One of Nigeria’s leading investment banking groups, LeadCapital Plc, has launched a new mutual fund called Lead Balanced Fund (LBF).
In this interview with Nairametrics, the Group Managing Director of LeadCapital Plc, Mr Wale Adewumi, gave a detailed insight as to why investors should take advantage of the company’s offer of 5 million (units of N100 each at par).
Mr Adewumi also used the occasion to talk about the milestone LeadCapital Plc has recorded since its establishment.
Below are the interview excerpts:
Nairametrics: What do you think people need to know about Lead Capital Plc?
Adewumi: To talk about LeadCapital Plc is like giving a whole day’s lecture. We are a leading investment bank in Nigeria and our footprints strategically cut across the country. We have been around for over three decades.
Since we came on board, we have been involved in several landmark transactions. We are very strong in the federal government’s privatisation exercise. We also have subsidiaries out there blazing their own trails; we have Lead Securities and Investment Limited (“LSI”) which is a stock brokerage firm with a large clientele and doing very well in the stock market. LSI has a trading portal named LeadTrader. LeadTrader has been up and running for about four years now and we are the second firm to launch such platform in the Nigerian capital market. It is a platform that allows investors to trade on securities listed on the Nigerian Stock Exchange at anytime and anywhere they are. It also has an app that enables the use of mobile devices like phones to trade.
Lead Capital has another subsidiary called Lead Asset Management Limited (“LAM”), which is in the business of fund/portfolio management. LAM assists investors to invest their money in different assets classes for decent returns.
Nairametrics: How best can you describe what Lead Balance Fund entails?
Adewumi: The Lead Balance Fund, which we have just launched its initial public offer, is a fund that seeks to offer investors the benefits you enjoy from fixed income securities, together with what you benefit from investing in equities.
It is, however, pertinent to understand that equities for some people right now seems a no-go area. Equities, if you understand it very well, is an asset class that gives investors the highest yield on a long run basis. Although, there can be a bearish season where prices are not going up, this is often dictated by the state of the economy. As we all know, Nigeria was in recession about two and a half years ago and only started recovery towards the middle of last year. In view of this, the post-recession effects are still lingering in the economy.
Most companies are not doing very well in terms of profitability as a fallout of the recession that the country went through. The stock market has been stagnated as a result of this. Interestingly, post-recession, the economy is expected to witness a boom again and as that happens, we would see the reflection of that in the equities market.
We are at a point where we should begin to see improved performance by the corporates, especially the listed companies which will translate into price gains for investors in their equities.
So, at this point that we are launching the Lead Balanced Fund, is really the most auspicious time to do this, in the sense that stock prices are at rock bottom now. The prices of equities are really at bargain levels now. When we invest now, over the next year or so as I said, when we expect the economy itself to have experienced some upward trend and growth, stock prices would also gone up. The level of the growth can be quite significant, it can be up to 50% growth or some stocks can even double their prices, as the case may be.
As an investor in the Lead Balanced Fund, you will benefits from these gains, much more than what you get from investing in just the fixed income securities.
Nairametrics: What is the confidence you are giving to people for the mouth-watering returns?
Adewumi: I think for everybody, we just have to be optimistic about the future of our economy. The Government is really the one that is dictating the pace of our economy.
Without campaigning for the incumbent administration, we can see the strides they are making in different sectors of the economy. Transportation, for instance, the rail network they are building will translate into huge economic benefits. The agriculture sector is another area where the Government is really committed to giving more support.
Besides that, the Nigeria Commodity Exchange will soon take off. When the exchange takes off, it will help in efficient and effective trading of agriculture produce across the country. For the power sector, even though we are not seeing much improvement, we should know that the sector has now been privatised, and following the privatisation, there has been continuous engagement to ensure that the lingering problems are resolved. Ultimately, when power supply increases, our economy will be better for it.
From all these explanations and observations that I have made about the government, one would naturally think that the future is looking brighter. The government is working towards providing a more enabling environment to operate.
In addition, some of the indices coming up are very attractive; inflation is down, while our external reserves is growing. These are indications that the future is looking better for Nigeria.
Nairametrics: Is this fund open to everyone?
Adewumi: As a mutual fund by definition, it is a publicly-accessible fund. It is regulated by the Securities and Exchange Commission and members of the public can confidently invest in it, it is safe and every investor should embrace it and enjoy the rewards that come with it.
Nairametrics: How will you differentiate the Lead Balanced Fund from the initially-launched Lead Fixed Income Fund?
Adewumi: The difference it has compared with the first one (i.e., Fixed Income Fund), is that it takes advantage of the fact that equities are usually in the long-term, much more rewarding than the fixed income.
Trying not to play-down the fixed income, which gives you a steady and a stable return, any investment you make into equity now, is expected to give you superior returns in 2-3 years. This is much higher than what you would get with fixed income. This is really the catch for the balanced fund.
FG denies report on reintroduction of Covid-19 restrictions, clarifies position
The FG has denied media reports that it has reintroduced new Covid-19 restrictions as part of measures to curb the spread of the new India variant into the country.
The Federal Government has denied media reports that it has reintroduced new Covid-19 restrictions as part of measures to curb the spread of the new India variant into the country.
The government explained that it was only maintaining the curfew under phase 4 of the phased restriction of movement adding that it never relaxed the curfew imposed earlier under phase 3 of the eased lockdown.
This clarification was made by the Secretary to the Government of the Federation (SGF) and chairman of the Presidential Steering Committee, (PSC) on Covid-19, Mr Boss Mustapha, on Monday, saying that it was erroneously reported.
Mustapha said the announcement by the National Incident Manager, Dr Mukhtar Mohammed, during the PSC press briefing was taken out of context because the federal government did not relax the curfew imposed earlier under Phase 3 of the eased lockdown.
What the SGF is saying
Mustapha said, “Under the Fourth Phase of restriction of movement, night clubs, gyms and others will remain closed till further notice; while all citizens will also ensure that mass gatherings outside work settings do not exceed a maximum of 50 people in an enclosed space.
These restrictions have been in existence under the Third Phase but are being maintained under Phase Four of the phased restriction of movement.’’
He further said because people had been violating the safety protocols, they had forgotten that the protocols were never relaxed in the first place.
The SGF said, “Therefore, the PSC hereby reiterates that there is no newly introduced lockdown. There is no need for the panic that followed the announcement of the Fourth Phase of the phased restriction of movement.
We will continue to appeal to members of the public to comply with these restrictions because they are necessary safety measures against contracting the dreaded coronavirus, which is still ravaging human populations across the world.’’
Also, the Minister of Information and Culture, Alhaji Lai Mohammed, at a meeting with Online Publishers on Tuesday, in Lagos, denied reports on the introduction or even reintroduction of new restrictions on Covid-19.
Alhaji Lai Mohammed said there were no new restrictions, adding that the PSC on Covid-19 only reiterated existing regulations to control the spread of the disease. He said the only thing that was newly introduced was that anyone, including Nigerians travelling from Brazil, Turkey or India, must go through compulsory quarantine.
In case you missed it
It can be recalled that there were media reports that the Federal Government had reintroduced Covid-19 restrictions across all 36 states and the Federal Capital Territory (FCT) following the disturbing resurgence of the coronavirus pandemic with the new India variant.
President Muhammadu Buhari had approved the transition of the Presidential Task Force (PTF) on Covid-19 to PSC on Covid-19, with effect from April 1, 2021, with a modified mandate to reflect the non-emergent status of Covid-19 as a potentially long-term pandemic.
Inflationary concerns may lead to higher rate; Why 3 CBN MPC members want rates hiked
Despite the slight push back, the MPC decided to hold the rates, owing to the supply factor and the weak economic recovery of Nigeria.
Three members of the CBN’s Monetary Policy Committee proposed a rate hike citing several factors including Nigeria’s galloping inflation rate. Their decisions contradict those held by other members of the committee who voted for a continuation of the current monetary policy rate of 11.5%.
This was contained in the personal statement of members of the Monetary Policy Committee (MPC) in the meeting held on the 22nd and 23rd of March 2021. The decision to hold the rate steady was not unanimous as three out of the nine members voted to increase rates. These disconnects from the majority took their stand as a result of inflationary concern facing the Nigerian economy.
According to the Central Bank of Nigeria Communiqué No. 135 Of The Monetary Policy Committee Meeting, the members who were in support of hiking rates are namely; OBADAN, MIKE IDIAHI; SHONUBI, FOLASHODUN A.; and ADENIKINJU, ADEOLA FESTUS. The prime reason was the risk of high inflation on the economy.
Despite the slight push back, the MPC decided to hold the rates, owing to the supply factor and the weak economic recovery of Nigeria. The CBN governor Godwin I. Emefiele and five others were in support of maintaining rate despite unstable inflation postulating that supply factor is fundamental to healthy recovery especially as a result of the pandemic.
Emefiele said: “Supply constraints remain the key driver of both the inflationary pressure and the weak growth that we observe today. The weak GDP recovery provides an argument for further policy ease to support growth, but rising inflationary expectations justify a tightening. My inclination today is for a more balanced and cautious approach to monetary impulses.”
Even though Emefiele admitted that inflation rate could rise in the near term, he feared that an adjustment of the MPR could worsen Nigeria’s “conditions” especially with the tepid recovery we are still experiencing.
“I reiterate the imperatives of targeted lending to productive sectors to sustain growth without undermining our core objective of price stability. Based on the near-term inflation expectations and growth outlook, my position is to maintain the current stance of monetary policy and intensify our interventions. An adjustment today could in my view, destabilize the fragile recovery and worsen domestic conditions.”
However, some members who did not share the view and speculation about higher inflation may affirm this stand OBADAN, MIKE IDIAHI postulated that the CBN should put more pressure on deposit money banks to comply with the LDR scheme, according to him.
OBADAN stated that, “We are faced with the dilemma of low and fragile growth that needs to be reversed, accelerating inflation also needs to be tamed because it is Classified as Confidential and has a negative impact on people’s welfare and macroeconomic stability which is required for enhanced investment and production. Orthodox policy instruments available to the Bank are not capable of achieving the desired goals of strong growth and inflation control simultaneously without sacrificing one for the other. Stability needs to be brought to bear on the policy-induced drivers of the current inflation acceleration, while the MPR can be raised marginally with three objectives in mind: to signal the sensitivity of the Bank to address any possible monetary influence on inflation.”
A skeptical and more hawkish Obadan also suggested that the recent inflation rate was also due to monetary policy reasons such as increased lending due to CBN’s LDR Policy, depreciation of the naira and a lower interest rate environment which drives people into assets that provide a hedge against the naira. He also suggested that more efforts should be geared towards attracting foreign portfolio inflows.
“The factor of monetary influence on inflation cannot be ruled out completely. It interacts with other factors to drive inflation, perhaps, in a limited role. Against the backdrop of the Loan-to Deposit Ratio (LDR) policy, I do not expect the MPR adjustment to adversely affect the volume of lending significantly. To this end, we should put more pressure on the deposit money banks to comply with the LDR policy. Marginal upward adjustment of the MPR can also signal the desire of the Bank to tackle the phenomenon of negative real interest rate. Finally, in the short term, it could be a signal to foreign private investors while we implement measures to ensure stable sources of external reserves accretion in the medium term. Yes, foreign portfolio investment flows are indeed hot monies that tend to be very volatile. However, under conditions of improving growth, such flows could play a stabilising role in the economy. So, my vote is: raise MPR by 50 basis points and leave the other parameters as they are.”
SHONUBI, FOLASHODUN A., on the other hand, emphasized inaction was not an option considering how weak and fragile the economy currently is.
“Clearly, not doing anything will portray the Bank as abandoning its mandate of price stability. In as much as growth remains weak and fragile, we cannot afford to pull the brake to avert a more damaging reversal of the trend in output growth. Notwithstanding that the present inflationary pressure is largely attributed to non-monetary factors, its persistence, and reversal of the moderation in month-on-month growth stresses the need for the Bank to take immediate action. Whereas it may appear unfeasible to deploy the conventional monetary policy to pursue growth and tame inflation simultaneously, the Bank cannot abandon either of the objectives at this time.”
He also called for the continued intervention in key sectors of the economy postulating that this will boost economic growth.
“I believe the Bank’s interventions through the aggressive provision of credit should continue as a complement to the ongoing effort by the fiscal authority to boost economic activities. As the Government acts more decisively to discourage bad behaviour and restore orderliness, we must collectively work to overcome the insecurity challenges. At the same time, we must begin to tighten to deal with the subtle monetary component of inflationary pressure and curb spiraling inflation, without suffocating economic growth.”
Adenikinju, the last of the trio emphasized on the need for the CBN to focus on addressing higher inflationary environment. He also explained that addressing inflation will signal to economic agents that the central bank is keen on stabilizing prices thus curbing the demand for forex.
He stated that the persistently high inflation rate is cause for concern and that the CBN should begin refocusing its efforts to counter it, signaling to the wider economy that the CBN’s top priority would help to minimize foreign exchange market excesses, reduce liquidity-induced inflationary pressures on the economy, and protect fixed-income earners.
“The rising global commodity prices, plus the depreciating exchange rates and relatively high costs of shipping and clearing of goods at the Nigerian ports have all contributed to high imported inflation and reduced the extent to which imports could have mitigated the impacts of high domestic food prices in the short term. However, the weak economic growth, rising unemployment and poverty also mean that we cannot aggressively pursue strict price stability at a time we are slowly crawling out of recession. I see the CBN intervention credit as complementary and not a substitution to credit from the deposit money banks. Also given the focus of capital expenditure of the government this year, it then means that we can focus on growth and tackle inflation at the same time. However, I believe the persistently high inflation rate is concerning enough for CBN to start shifting its focus to address it. Signaling to economic agents that price stability remains the focus of the CBN will also curb some of the excesses in the foreign exchange market and reduce the liquidity induced inflationary pressures on the economy and protect fixed income earners.”
Whilst the trio may not have gotten their wish, we believe the CBN might raise rates to cool off the galloping inflation rate. The CBN has gradually raised rates on its short-dated securities, a clear indication that it is worried about widening the negative real interest rate emanating from rising inflation.
Nairametrics | Company Earnings
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- Seplat Petroleum Development Company postpones Q1 2021 dividend payment date.
- FMDQ approves quotation of MTN’s Commercial Paper worth N73.5 billion.
- MTN Nigeria issues a 7-Year Series 1 bond worth N110 billion.
- Caverton Offshore Support Group reports profit after tax of N520 million in Q1 2021.
- Okomu Oil proposes dividend worth N6.7 billion for shareholders.