foreign counterparts in market transactions and participation. For instance, in November 2020, NSE data showed that local investors outperformed foreign investors by over 58 per cent in total transaction value. Going forward, how do you think this level of local interest can be sustained and consolidated?

We have seen this trend continue even at the beginning of the year 2021 with higher participation from local investors versus foreign investors. We do not think this momentum will wane. One way in which we can sustain this move is what Stanbic IBTC Stockbrokers have provided via the mobile app which has, in no small measure, facilitated easier trading. Another way is to regularly organise retail workshops that highlight available opportunities and that project Stanbic IBTC as an end-to-end financial services provider. If yields remain low in the fixed income environment and dividend yields remain more attractive, we expect this trend to continue.

What initiatives are you envisioning to institute in 2021 and beyond to help boost the capital market and drive investor interest?

As a group, there are plans to partner with other institutions to provide platforms that allow investors achieve their objectives. There are also plans to organise regular webinar series and conferences to cater for all segments of our client base. Our continuous investment in technology and partnership with the Exchange are also crucial to our contribution to growth of the capital market.

How will you appraise the capital market’s regulatory environment?

The capital market has a very robust regulatory environment. The apex regulator, the Securities and Exchange Commission (SEC) is very proactive and dynamic. The Nigerian Stock Exchange is a forward-looking Exchange and their approach to regulating the market is a very inclusive one. We have a regulatory environment wherein market participants are encouraged and commended for doing business the right way.

For those looking for opportunities to invest in Nigeria now, what should they be looking for and what would be your advice?

We advise clients to look at companies that have a strong track record of good corporate governance. With good corporate governance, there is a greater chance that the company invested in will deliver on set objectives. We also advise clients to consider companies that have historically delivered strong returns in terms of Profit Before Tax (PBT) and Profit After Tax (PAT), as well as companies that give decent dividend yield. There are a few of these companies in the banking, consumer and industrial sectors.

Stanbic IBTC Stockbrokers is the leading stockbroking firm in Nigeria. What goals are you setting for yourself over the next three to five years?

We intend to continue to keep customers at the centre of our business and our aim is to continue to delight our customers with exceptional customer service. We also intend to continue to leverage on technology to make accessing the capital markets easier for our clients and we believe this will help grow the size of the market. We intend to remain the leading stockbroker in Nigeria in terms of service and market share.