The Managing Director/Chief Executive Officer, Meristem Wealth Management Limited, Mr Sulaiman Adedokun, has faulted the government’s Economic and Recovery Growth Plan for not involving the capital market in its focus. In this interview with FEYISAYO POPOOLA, he states that it may be difficult for the government to achieve growth without the capital market
What do you think about the current state of the nation’s capital market?
The market is currently down and we understand this is because of the political environment of the country. There is a lot of apprehension about foreign portfolio investors right now because they are the largest in number.
Everybody wants stability. That is why we have people selling off their investments and then waiting to see the state of the market before they come back. No matter the level of good results we have, we will still not see investors responding the way they should. This actually creates an opportunity for long-term investors; instead of running away from it, this is the best time for them to invest.
This is because when market is down, prices are down as well. That means there is value that investors can buy into. So, for long-term investors, it will pay them because the investment is not for a short term.
Some people can take their money away and invest it in fixed income, but this is the best time for long-term investors to key into the market.
How can the potential of the market be fully harnessed?
The market has a huge potential. Don’t forget, we are in a developing economy; and in a developing economy, there is a huge gap to be filled.
The gap is so huge that the market will remain so much untapped in some areas.
The capital market needs to be deepened more than this to provide an opportunity for growth in the economy; it is a barometer of growth and development in the economy. When the capital market is down, people believe the economy is down, which provides an opportunity for the government to grow the economy.
The connection between the monetary sector and real sector is the capital market. No economy grows without the real sector and the real sector cannot grow without funds. The funding of the real sector can better come from long-term funds that are from the capital market. Government needs to focus on the capital market because listing of government and private firms on the Nigerian Stock Exchange will enhance the market.
Funds can be raised from the capital market to fund various infrastructure projects and boost infrastructural development in the country from a state of deficiency to a state of sufficiency.
Government’s role is to provide an enabling environment and let the capital market shape the economy. There is a lot to be done by the government in exploring the potential of the capital market.
What area should operators and regulators focus on in improving market outlook?
There is a high level of distortion between the regulators and operators in the capital market. The capital market is an ecosystem where everyone is expected to perform their respective duties. The regulators need to up their game. The stock market crash we had in 2008/2009 was a result of regulatory deficiencies.
Now, there have been a lot of awareness and activities on the part of the Securities and Exchange Commission, and other regulatory bodies. We need more of proactive regulators to ensure that the economy is moved to the next level. Regulators should involve operators by making them to participate actively in the formation of regulations in the industry.
That needs to be sustained so as to be able to tap into the opportunities in the market. The market needs high level of transparency; no investor wants to put money in the market except there is transparency and integrity.
There is a strategic role that regulators and operators need to play to do more in terms of partnerships.
Do you think we have enough products in the capital market to spur the kind of growth people are expecting after elections?
We still have a long way to go compared to developed economies. We need enough awareness and a framework to be worked upon to develop the market. We also have products being introduced into the market; For instance, the Exchange Traded Funds. It provides access to nearly all assets classes but we are just starting in that area.
That supports the fact that there is huge room for growth in terms of product development that will have a ride on derivatives. The derivatives market needs to be developed and groomed as fast as possible so as to enable other products to be developed to meet other needs.
I am aware that there are many activities going on to achieve this. The pace may be slow due to the system, the politics and the likes, but we really need to push significantly to ensure that we get there quickly before it is too late.
Which sector(s) of the economy do you think has tapped the capital market the least?
The telecommunications sector has tapped the least. This is because it has not been active in the market. After the telecommunications sector is the oil and gas sector. Both of them have tapped into the market, but the huge potential to tap the market is more than what they have done.
Imagine if all the telecommunications firms were listed on the stock market, what would have been the situation of the market? It would have been much bigger than what it is. That would also enable many people to invest because people want to invest in good stocks.
The fact that we have few stocks in the market compared to what we have in other countries is limiting investors to a number of stocks rather than exposing them to a variety of stocks to invest in.
It is one of the roles of the government to ensure that there are incentives to deepen the market. The focus on capital market by government can provide the catalyst for economic growth. See Ghana, for example; before MTN was granted the licence for its 4G network, it was asked to go and list on the Ghana Stock Exchange. Those are the kind of things we need.
Any government that knows that the capital market exists and knows its benefits must be able to develop the market.
The Economic and Recovery Growth Plan does not capture the capital market. How does the government intend to achieve growth without the capital market? It will be very difficult. From meeting budget deficits to financing infrastructure, you need to raise money.
How does the government intend to finance capital expenditure alone? But if they come to the capital market to do a long-term fund raising that specifically matches the infrastructure, it will do the economy a lot of good because the long-term financing of the projects is better done using the capital market.
What can be done to encourage more companies to list on the stock exchange?
The government has to create incentives and an enabling environment to encourage more companies to list
With Fintech talking over the trends, how is Meristem prepared to stay ahead of trends in the market?
Technology has always been at the front burner for us because it is a lever. In today’s world, it is difficult for a financial institution to exist without technology. One of the factors that drive growth is through technology. Imagine having to meet a customer’s need in Abuja while you are in Lagos. Branch network may not be the best option; only technology can fill that gap.
We started the first online trading in Nigeria. That is to tell you that we have always been at the forefront of technological advancement. The intention is to make sure that we reach out to many people and create the benefit and comfort provided by technology.
We know that Fintech has come to stay. So, the next thing we’re thinking is how to leverage the technology to provide the best quality service to customers. We have had a lot of collaboration with Fintech companies because we believe that that is what will take us to the next level. We are not where we want to be yet; so we will keep pushing.
What plans does Meristem Securities have for the capital market in terms of expansion?
We want to redefine the industry. We want to please customers by observing them, determining what they need and looking for ways and products to meet their needs in a way that they have satisfaction.
We want to provide leadership and be a reference when it comes to investment management and wealth management in the country.