Several Nigerians, including Vice President Yemi Osinbajo, have called on the apex regulators of the banking and Financial market sectors, the Central Bank of Nigeria and the Securities and Exchange Commission (SEC) to implement a regulatory framework for Cryptocurrency transactions in the country.
In this interview with Nairametrics, Sonnie Ayere, the Group Chief Executive Officer of DLM Capital Group, a firm that has been at the forefront of creating alternative financing solutions for businesses and providing bespoke innovative ideas to access funds for growth, bared his mind on the subject.
To him, without a status of cryptocurrency as a medium of financial exchange by the majority, it could suffer setbacks and remain trading within speculative confines related to commodities, like gold.
What growth trajectory do you predict for the Nigerian economy in 2021 after recovery from recession?
We believe that the post-recession economy for Nigeria in 2021 would reflect significant growth as the effects of the Covid-19 pandemic on the economy wanes with the resumption of vaccinations to beat back its spread. Businesses requiring customer visits were most severely affected in 2020 by lost patronage. While manufacturers, and marketers alike, carried on with stable, unthreatened production levels and supply of goods; the challenge was how to get customers to pick and purchase them. This inspired a rise in demand for delivery options, by both customers and sellers; thus, we have indications of further potential in new and existing delivery and logistic companies, online retailing, and online payments for sales beyond fixed locations or outlets.
We expect the post-recession economy to exceed its current state in economic performance as this is a state for which most movement restrictions have been eased, and the conduct of business for physical transactions has resumed. We believe that the earlier formed opinions on the Nigerian economy forecasted a more than a transient period of recession relative to other countries facing the same. We believe this was premised on significant negative expectations of anticipated weak responsiveness from the government, high infection rates and perceived challenges of financing and management of the pandemic.
The year 2021 resumed with increased activity in the global economy which has induced higher price levels for commodities following a rebound in demand. In Nigeria’s case, this is relevant to the nation’s Crude Oil exports. Nigeria is again opportune with increased revenues and a chance to increase its savings.
Despite the disruption triggered by the COVID-19 pandemic, Agriculture, ICT and Financial Services sectors have remained resilient. What do you think is responsible for this and which sectors do you see driving further growth in 2021?
For these three sectors mentioned, the most profound contributions came from the ICT services, because it largely facilitated greater levels of transactions for the financial sector particularly with regards to growth in electronic payments and online merchandising. Agriculture particularly thrived as supply chains faced little threats with movement restrictions, and unlike most other sectors, enjoys steady demand. The prize for value should go to ICT related services for easing the sales of goods and services away from physical markets where people would ordinarily transact.
The Federal Government has presented a budget estimate of 13 trillion with a historic deficit of N5 trillion. How realistic do you see the 2021 budget in line with the assumptions?
Overall, higher oil prices translate to stable expectations on financing with crude oil production and sales. The expectations of performance from that should be covered with increased global energy consumption. Higher revenue from sales also affords the country a greater capacity to service future debt financing payments, which also translates to lower borrowing costs.
What would be critical is the government’s success in increasing tax revenues in the face of depressed economic activity and its ability to raise debt and conduct asset sales if needed.
What is your assessment of the investment climate in Nigeria on the back of COVID-19?
The Investment climate in Nigeria following the Covid-19 outbreak is shaped to reflect the economic situation following the impact felt within average households, and these are lower average earnings per household, a reduction in businesses that can breakeven, and a need for preserving wealth.
For the Financial Markets, the trend is of lower yields for all fixed-income investments; these span government treasury bills and bonds, corporate debt, that is commercial papers and corporate bonds, and even rates on bank deposits. For the stock market, 2020 featured a strong rally though corporate performances were varied, clearly reflecting differences in customer patronage of underlying sectors. We believe it was a clear search for yield as many companies offered attractive dividends relative to their trading prices.
What will be the outlook for the Nigerian fixed income market in 2021 in terms of the regulatory landscape and opportunities for investors?
For the fixed income market for 2021, we anticipate an increase in corporate issues from companies familiar with the financial market and “in-pipeline” transactions from new corporate prospects. The focus would be access to the current lower market rates at different tenures and refinancing their existing debt at these lower rates. We expect to also see increased issuance of commercial paper to shore up working capital for financing inventory.
We anticipate support from our regulators as we push for the inclusion of more companies into the opportunity space for all stakeholders in our domestic financial markets. However, there appears to be a push for higher rates by the main buyside operators, hence an increase in FGN yields.
The Nigerian equity market was on a rally that triggered a circuit breaker on the NSE recently, what does this mean for the market’s outlook?
The impressive rally of equities in 2020 was triggered by investors searching for higher yields. It is only rational that some investors would reconsider their aversion for stocks and seek the upside offered by rich dividend income relative to fixed income investments at the time. Institutional investors have for a recent while favoured fixed income and backed down on taking on equities; fixed income yields in the market had sufficed for the performances of their managed portfolios. We have seen this change with the rally and we do hope for better corporate performance to sustain strong fundamentals for each component industry represented on the Nigerian Stock Exchange All-Share Index.
From an investment perspective, what investment options would you advise investors (retail and institutions) to focus on in 2021?
2021 presents opportunities for value investors as some domestic company stocks remain undervalued relative to similar companies in other foreign stock markets. A domestic investor should focus on companies that have either better endured or increased their sales channels beyond the pre-pandemic levels.
In the fixed-income space, it is important to note that upcoming deals will seek to capitalise on current market offered rates as some sectors of the Nigerian economy ease back into profitability under rising economic activity. Current traded debt securities would be more attractive and priced to yield lower based on improvement in economic conditions.
The theme for investment should be the location of the business front. Many location-based businesses that an individual would traditionally visit to view and purchase merchandised products have had to step up on selling efforts by expanding sales channels beyond their physical location by way of promoting brands and products via social media, their e-commerce sites and offering online options of delivery and payment.
The frontier for distribution has been stretched to include mobile devices with online payments; investors must seek where revenues are secured with a focus on distribution costs.
What is the future of crypto regulation in Nigeria, and what are the gains of Nigeria adopting a digital currency?
Ultimately on admission as an acceptable medium of exchange; some form of regulation under the ambit of the monetary authority and the securities exchange commission would be handed down to manage its effects on the economy as currencies do. The adoption of cryptocurrency as an acceptable medium of transactions included in monetary resources across more countries would most likely precede its adoption in Nigeria; we do feel these would be soon addressed by individual countries and the International Monetary Union as full adoption of cryptocurrencies quite literarily portend some displacement of currently accepted international currencies in international trade, a development member countries which own the major currencies would most likely resist; and of course, countries with currencies out of this group, would most likely support.
Without a status of cryptocurrency as a medium of financial exchange by the majority, it could suffer setbacks and remain trading within speculative confines related to commodities, like gold.
Some critics have argued that there are other ways for the CBN to curb illegal transactions instead of placing a ban on crypto transactions. What is your take on this?
There is no argument that there are other ways to curb illicit flows, but with an unregulated status, it would be natural for the apex bank to view some transactions as ‘rogue’; that is, operating without oversight, controls or data on source and destination of transactions. Until the monetary authority props its infrastructure to monitor and regulate this, cryptocurrencies would be seen to support parallel transaction ecosystems.
Corporate Nigeria spends N31.22 billion on travel expenses in 2020
According to data obtained by Nairametrics Research, travel expenses of major corporations in Nigeria dipped by 36.97% in 2020.
Corporate Nigeria represented by the largest listed companies on the Nigerian Stock Exchange experienced a reduction in business travel expenses in the year 2020.
According to data obtained from the audited financial statements of the top 30 companies listed on the Nigerian Stock Exchange (NSE) known as the NSE-30 and verified by Nairametrics Research, travel expenses dipped by 36.97% from N49.54 billion recorded in 2019 to N31.22 billion in 2020.
Travel expenses include flight tickers, hotel expenses, cost of renting and maintaining private jets, local interstate and intrastate transportation etc.
- Of the 30 companies considered, only 3 of them increased their travel expenses in 2020. Notably, Guinness increased its travel expenses by 283.1% from N261.4 million to N1 billion in the review period.
- Nascon Allied Industries and Presco Plc incurred a sum of N91.8 million and N2.02 billion in travel expenses, representing a 125.2% and 33.7% increase respectively.
- On the other hand, MTN Nigeria recorded the highest decline in travel expenses, reduced by 79.9% to stand at N964 million as against N4.79 billion recorded in 2019. Stanbic IBTC followed with a decline of 60.95% to stand at N676 million.
- It is worth noting, that some companies were not included in this study as they did not disclose their travel expenses during the period under review.
Why the drop?
The drop in travel expenses was expected as the entire private sector experienced a lockdown for most parts of the year due to Covid-19. The Federal Government introduced movement restrictions on land, sea, and air commute in response to the spread of the Covid-19 virus.
- This resulted in the cancellation of business travel expenses across the commercial and political nerve centres of the country. Bearing the brunt of this cut in expenses were airlines, hotels, and the entire travel industry who suffered massive revenue losses.
- The travel industry has been one of the worst-hit sectors due to the COVID-19 outbreak with lockdowns, travel bans, restrictions, and quarantines, which have had a severe impact on business travel for corporate entities in Nigeria.
- High travel cost implications, hotel rates, and reduction of airline services also made companies resort to phasing out in-person meetings and business travel, as it is more affordable and productive to go digital.
- The deployment of technology has helped companies cut their travel expenses since part of the key reasons for business travel is for conferences, meeting suppliers and customers. Going forward, video calls show strong potential to replace in-person meetings, resulting in fewer business travels.
- Additionally, business travels that are meant for training and other learning activities can be done through e-learning.
- The consistency of corporate entities in adopting technology by going digital will likely continue to reduce business travel expenses of corporations in the country.
Gains and losses
On the flip side, online virtual work from home tools such as Microsoft Teams and Zoom recorded massive revenue boost as the private sector and even government relied on them to connect with clients, employees and other stakeholders.
- Unfortunately, Nigerian businesses, particularly the tech sector failed to take advantage of the travails of the hospitality sector losing much of this revenue to the likes of Microsoft, Google, Netflix, and Zoom. Nevertheless, other Nigerian tech companies, especially in the entertainment, payment, savings and loans space all recorded a significant boost in topline revenues.
The top 5 spenders
The increase or drop in travel expenses for some of the companies under review suggests the approach management took in response to the Covid-19 lockdown. While some reacted by going completely remote as indicative of their numbers, others continued spending, perhaps due to an inefficient cost structure that could not be scaled down despite the imposed lockdown.
Access Bank (N7.15 billion)
Access Bank Plc spent a total of N7.15 billion on business travel expenses in 2020, representing a reduction of 31.9% compared to N10.5 billion recorded in the previous year.
- The tier-1 bank accounted for 22.9% of the total travel expenses incurred by the top 30 companies on the NSE.
- The bank’s total asset as of December 2020, stood at N8.67 trillion, representing the highest on the NSE.
UBA (N4.94 billion)
United Bank for Africa incurred a sum of N4.94 billion on business travels in the year 2020. Its travel expenses reduced by 30.1% compared to N7.06 billion recorded in 2019.
- Its expenses accounted for 15.8% of the total recorded by companies under consideration.
- UBA recorded a growth of 27.7% in profit after tax from N89.1 billion recorded in 2019 to N113.8 billion in 2020.
FBN Holdings (N3.51 billion)
FBN Holdings the parent company of First Bank of Nigeria, one of the major financial institutions in the country, spent a total of N3.51 billion on travel expenses in the year under review.
- The tier-1 bank reduced its business travel expenses by 48.24% from N6.78 billion recorded in 2019 to N3.51 billion.
- Also, FBN Holdings accounted for 11.2% of the total business travel expense of the companies under consideration.
- It is worth noting that FBN Holdings classified its travel expenses as passages and travels.
Dangote Cement (N2.11 billion)
The most capitalized company on the Nigerian Stock Exchange, valued at N3.7 trillion spent a total of N2.11 billion on business travel expenses in 2020.
- The foremost cement manufacturer in Nigeria recorded a 13.8% decline in travel expenses from N2.45 billion recorded in 2019 to stand at N2.11 billion in 2020.
Presco Plc (N2.02 billion)
Presco Plc, a fully-integrated agro-industrial establishment specializing in the cultivation, extraction, refining, and fractionation of crude palm oil into finished products, spent a total of N2.02 billion on travel expenses in 2020.
Its travel expenses in 2020, represent a 33.71% increase compared to N1.51 billion recorded in the previous year.
- It also accounted for 6.5% of the total travel expenses recorded by the companies under consideration.
- Zenith Bank – N1.88 billion
- Seplat – N1.26 billion
- Guinness – N1 billion
- MTN Nigeria – N964 million
- Fidelity Bank – N964 million
Note: Fidelity Bank classified its expenses as travelling and accommodation, while MTN Nigeria as Trainings, travels and entertainment cost.
New Management set to take charge at GT Bank as list of appointment and exit leaks
A major Management restructuring is at the final stages of completion at GTB, one of Nigeria’s most respected commercial banks.
A major Management restructuring is at the final stages of completion at Guaranty Trust Bank, one of Nigeria’s most respected commercial banks.
Sources with knowledge of the matter informed Nairametrics that a clean sweep of top management staff above the age of 45 has been effected as current maverick MD/CEO Segun Agbaje prepares to retire as MD/CEO of the bank and proceed as MD/CEO of the bank’s Holding Company.
Segun Agbaje is expected to leave following the end of his 10-year tenure as Managing Director of the bank.
According to multiple sources, the bank is set to announce Miriam Olusanya as its new Managing Director. We understand the Central Bank has already been notified and a formal announcement could be made anytime soon.
In an internal memo dated April 28, 2021, and seen by Nairametrics, Thomas John has been appointed Managing Director of GTB West Africa while Bayo Veracruz was appointed Managing Director of GTB East Africa.
Others are Olayinka Odusote as Divisional Head, Digital Banking, an important position considering the bank’s ambition to transform into a full-fledged digital bank. Ijeoma Esemudje is appointed Divisional Head Corporate Bank Mainland & Agric.
As part of the management restructuring already in effect, two of the oldest and revered Executive Directors of the bank have already been asked to retire after illustrious years of service to the bank. Nairametrics also understands 4 General Managers out of 9 have also been asked to exit the bank paving the way for younger executives mostly under the age of 45 to take charge.
A list of appointments and exits purportedly approved by the board is already being circulated across several social media groups on WhatsApp and Telegram. Nairametrics cannot confirm the authenticity of the list and although officials at the bank did not confirm the list, they stated that a press release would soon be made to announce the appointments.
Recruitment vs Selection Process?
In September 2020, Agbaje disclosed during the bank’s investor earnings call that GTBank was already looking for its next Managing Director. According to him, five of the bank’s Executive Directors were in line for the top job and were at the concluding stages of the recruitment process.
“What we are looking for now is a Managing Director for Guaranty Trust Bank Nigeria. The process has started; we have 5 Executive Directors and so all of them are going through the process at the moment.
We are working with a consulting firm in the UK ….. at the end of this process which will end at the beginning of the fourth quarter, we will have a Managing Director for GT Bank Nigeria.”
Nairametrics | Company Earnings
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- Okomu Oil proposes dividend worth N6.7 billion for shareholders.
- Ardova Plc confirms appointment of Oladeinde Nelson-Cole as secretary.
- Cadbury Nigeria Plc set to hold 56th Annual General Meeting (AGM) on June 16.
- FCMB Group Plc appoints Muibat Ijaiya as Director.
- Afromedia Plc reports a loss after tax of N27.3 million in Q1 2021.