Nigerian investment banks closing down

Until the bullish run that characterized the Nigerian capital market, the nation’s banking sector was geared towards the consolidation regime in the aftermath of the Central Bank of Nigeria directive to the increase their minimum shareholders’ funds to 25 billion naira, just a few financial institutions could pass as investment banks in Nigeria.

Perhaps with the exception of the then Investment Banking and Trust Company (IBTC), now Stanbic IBTC, in the banking realm and City Securities Limited merged with other subsidiaries in the FCMB Group to form the First City Capital Market, in the core capital market sector, investment banking suddenly emerged a major attraction in the financial industry during the frenzy of mergers, acquisitions and initial public offerings conducted, mostly, by banking institutions in the course of the year 2005.

By the December 2005 expiration date of banking consolidation, most banks and stock broking firms had diversified into investment banking, with the creation of dedicated desk to private equity placement, underwriters, and issuing of securities.

Fortune&Class Weekly industry cross checks indicates that while the capital market, especially the primary market aspect of it, enjoyed a near three-year period of boom, investment banking became a major attraction for banks and licensed stock broking firms and issuing houses.

Stanbic IBTC during this period maintained its leading role as an investment bank, FCMB Capital Market became respected for its track record in packaging companies to raise funds at the capital market. On the back of these came the discount houses: Kakawa Discount House, FSDH Discount House and Associated Discount House, among others. Then licensed stock broking houses invigorated their operations as issuing houses which witnessed the emergence of BGL, Afrinvest, Capital Bancorp and others.

Of stockbroking firms that had expanded their operations into issuing houses and investment banking, Afrinvest was at the head of the most daring in exploiting opportunities in the capital market. Even as the bullish period, a period where there was general increase in prices of stocks in the market, waned, Afrinvest had banked on its reputation to float a mutual fund and had invited the public to buy into it through an initial public offer.

Unfortunately, the bearish nature of the capital market, a period when general prices of stocks trend downward, is no respecter of any institution. Public response to Afrinvest Mutual Funds, according to Fortune and Class Weekly checks, is reported to be low.

Beyond this, however, is a near close down of activities in investment banking, most stockbroking firms and banks that were engaged in investment banking had more or less closed down their operations or at the minimum reduced operational focus in what they termed an attrition process.

The new deal in the capital market is the untested role of market makers that some selected firms have been appointed to undertake. On the last count, the Securities and Exchange Commission had registered BGL Limited as a market maker to join the five earlier approved. These are: ChapelHill Advisory Services, Diamond Capital & Financial Market Ltd., Greenwich Trust & Investment Ltd., Value Capital Ltd and Vetiva Capital Management Ltd.

Some market operators have hinged their hope of a revival of the market where it is believed that investors had lost about 1.4 trillion naira since stocks prices started hitting the down side, to the activities of the newly registered market makers.

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2 Responses

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  2. I just stopped by your blog and thought I would say hello. I like your site design. Looking forward to reading more down the road.

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