Capital Market | |
Capital Market | |
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Saturday, July 11, 2020 / 01:00pm / By Seye Adetunmbi / Header Image Credit: EcoGraphics
I started my working
career in the capital market as Deputy Manager, Corporate Finance in 1990 after
leaving MBA School in 1989, and my first assignment was the private placement
of the divesture of the controlling holdings of Ondo-State Government in
Araromi/Aiyesan Oil Palm PLC. I was privileged to have two brilliant and
experienced chartered accountant bosses as my Chairman/Managing Director and
General Manager, respectively. However, the
financial intermediary service firm I worked for had not handled such a capital
market issue before. In fact, there were very few investment banking mandates
that had been consummated in the Nigerian capital market in the late 1980s and
early 1990s. This was coupled with the fact that some of the regulatory
policies were just evolving and they changed at short notices. This meant that
there was no precedent for me to follow with respect to procedure in-house to
see my assignment through in a regulated capital market setting. The
implication of this was that I took it upon myself to develop my knowledge on
capital market issue process through papers presented at seminars and
workshops. It was imperative for me to be on top of how best to go about the
private placement procedure in line with the requirements of the Securities and
Exchange Commission (SEC).
The private placement brief, I must admit challenged me a great deal from the beginning to the end. In the process of seeing through the brief, I developed passion for investment banking and lasting career in the capital market. There and then, I found the need for a standard pragmatic manual for capital market operators and corporate finance operatives. Naturally by instinct, I started taking notes on financial market operations and practice within and outside Nigeria which culminated into a textbook. The initial manuscript was first concluded as far back as 1992 which I updated for this edition. I received inquiries from people who read my research work on Real Estate Investment Trust, Debt Securitization and Asset Backed Securities which also prompted me to see this book through.
Contemporarily, the
financial market sector of most developing economies in the recent past
recorded a remarkable development and growth as a result of embarking on
strategic economic liberalization schemes. Structural Adjustment Programme
(SAP) was one of such schemes. This is evident in the increasing numbers of
operators in the financial intermediary services in the economy of these
nations. In Africa for an example, there were more financial market operators
in Ethiopia, Kenya, Nigeria, Zambia and Zimbabwe in their SAP era than it used
to be in the pre-SAP days. With the increase in the monetization of these
developing economies, commerce and industry have been developing side-by-side
with their financial system respectively. However, one area that is yet to come
of age in spite of the imponderable potentials in the sector is the capital
market of most these developing economies which still leaves so much to be
explored. Financial market professionals may agree with me that the strength of
the financial sector cannot be divorced from a developed, functional and
vibrant capital market.
The essence of knowledge
and information cannot be overemphasized because they are keys to any edge. It
is an apparent fact that, lack of adequate business information on developing
nations is one of the major barriers to their economic development and growth.
It is also becoming very evident that economic reforms and liberalization
programs being adopted by some of these developing countries, are not yielding
the desired results fully for diverse reasons. Poor implementation is perhaps
one of the key causes, and this is due to lack of credible and available
information on contemporary environments with similar peculiarities. On the
other hand, the sudden surge in the financial market activities in the world
emerging markets did not match with the available expertise. The implication of
this dearth in resource persons and relevant procedural information is trial
and error approach to the professional needs of the financial market resulting
to an inefficient market.
Nigeria is the case study
in the book because activities in the money and capital market between 1980 and
2020 had been quite remarkable and should be documented, such that, it will
serve as a guide for other emerging markets, government technocrats, intending
practitioners, existing financial market operators and individuals who wish to
know how the financial market operates and works. In January 1995 for instance,
the federal government of Nigeria revoked the Exchange Control Act of 1962 and
the Nigerian Enterprise Promotion Decree of 1989, as a bold move to integrate
further, its economy into the global economic system.
I have read a number of
publications on financial intermediation and its practice in developing
economies which I found very informative on the activities in the sector.
However, I deem it necessary to put a textbook together which will not only
review the activities of the Nigerian financial market to date, but to serve as
a practical guidebook for intending operators and participants who have been
eager to be involved but have been constrained by lack of information and the
technical knowhow. The book should also clear misconceptions on the operational
procedure in the financial market, particularly the mix-up of the identities
and the respective functions of the various registered financial market
operators and players.
The prevailing
inflationary trend in most of the developing economies made money market funds
expensive for the financial engineering of the formal sectors of the economy
until recently in Nigeria. This apparently makes it necessary for most of the
Nigerian manufacturing companies to explore the capital market window.
Activities in this sector are inclined to grow continuously and it is against
this background that I have been inspired to put the guidebook together with
special reference to the capital market operations.
In my working career, I
have been directly involved in securing registration as a capital market operator
for four different companies. I was also actively involved in taking public
liability companies to the capital market under the auspices of the Securities
and Exchange Commission. I also had integrated exposure in stockbroking
operations and corporate finance. I have at one time or the other coordinated
various capital market workshops and seminars on multifaceted financial market
issues while I have presented several papers in Nigeria, Zambia and USA on
financial market operations, specialized products and services. I participated
in the second conference of the African Stock Exchanges Association (ASEA) in
Johannesburg, South Africa in 1994 and the 10th Conference at Sandton City,
South Africa in 2006; some of these experiences were reflected in the guidebook.
Most of my specialized seminar papers constitute the section five of the
textbook.
Therefore, in view of the
practical approach of this book, most of the materials in this maiden edition
other than the statutory information are informed by my functional involvement
in the financial market operations. In addition, I carried out a detailed
research into a select literature, workshop and seminar papers on the capital
market operations of some active markets. Necessary clearance of facts was done
at the appropriate quarters on the relevant areas of this textbook. Hence, most
of the procedural information in the book might not be found in theoretical
finance textbooks.
On August 15th 2008, the inspiration to convene Capital Market Roundtable in Nigeria resulted to an interactive e-Forum. The roundtable parades the best of professionals in the Nigerian financial market. It is an online platform where past and present operators, tested practitioners and regulators converged to cross-fertilize ideas for the good of the market and the national economy. The last section of the book brought out some of the best moments in the forum. The various relevant issues discussed and debated were highlighted for ease of reference and application as the need arises. I am a follower of the school of thoughts of Warren Buffet, the oracle of value investing; the pages separating each section of the book contains some of his timeless quotes which readers may find refreshingly instructive.
The book is not an end in
itself. However, the 20 chapters should be able to inform the financial
engineers, formal sector players and practitioners, proprietors, entrepreneurs,
investors and company executives on the opportunities that abound for them in
the financial market as well as the challenges too, and how to benefit from
this sector in a developing economic environment.
Section one provides an
incisive intro to the world of financial intermediary services. The book also
articulates functions of the professional parties that are relevant to typical
market issues in an emerging or a developing market. Thus, solicitors,
management consultants and accountants who are often faced with professional
callings in the financial market would also find section two of this guidebook
useful.
The technocrats in
government that are confronted with the problems of how to fund capital
projects would also find the book relevant.
Section two and section
four would enable them to understand the step-by-step of long-term capital
raising alternatives available to productive government capital projects in an
organised stock market by exploring various financial market instruments and
integrated capital market product derivatives. Likewise, the owners and
managers of private sector companies with growth potentials would find the book
useful. Practitioners pursuing careers in the capital market should also find
the book functional, while those individuals aspiring to be stockbrokers,
companies seeking quotation on the Nigerian Stock Exchange or prospecting
registration as capital market operators should benefit from reading the guidebook.
Furthermore, the book should enhance or facilitate the induction programme for
new employees of the financial market operators. Students of accounting,
banking, business management, economics, finance and law should find this book
very relevant because of its practical approach to financial intermediation and
practice in Nigeria, particularly in the capital and money markets. The
glossary of financial market terms was well researched, quite educative and
should be beneficial to all and sundry.
In
spite of my efforts, I still feel that some information which some readers may
wish to find in the textbook may have been left out. Nevertheless, I consider
this book as an insightful compendium on financial market activities in
Nigeria. It is also important to note that the guidelines articulated in this
book were valid as at the time of publication. In subsequent editions changes
in operational procedure and the directory of operators shall be effected
accordingly. This is why this publication is a continuous exercise which should
be reviewed periodically. Financial intermediary service has a broad spectrum,
this textbook is therefore limited to the areas which I have competence
professionally, adequate knowledge and modest exposure. This I deem fit to share
with my professional colleagues, article clerks in the capital market and all
inquiring minds.
To participate in the book launch, kindly send
an email to valueinvestingnigeria@gmail.com
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