Wale Agbeyangi, Managing Director, Cordros Capital: Interview

Interview: Wale Agbeyangi

What challenges do the Securities & Exchange Commission’s recapitalisation deadlines pose?

WALE AGBEYANGI: In the industry as a whole, due to a number of undercapitalised firms and because capital markets are still facing recovery challenges from 2009, many are finding this aspect difficult. Nevertheless, I am confident that a number of operators will meet the minimum capitalisation requirements before the deadlines. Investors remain weary, looking at the array of companies covered by many of the brokerage firms. The most important thing is to find investors who see a long-term opportunity in this market. If international financial services firms are scrambling for licences in Nigeria, it means the futureis bright, but many do not see beyond what we see now. The major challenge is conveying that long-term view. Deploying capital above the N20m ($122,000) threshold is also a challenge. The minimum guidelines used by the Nigerian Stock Exchange (NSE) set the basics for brokerage firms, but there is always the need to scale up. The bigger you are, the easier it is to deal with a variety of issues in the market, anchored by good research and technology.

What impact do you expect the demutualisation of the NSE to have on ownership structures?

AGBEYANGI: This is a good move – making the exchange a profit-making institution – as it will, in turn, make it competitive. The NSE will be run like a business, with better corporate governance. This is good for all the operators, because, at the end of the day, we are all owners of the exchange.

In the long term, we will also be able to compete with international best practices. The tension that exists among the stockbroking community is a question of what is due to you as an investor in the NSE before mutualisation. There are several contentious issues between the NSE and the owners, and we have been working on resolving these issues for over two years, so I am very confident these will be settled.

To what extent will the debut of SEPLAT Petroleum Development Company (SEPLAT) spur a new wave of initial public offerings on the exchange?

AGBEYANGI: We are expecting a large number of new listings in the coming years, derived mainly from oil and gas, telecoms and manufacturing. SEPLAT certainly sets an example, and I am happy about its success, mostly because of the high-quality investors it has attracted. The exchange’s depth can only be increased by listing firms with large balance sheets.

How can more companies be encouraged to list?

AGBEYANGI: People are generally opposed to a government mandate forcing business owners to list, but this has been proposed in the form of telecom licences. Still, they cannot force a private firm to list; it is a choice. What the regulators should do is encourage owners to list through incentives and let them know the advantages. Access to cheap capital and better corporate governance are big drivers. Aside from this, unfortunately a lot of advisors ignore the potential offered by small and medium-sized enterprises (SMEs), looking instead for the big companies with bigger fees. However, there are thousands of SMEs in Nigeria that do not have access to capital and advisory services. With the NSE encouraging these smaller businesses to list and appointing necessary advisors, this market is also a good platform.

What are the prospects for mutual funds and exchange-traded funds (ETFs) in Nigeria?

AGBEYANGI: Many companies are looking to launch mutual funds and ETFs in Nigeria, but they are still not very popular. Most investors want to see their investment, rather than handing their money to a fund manager or placing it in an ETF comprising many firms. Some of this is cultural, but these products require educational investment, which all stakeholders should encourage. By the time the market improves, investors will be ready for new products.