Mr. Dele Sotubo is the Chief Executive Officer (CEO) of Stanbic IBTC Stockbrokers. In this interview with DGossip247, he discusses critical issues in the capital market and the company’s efforts in attracting interest in the market through stakeholder engagements
There have been agitations for multinational oil and gas companies and telecoms giants to list on the Nigerian Stock Exchange. What efforts are market operators like your company making to encourage them to list on the Nigerian Stock Exchange?
The listing of these companies will help deepen the capital market. The regulators and operators are currently in discussion with government on the best way to ensure that these companies list on The Exchange to help deepen the market. Beyond that, we will continue to play an active role in listing such companies on the NSE. The listing of SEPLAT, an oil and gas company, on the NSE, is a clear example of our contribution, as financial services group, to deepening the NSE.
Investor confidence continues to be a major issue since the market crash of 2008. Reports suggest that over N793 billion was pulled out of the market by foreign investors in 2014. What needs to be in place to sustain the interest of local investors?
Restoring confidence in the market after the global melt down will be a gradual process as activities in the equities market is cyclical. Foreign investment withdrawal from the market in 2014 was largely as a result of Macros fall in oil prices and currency devaluation and exchange rate instability.
Improved macro-economic situation will galvanise investors’ interest and boost retail investors’ confidence in the market. The increase in the number of more sophisticated domestic investors such as pension and asset management and insurance companies should drive participation in the medium to longer-term. We believe that the increase in retail investment products such as ETFs will also encourage retail investors’ participation.
The current reforms in the economy, particularly in power and agriculture, have helped to position Nigeria as an investment haven. Are investors showing strong appetite for opportunities in these sectors?
With the recent GDP rebasing and the reforms around the power sector, we see strong appetite from investors, perhaps not on the stock market now. However, investors have shown increased interest in partnering with Nigerians on power projects and, to a large extent, agricultural transformation.
The challenging macro-eco-nomic environment is likely to slow down the pace of investment on that front as many players wait on the side-lines until the elections are well out of the way and the uncertainty around the fiscal operations of government has been eased.
In the last decade, technology has redefined the operations of the capital market. How do you see technology shaping the stockbrokerage business in the next decade?
The interesting thing about technology is that it fosters efficiency and productivity. It also drives transparency in the capital market. This can also be a mode through which retail investors can be attracted into the market.Many Nigerians using mobile devices can now have access to put their trades through the market. With the introduction of Direct Market Access (DMA) and other similar initiatives, we expect that this will help to improve participation of investors in the capital market.
There seems to be a general disposition by Pension Funds Administrations (PFAs) to Federal Government securities, about 40 per cent of PFA’s investments are skewed in that direction, followed by money market instruments. Investment in the capital market is considerably less. Which factors, in your opinion, other than regulation, determine these investment decisions?
Apart from the perceived low risk appetite of PFAs, which is understandable when we consider the adverse effects of the 2008 stock market crash on portfolio investors, we also believe that the limited number of high quality liquid stocks reduces their options. Lack of depth in the Nigerian market makes the available options limited.
The preference for capital preservation and guaranteed money market yields also contribute to the low risk appetite for equities. Part of the regulation also requires pension funds to report returns on an annual basis, which discourages them from taking the long term view on investments. We expect the listing of more quality companies as reforms in sectors such as the power, oil and gas, telecommunication and agriculture increase demand for capital.
The appointment of Stanbic IBTC Stockbrokers two years ago to manage bonds for the Federal Government was expected by stakeholders to lead to a more robust market for bonds, opening up the market to retail investors. Will you say that stakeholders’ expectations have been met?
Yes, Stanbic IBTC Stockbrokers was appointed by the Debt Management Office as Government Stockbroker to FGN Bonds and part of the duties assigned is to create awareness on Retail Bond trading. Retail investors have started taking advantage of investing in bonds on the secondary market through retail bond trading as this helps to diversify their portfolio and manage their risk.
Stanbic IBTC Stockbrokers Limited has been able to consistently provide liquidity in the retail bond market. We now have retail investors participating in the bond market with a minimum of N100,000 as against wholesale bond market which requires N100 million minimum. We will continue to organise workshops and educate the public on the advantages of investing in bonds.
You were involved in the recent listing of the Stanbic IBTC ETF 30. The exchange traded fund is a relatively new product in the Nigerian market, barely three years old, with only three listings. Do you think that the market is sufficiently mature to appreciate this product?
The market is growing gradually and the ETF will help deepen our market as well as diversify investors’ portfolio and risk. ETF represents baskets of stocks and a simplified method of investment whereby investors have a stake in many companies tracked by the ETF. More awareness towards its benefit will give room for growth. The market will definitely support this product.
Stanbic IBTC Stockbrokers won the NSE CEO award as the best dealing member firm, both in volume and value terms in the capital market in 2014. To what did you ascribe this recognition?
The award reinforces Stanbic IBTC Stockbrokers Limited as the largest stockbroking firm in Nigeria in both volume and value of total transactions executed in 2014. Market data for the year under review showed that Stanbic IBTC Stockbrokers Limited achieved a turnover in excess of 24 billion units of shares, which represented 11.42 per cent valued at over N472 billion or 17.55 per cent to lead both the volume and value tables. Stanbic IBTC Stockbrokers was also the largest stockbroking house in Nigeria in 2013.
We were able to provide flows and market intelligence to our clients, which helped us generate trades, coupled with our participation in major primary market transactions. We uphold integrity, standard operating processes and professionalism in our dealings. These continuously drive client patronage and great ethical standards. We also leveraged on the expertise of our research team in providing value added insights for our numerous clients.
Ethics and corporate governance are major talking points in the market, particularly after the 2008 market crash. How demanding is the corporate governance processes at Stanbic IBTC Stockbrokers and how do you ensure that staff play by the rules?
Stanbic IBTC Stockbrokers Limited is known for integrity and professionalism, which comes from strong corporate governance. We have a robust compliance and monitoring team that ensures that all rules and regulations are adhered to. We will continue to uphold standard operating procedures, actively participate in the market without compromising our values and have every staff understand the company’s position at all times. We have zero tolerance for non-adherence to rules and regulations by staff members. Personal account trading rule and code of conduct are in place, which guide the activities of staff.
Stanbic IBTC Holdings has positioned itself as a financial supermarket, with interests in several sectors of the economy, including stockbrokerage. As a subsidiary of Stanbic IBTC Holdings, are you benefiting from cross-selling of solutions?
Certainly, Stanbic IBTC Stockbrokers Limited is a member of the Stanbic IBTC Holdings, a full financial services group with a clear focus on three main business pillars – Corporate and Investment Banking, Personal and Business Banking and Wealth Management. We look to leverage on the group’s African and global footprint to attract the biggest clients into the Nigerian Capital markets.
As mentioned earlier, the listing of SEPLAT is a clear example of how we benefit from Stanbic IBTC Holdings. The transaction was driven by the combination of our Corporate Finance and Equities brokerage business. The international presence of our parent company also played a major role as the stock was also listed on the London Stock Exchange, making it the first dual NSE/LSE listing. Cross selling exercises create immense opportunity for attracting and closing deals inhouse. We will continue to take advantage of this.
What should investors expect from the capital market in the second half of 2015?
We expect continuous volatility in the equities market as macro concerns linked to the falling oil price and currency drive investor sentiment. The passive position of domestic investor has not helped the situation. Despite the bearish outlook, we expect trading opportunities to continue to emerge for shortterm investors while longerterm investors take advantage of the falling prices to increase exposure in quality stocks. However, we expect to continue to see investors interest in quality names.
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