Bolade Agboola is an executive director at CashCraft Asset Management Limited. He is an Associate of the Chartered Institute of Bankers and Chartered Institute of Stockbrokers. He is a registered Issuing House Operator and has worked for about 20 years in various banks before joining CashcraftAsset Management Limited.He spoke to funmi ilesanmi on issues bothering on the capital market and other economic issues. Confidence of Nigerians in the Stock Market Confidence in the stock market has to be built over a period of time because a lot of people lost money and a lot of people came in and the economy went down. It will take quite a while for full confidence in the stock market to be restored and that confidence will be restored when we start to see the full corporate result and also when the bank that were recently merged start coming out with their results. What they took from those banks are the good while the bad is with the Amcon. The good aspect of the bank is now with them so those are the things that will drive the market and I believe that before the end of the year we will see a lot of improvement. That confidence also, has to do with the way debt issues with Amcon is resolved. Those are some of the things that will determine how early the confidence can be resolved. I think this will be a positive turn around this year in the market. The signs from the global economy especially US and China are not discouraging and we also believe that this year too, the Euro zone crisis would also be resolved. Those are the positive result we are expecting and of course what is still dampening Nigeria’s outlook is the local problem-the terrorist issue; which I also believed would be resolved before the end of the year. Role of Euro Crisis in Fall of Nigeria Capital Market Yes, the Euro crisis has a role to play in this because when you look at it from the background that 70 per cent of the stock market is owned by foreign investors so whatever happens globally will also have an impact on the market in terms of new investments coming in because what drives the market is the investments so the capacity of fresh investments coming from Europe will be limited because of the crisis. Divestment of Insurance Companies The divestment of banks from insurance companies is part of the pursuit of the CBN towards monoline specialized banking. What we are having generally is a type of management buy-out. Officially, these banks are not supposed to have shares in those companies but what they are doing is to empower their management to buy the companies. It would not really have any effects, it is just unfortunate that the line of banking we have chosen does not allow the kind of thinking that follows successful universal banks like Germany and the rest where banks can invest in industries, invest in non-core businesses like insurance. I think it is one of our reactions to the regulatory failures that led to the financial crisis but time would tell whether it is a good decision or bad decision because the school of thought in allowing banks to do all those things is that for certain times in Nigeria the banking industry was able to attract a lot of professionals and coupled with their money through these they encouraged to invest equities in companies but unfortunately, because of regulatory failures and economic crises that came up in 2008, we have now decided to adopt that train. I believe that universal banking is still being done in most part of the world and we have chosen to do specialized banking but time will tell whether we have taken a good decision. I am circumspect about it because I know Nigeria banks are operating international banking outside the shores of Nigeria. I also know that International banks have branches in Nigeria are also operating some elements of universal banking, so how we are going to resolve that in the future, I do not know; but I believe that it is one of those decisions that is neither here nor there. Directive that Registrars Stop Handling Shares of their Parent Companies I do not know how we are going to handle it. Two of the most effective registrars in this country in terms of performance and everything are owned by two of the leading banks, GT Registrars and FirstBank Registrars. In terms of any rating in the market they come first and second whether they are handling shares of their own banks or shares of other banks. It is also due to regulatory failure during the boom era that we are now saying they should not handle shares of their parent companies because for every activity of the registrar, they are supposed to have a timeline which regulators can check and there are rules and all the rest. It is like we do not even trust our capacity to run those institutions because if you say now that those registrars should be sold off which is the decision the CBN has taken, I do not know whether it will also have the capacity to mitigate the disaster we have in 2008, it is debatable. Unauthorized Sale of Shares by Stock Brokers The brokers do make mistakes. I mean you are punching your computer, these are things that would be intentional, which is conversion where the proceed is taken away but definitely these could be operational errors. It is good to be able to distinguish between these and shareholders have different types of arrangements with their brokers. Some of them pledge it as collateral and then when you want to realize it, they will run to the exchange, run to CSS and say they sold my shares illegally. I think the stock exchange is taking adequate measures to combat that and some of the things that has been used to combat that is the fact that almost all investors are on trade alert and whatever they do can easily be determined, so the investor can be aware. If he did not authorize it, he has three days to say I did not authorize it. I believe that as everybody embraces e-banking and all other e-services, all of that complaints would be resolved. Definitely, we will continue to have issues of unauthorized sales due to operational errors and due to some other factors. ICT in Stock Broking Business We cannot do our business without ICT. You will find that during the Fuel Subsidy crisis most people were able to trade from their homes, so that is how far we have gone and there is still a lot to be done in terms of payments. Today you can be in Maiduguri and instruct your broker to buy stock for you, credit your account with any bank, anywhere you are across the country and the stock will be bought and your proceeds can be credited to your account. So you do not need to physically go to your broker to transact any buy or sell transactions and that shows what ICT has done in facilitating that. I believe that as the national ICT platform improves, all these things will improve. ICT has actually helped the business tremendously. CBN’s Cashless Policy The cashless policy is a desirable policy and I will say that virtually all the banks started around 1997, 1998 with the use of Visa and Valucard and I think we have come a long way. It is a desirable policy but the only thing some of us do not agree with is the limit because if I can take $5,000 in Nigeria and then enter Britain or any country and I can carry $5,000 as my BTA, I see no reason why we should limit the maximum you can take from the bank to N150,000 which is less than $1,000. Knowing that there are still a lot of challenges outside Lagos; if I want to have a ceremony in my village and I know I can go there with the intent that I can take some money, if that is the period armed robbers visit the village like they did in Ogun state and the banks were shut down for one week, how do I go about it when I need to buy cow and other things? To me, we need to do it right to help the banking system. We need to create incentives for people to do their transactions via ATMs, PoS but allowing banks to make money out of necessity is what I do not like or creating a situation where it becomes fraudulent by issuing several N149,000 cheques and walking to the banks everyday. To me that is an area I think the CBN should look into. We do not need to put penalties on it but we can create sufficient incentives for people not to take cash. Tackling Fraud in e-Payment Services I think with the technology adopted, incidences of fraud will be limited. I believe that it is a real challenge because electronic fraud is something that should be worked on. I believe the banks have done a lot in curtailing and making the system full proof through the operation know your customer (KYC), identity cards and the rest. I believe that we will get used to it. Attaining Single Digit Inflation Rate Inflation in Nigeria and other emerging countries is determined by so many factors. It will be very difficult to bring down inflation one of the reasons being pressure on the foreign exchange and the fact that fuel prices are adjusted in arrears. One of the things the removal of subsidy would have done was to first of all create a pipe in inflation and because things are changing daily based on the movement of exchange rates based on price of crude oil in the international market, then it would have been moderated. We have had this devaluation and price of petroleum products induced exchange rates. Of course we have not seen the government doing a lot of borrowing and then a lot of money coming into the system through the way the federation account is handled. Really, it is going to bring inflationary rate to a single digit. It is desirable, we can plan but because of the structure of our economy, it will still take us a while to attain single digit inflationary rate.