Tajudeen Olayinka is an expert in financial engineering, investment banking, and the securities market. He is also the Chief Executive Officer of Wyoming Capital & Partners.
In this interview with Nairametrics, he speaks on issues bothering Nigeria’s capital market and other challenges in the nation’s economy.
Enjoy the conversation.
NAIRAMETRICS: How would you assess the performance of the Nigerian economy since the beginning of the year?
Tajudeen Olayinka: The Nigerian economy has not performed well since the beginning of 2022, and this has been to the dissatisfaction of most economic agents. If we assess it from four key parameters, the result is negative.
From the point of view of output growth, the slow GDP growth, averaging about 3% since the beginning of the year, is nothing to write home about, as an economy that is seriously challenged and far away from full employment level should not be doing a single-digit growth rate. This is the reason a large number of the population is still enmeshed in absolute poverty, as more and more people are becoming unemployed.
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From the point of view of price stability, we have seen the worst inflationary pressure in recent years, and this is not a coincidence, as the current administration of President Muhammadu Buhari hasn’t been able to stem the tide of rising inflation since it came to office in 2015.
From the point of view of unemployment, it is also the worst in recent history, judging from the most recent official statistics. And when we consider the external sector, the result is negative, as the exchange rate policy of CBN hasn’t helped to create a desirable external balance. So, from these four parameters, the economy hasn’t done well.
NAIRAMETRICS: What is your take on the investment landscape in the country?
Tajudeen Olayinka: I do not need to write a new story on the investment landscape. We have seen how investors have had to reprice securities across markets and instruments, including loans and advances by banks on a consistent basis in recent times.
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This does not augur well for a struggling economy like ours, as it is also responsible for the rising cost of capital in the economy, which is making it increasingly difficult for real sector businesses to raise money at a lower cost of capital. This could threaten the capacity of the economy to increase the level of capital formation.
NAIRAMETRICS: What are the challenges faced by investment banking and stockbroking in Nigeria?
Tajudeen Olayinka: The challenges faced by investment banking institutions and stockbroking firms are not different from what other businesses are going through when an economy is challenged in the way we have witnessed in the last few years.
We have seen so much pressure on the market in the area of transaction taxes because the government now relies on market operators to generate revenue, for fund fiscal deficit. This is upsetting the market. Another thing to consider is the state of the market itself.
The market hasn’t completely come out of the global financial crisis of 2008/2009, as investors’ confidence is still shaky. That is the reason public companies, especially those listed on the NGX Exchange are finding it increasingly difficult to raise equity capital to fund growth.
The recent hijack of unclaimed dividends by the government and the newly reintroduced capital gains tax are other issues of concern to market operators and investors.
NAIRAMETRICS: What are some of the prospects of fund management in an emerging economy like Nigeria?
Tajudeen Olayinka: The prospect for fund management in Nigeria is quite high, as it offers an additional opportunity to cater for the interest of retail investors and high-net-worth individuals who are not so savvy about the technicalities of managing profitable portfolios.
It is one important area the Securities and Exchange Commission (SEC) has continued to pursue with vigour. More stockbroking firms now have asset management companies as active subsidiaries.
NAIRAMETRICS: Most portfolio managers don’t look at retail investors rather they target high-net-worth investors what structures. What plans Do you does your organisation have to encourage retail investors as regards mutual funds?
Tajudeen Olayinka: We don’t engage in retail business or clear-cut asset management. What we do is a market-wide partnership that serves the long-term interest of the market and clientele. We engage more in advisory and customised research services. Our partnership works.
NAIRAMETRICS: What factors do you think could make investors come to the market or stay in the market?
Tajudeen Olayinka: What will make investors stay in the market is the implementation of market-friendly policies that reduce volatility and encourage investment. This means that government and regulators must be up and doing.
NAIRAMETRICS: What are your takes on the investment landscape in the country amidst the build-up to the 2023 elections and interest rate hikes?
Tajudeen Olayinka: The 2023 elections are not a real problem to the market or investments in Nigeria because the frontline candidates in the presidential election are market-centric, and so, should be a boost to investors’ confidence. The major challenge is the economy, especially in CBN’s response to rising inflation and poor fiscal management.
The last three interest rate hikes by CBN have caused so much disruption to the market, as it is responsible for the prolonged repricing of securities across markets and instruments, including loans and advances by banks. This is the real problem.
NAIRAMETRICS: Do you think the offshore listing being embarked upon by some companies has a direct impact on the Nigerian economy?
Tajudeen Olayinka: Yes, it should have a direct impact on the economy if we have more public companies in good financial states embrace cross-border listing. What it means is that they can raise capital in foreign currencies outside the shore of the Nigerian market.
It is also a way of the internationalising domestic capital market, as more securities can derive proper pricing in two or more markets. This will enable them to contribute to the development of the economy.
NAIRAMETRICS: What are the challenges people face with getting dividends and why do unclaimed dividends remain high?
Tajudeen Olayinka: Most of the challenges are man-made, and with the adoption of e-dividend, it becomes easier for investors to get their dividends early enough for reinvestment in the market or elsewhere.
Another issue is with non-resident investors who did not update their accounts before relocating abroad. But with time, we shall overcome the issue of unclaimed dividends. I believe SEC is working hard in trying to minimize issues around unclaimed dividends.
NAIRAMETRICS: What is your take on the state of disequilibrium in the foreign exchange market?
Tajudeen Olayinka: CBN hasn’t adopted a flexible exchange rate system, as we still have a long list of items on the official foreign exchange restriction list. This is the reason for the state of disequilibrium in the foreign exchange market and has kept Nigeria’s capital market in a very depressing state, as foreign portfolio investors who are not comfortable with the current exchange rate regime are discouraged from bringing in new money to participate in the market.
NAIRAMETRICS: On a year–on–year basis, the headline inflation rate accelerated to 21.09% in October. What are your projections for the end of the year and what do you think will be done by the authorities to bring about its reduction?
Tajudeen Olayinka: The headline inflation of 21.09% in October is a clear indication that the demand-side management tools of CBN are beginning to filter into supply-side problems, thereby further aggravating the already bad supply-side situation.
The multiple hikes in MPR have further reinforced cost-push inflation. This is the reason the inflation number is rising year-on-year but slowing down month-on-month. It also explains why it may be difficult to control inflation which is largely driven by supply-side factors, using demand-side management tools.
I think we may continue to experience rising inflation for the remaining part of the year until CBN’s currency redesigning program begins to take its toll on holders of illegal money (money in the wrong hands). That’s partly the essence of that program.
NAIRAMETRICS: In which way do you think the present administration of Buhari will help revive the nation’s financial market, especially on the issue of identity management and other economic drivers?
Tajudeen Olayinka: I think the current administration has done something commendable in the area of minimizing the recurring incidence of identity theft, even though it is not yet eliminated.
It is also important that market operators understand the need to know their customers or clients, by improving on KYC. There are too many dubious people wanting to steal from the market, using a fake identity. Gradually, we shall overcome.