SUNDAY AKINTOLA: HOW MUSHIN HOME BOY GREW MULTI-MILLION NAIRA BUSINESSES IN MUSHIN, LAGOS

SUNDAY AKINTOLA is specially proud of beating all the odds as a home boy growing up in the densely populated Mushin area of Lagos State to become a successful owner of business chains that span micro finance and telecommunications. In this interview with GOKE OLUWOLE, and TAI ADEWALE SHOFELA, Chairman of Sovereign Micro Finance Bank, AKINTOLA shares his journey to conquering the litany of challenges that littered his path to business success.

How would you describe yourself?

Yes, by His grace, I am Sunday Akintola, a gentleman who happens to be one of the lucky entrepreneurs whose company is positively impacting on Nigeria in the area of poverty alleviation. I am the Chairman of the Board of three companies; Covenant Perazim Investment Limited, a multi-facetted company established to operate in the Oil, Gas and Agriculture sectors, Sufi Enterprises Limited, which is a company involved in the sale and distribution of GSM companies recharge cards, and Sovereign Micro-Finance Bank. I am a graduate of Accounting from the University of Lagos. I am also an ex-banker having worked with one of Nigeria’s fastest growing banks Zenith Bank Plc.

Briefly, can you tell us the background to how you grew this multi million naira business empire?

Most big businesses always start in small ways. This multi-million business concern, like you rightly said, is a business that was registered first as Covenant Perazim Investment Limited in November, 2003 while I was still in service with Zenith Bank. It was then the thought occurred to me on what I could do to change my life and touch the lives of other people around me. I thereafter initiated the venture, but we started operation with four staff which included my wife and my brother in-law in a shop here in Mushin from where we sold telecoms recharge cards.

I resigned from my banking job six months after we commenced operations, to be precise, July 1, 2004, two days after securing the NCC dealership licence. In fact, I got my licence on a Sunday and I put in my resignation the following Tuesday, and by August, 2004, I was already able to raise the mandatory N5 million to join the recharge card dealership community of the then V-Mobile Network with Sufi Enterprises Ltd.

All these while, my colleagues, some in the banking halls and some from other companies like Chevron, Exxon-Mobil and other multi-nationals, were greatly disturbed about my decision to go into business; they asked if something was wrong with me and how could I leave certainty for uncertainty; leaving the bank to go and sell recharge card. For them, it sounded absurd. But I told them I wanted to go and develop my business.

Things started to crystallize for us because all we were doing then was to get some money to buy and sell recharge cards until we had our breakthrough when in 2006 the V-Mobile Network started seeing us as a serious business entity, and in 2007, we won the best dealers award of the V-Mobile Network. That same 2007, we were among the 25 dealers selected in Lagos and promoted to the status of big dealers. However, as part of the requirements of that new status back then, we were also expected to have our own building as office complex. On the back of this, we decided to build our own building. Thankfully, by the end of 2007 we were able to build our own office complex.

Personally, how had your background influenced the development of your business?

I am a proper Mushin boy, born and bred in this community where people have the notion that nothing good can come out of the community. While we were in the secondary school, those of us from Mushin were seen as boys from homes of hooligans and thugs but to God be the glory, we came out very disciplined, because I am fortunate to have very responsible parents who gave us good up bringing.

Can you believe that as far back as 1963, my Dad refused all discouragement from others not to send my elder sister to school; he sent her to the only private boarding school then in Abeokuta, the Baptist Private School, Idi-Aba, Abeokuta. People were laughing at our parents for sending my sister to the boarding school. Ironically, I had to attend a public school, Odo Abore Primary School in Mushin. I guess my brilliance then impressed the school management such that they made me the school’s senior prefect.

After finishing at Odo Abore, my parents preferred that I schooled out of Lagos State, they rejected my preference for the Nigerian Model College at Idi-Oro, a suburb of Mushin. They sent me to Baptist High School, Saki, in Oyo State. From Saki I proceed to the Lagos State College of Education, and later, to the University of Lagos where I studied Accounting. I also taught in a primary school for two years before I joined Zenith Bank in 1993 where I spent 11 years before quitting in 2004.

Though my parents were not rich, I remember that they always struggled to pay our school fees then. They thought us about God and, my mother, especially, taught us the principle of prudence and wealth creation. All these contributed to my success today, but the secret to my business success is God. There is nothing we do in this office that we don’t ask for God’s favour, He is our Alpha and Omega. In this office there is nothing we do that we don’t tell God; we pray in the morning and we pray to close each of our day’s operations.

As a major player in the telecoms recharge card distribution and marketing sub sector, how would you describe the industry?

Yes, the industry is full of illiterate and semi illiterate people, but with the new policies from all the companies, I expect that the situation will finally change. I believe that there will be a lot of changes because it is only in the telecoms sector that some illiterate people will buy something at the rate of N400 and sell it for N250, that is about 80 per cent less than the cost price. But now, the business is getting more exciting, interesting, and rewarding than what it used to be.

What prompted your interest in establishing a microfinance bank, which is seen as very risky commercial engagements, or do we reason that you preferred this because of your banking background?

It wasn’t my background in banking that inspired me to establish Sovereign Micro Finance Bank, rather, it was due to my interaction with the people at the grass-roots of my immediate community here in Mushin while I was operating the telecoms business. The economic plight of these people rekindled my interest in empowering the people in my immediate community. You know when we were doing the telecoms business a lot of people always came to us for financial aids in form of soft loans, but there was no way we could be able to solve all these needs, so we now saw the opportunity to serve and empower our people when the CBN came out with the guideline and licensing procedures for establishing micro finance bank, that was the vision.

Again, there was this experience I once had while I was trying to establish a friend in the recharge card business in Abeokuta. I then realized that what most people need is micro-credit, soft loan, when you don’t help people within your neighborhood they will be the same set of people that will make life difficult for you. Do you know some of those my friends who thought something was wrong with me when I left Zenith Bank today are now begging us to be part of what we are doing. But we shall adopt them provided CBN reviews its policy on the board membership; we are also looking for a way to involve them through our forthcoming private placement.

Don’t you think it is easy for Nigerians to abuse the concept of micro finance banking just like the earlier banking and finances houses of the past?

The establishment of microfinance banks and transformation of community banks is a thought in the right direction by the government, it shows the government knows what the needs of the people are; forget about the bastardization of the earlier finance houses, I can tell you the impact of the micro finance bank vision is already showing on our economy. As I am talking to you now, we are highly regulated, every MFB has a CBN supervisor attached to it and every bank is mandated to do a monthly return to CBN. They will trace and check all the loans you disbursed that month, so there is no way you can give all the loans to your family like in the era of finance houses and commercial banks of the past.

You can log on to the CBN’s website and check the full list of the MFBs as they are arranged alphabetically, this is also part of the effort to showcase them (micro finance banks) and for you to know the ones you can deal with, I can assure you there is no MFB that will like to go under because there are lots of opportunities in the micro financing business

Of all the MFBs in Lagos what do you think stands your Sovereign Micro Finance Bank out from the rest?

We believe so much in God, and this is the anchor of our own business philosophy… to be the fulcrum of creating financial independence for the people. You see, all these area boys, some of them have great talents but what they mainly want is financial empowerment. One of them approached us about three months ago that he wanted to have his own bus and I told him to go and start saving, that if he can save N50,000 out of the N450,000 he needed to buy a Faragon Volkswagen Bus, we will fund it.

He jumped at the offer and each day, he deposited N1500 with us out of the N3000 of his daily income from the transport business. We also work with other professional groups on how to empower their members. All these are parts of the ways to eliminate criminality from their minds because if someone has a wife and kids and a job, his approach to life will be different. He will not be thinking that he wants to die because he already knows he has a stake in this world.

What gave you the impression that Mushin people deserve another micro finance bank despite all the commercial bank branches that populate the roads?

I don’t think there is any other community that I will want to serve than the Mushin community; these are the people that deserve to be uplifted and empowered financially. It is the rural people who need micro-credit or micro-funding; our vision in Sovereign MFB is to empower all these so called area boys, and since I grew up in this area, I understand the economic philosophy and psychology of the people.

We’ve already started some collaboration with the professional groups’ trade and artisan associations on how to serve them better, and even the National Union of Road Transport Workers [NURTW]. We hope to set them up with financial backing of our bank.

Our operations here as telecoms recharge distributor had opened our eyes to many needs of the people. We are now able to understand the need of the people of this area, ask anybody here around Mushin, if they know Sufi Enterprises Limited, they’ll tell you that they know us very well, it is the goodwill we’ve created over time that is rubbing on the bank.

I have also realized that commercial banks are too big to recognize micro financing opportunities, they will not fund or support your business when you are small, it is always the big projects of billions and millions of big establishments that they will always be interested in funding while the man whose business need just N5, 000 to survive is left to wallow in abject poverty.

Which was the riskiest investment venture you had made?

The biggest investment risk I ever took was the outright sale of my entire investment portfolio when I couldn’t secure a loan to finance this MFB project. A friend at FirstBank just told me point blank that since my office complex didn’t have a certificate of occupancy, no bank will give me a loan and the best, he advised I did, was to liquidate my stock portfolio. That was how I sold all my stocks just as if I was been pushed by a spirit but to God be the glory, I was lucky enough to escape the stock market crash now being witnessed by investors. Up till today, my stockbroker still enquire from me how I was able to escape the downturn in the market.

There is no business that doesn’t have its own ups and downs, tell us the challenges being faced by operators of microfinance banks in Nigeria?

Our major challenge is commercial banks, they are becoming jealous of our achievements, which is why you see a lot of the country’s mega banks transforming into micro banks. They see us as threats, because they know we can go for clearing by statutory order and with this the commercial banks always stalemated us. At present, we have a serious battle with a commercial bank over a facility of N110million we got from a company which the company, the bank and us decided was supposed to be given to us but when the money was ready, they sat on it, denied us access to it because of our capital base. We need more money to service the micro needs of our people. What we devised now is that we have contacted about three to four banks for our clearing, one is in charge of the financing of Okada scheme, one for the NURTW scheme, while we also get another to manage our other schemes because it would be too risky to keep all our good eggs in one basket.

We are currently working with a commercial bank to provide us with an ATM which will soon be installed to serve the people of Mushin. We are going to table most of these problems before the Central Bank Governor at the next conference of MFBs in Nigeria. Maybe the Governor can help us caution the commercial banks.

Another major challenge we are facing, like every other business in Nigeria, is the problem of power supply. Large amount of our money goes to fuelling of generating sets, and mind you, we bought our own transformer at about N1.8million while our 100 KVA generator costs a whopping N2.9million and this we fuel with N8, 000 daily. If we plough these back into our business do you know the number of people that will benefit from our micro finance bank? The issue of multiple taxation, too, is another serious challenge to business in Lagos.

As an entrepreneur what will you say is your greatest achievement?

What I personally see as our achievement may not be too fantastic to you but for a company that started in a small shop five years ago on this street, selling recharge cards, now owns an edifice housing the headquarters of all our businesses which include banking, aquaculture, oil and gas, and telecoms; all these we can boast is valued to be above N100million.

We have about 60 well remunerated staff, with at least over eight brand new Toyota cars for our staff, and in the next three months, we are going to take delivery of another set of five new Toyota cars for our middle cadre officers. Some of our staffers who were employed some years ago with school certificates are now graduates while some are about completing their choice of courses in various higher institutions. While studying, we make sure they don’t lack anything. None of our staff has been involved in stealing and none had left us. We are still one united family five years after we started. Last December, we harvested our fish pond and the return from the investment yielded about N1.5miilion because it is safer to diversify to other businesses to expand our capital base and income sources.

What is your management style?

I am a hard working person, and all my staff members know this. I am always the first person to resume here and the last person to leave. Can you believe I live in Alagbado, yet I’m always very punctual at the office? You’ll see me resume here by 7.30a.m. everyday, I mentor my staff, they’ve all imbibed discipline from me. You know, I operate an open door policy here, all my staff are well remunerated. If a CEO is not disciplined, the staff will not be disciplined. Again, let me tell you that yesterday (Friday, 9 January) I was with one of my colleagues way back at Zenith Bank and he was reminding me how disciplined we were then while employed at Zenith Bank. He said it was I who once said that I dreamt that one day I would have my own bank, but we all did not believe it then because of the situation surrounding the licensing of commercial banks. But today, both of us are owners of full fledged micro finance banks; he owns Olive Microfinace Bank on Awolowo Way, Ikeja, Lagos, while my own is Sovereign Microfinance Bank, Mushin, Lagos. What we thought was impossible is now a reality in our lives. God has done it, it is easy now to grow a micro-finance bank into a commercial bank and that is our future because in the nearest future we hope to go public.

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Investor Beware! A Preview of the Nigerian Capital Market in 2009

Capital market drivers. The prosperity of the capital market depends on the prosperity of the economy. Thus the capacity of the market to successfully provide long-term funds and a good platform to trade in the accompanying securities will depend on the strength of macroeconomic productivity. A productive economy is invariably one in which economic agents create value and earn correspondingly meaningful income. Because economic agents generally subscribe to primary offers of either debt or equity or purchase stocks at the secondary market if they have income it is only consistent to argue that vibrant markets are ones where the economies create positive economic value added.

There are, however, other reasons investments can be made. These other factors are usually considered if the budget constraint has been satisfied. Thus no matter how appealing the market prospects of a security is, in the absence of income there will be no transaction overtures from the demand side. The reverse cannot be the case because even badly performing securities can be deliberately purchased once there are the funds depending on the kind of strategy that is being pursued by the investor largely because these strategies ultimately aim at making profits or returns.

So when an investor consciously transacts on the securities of an obviously dead company, such decisions though in the short-run, can be with a long-term focus of acquiring, restructuring and turning around the stock’s underlying business operations for better performance. A good example is the acquisition game between bank PHB and some Springbank investors.

Similarly some old persons, for instance, may forgo the fat capital gains of stocks of companies which are still at the early stages in industry life cycle and consistently go for the moderate returns of stocks of companies at matured stages in the industry growth cycle. Although in this case, returns are fundamental, risk perceptions are considered. This risk consideration is not strictly of the stocks but on the perceptions of the impact of the business environment on such firm’s prosperity.

Overall, three important considerations for flourishing capital market existence are the income levels of the investors; investor evaluation of current and potential performance of company as well as the risk perceptions of the investor. These forces cover the supply and demand sides of the market but not of the market umpires. What of the umpires: those who ensure that the rules of the game are complied with? The importance or unpopularity of market umpires have become more critical because from recent experiences their unwarranted interference with the market process created more problems than solutions. So a fourth factor can as well be added as the role of market umpires and regulators.

Behaviour of market drivers in 2009 In order to predict the performance of the capital market in 2009, we have to examine how these four forces are likely to fare during the year. While it is possible to make some informed guesses about the likely behaviours of the first three, it is difficult to predict how the regulators are likely to behave during same period. So for the umpires, we can at best advise on what they should or should not do in order to ensure that the market performs better.

We start with individual incomes. The incomes of individuals are tied to the prosperity of firms who in turn pay them wages in return for the services offered. Possible exceptions here are the government employees may continue to earn their wages irrespective of whether government’s finances are doing well or not.

Although it is equally possible for government to respond to macroeconomic conditions and reduce the number of persons in its payroll, oftentimes such decisions are mired in serious political considerations and are oftentimes wrongly targeted so that those who lose their jobs may not necessarily be the people who should. Historical experience in this country also has not supported wage cuts in the public sector. So we concentrate on the private firms who are more flexible in responding to changes in the environment of business.

The factors which therefore determine the profitable performance of firms in Nigeria are: infrastructure adequacy, monetary stability, fiscal equilibrium, efficient justice system and ease of taxes.

The presence of these factors ensure that firms face minimal macroeconomic uncertainty and also much more able to compete more efficiently. How are these determinants likely to fare in 2009? Infrastructure inadequacy has been unresolved and cannot be resolved in 12 calendar months. On average, partially substantial resolution of Nigeria’s infrastructure problems given its current state – should last longer than 18 months. Power supply has remained the most problematic of the entire infrastructure nightmare which was seemingly, but in futility, addressed over the eight year reign of the past administration.

What of monetary stability? It is going to be a scarce commodity in 2009. The scale of the budget deficit and the pressure on the naira exchange rate following the depressed earnings from crude oil are good pointers to what should be expected in these regards. Such huge deficits will be financed with equally huge expansions in money supply. At present, some of the areas that the budget had specified as its financing sources are being contested by some other stakeholders in the federation account particularly state governments.

With such sustained pressure, the Federal Government and the Central Bank, will come up with more ingenious ways of creating money out of nothing. This has started with the deliberate allowance of the naira exchange rate to fall from N116.00/US$1.00 to N138.00/US$1.00 in less than 60 days which enabled the transfer of naira earnings from actively struggling and value-creating economic agents to the government and its monetary authorities.

More straightforwardly, by deciding not to defend the naira as it statutorily claims with the community fund (foreign exchange reserves) and allowing the naira to fall at such scale with such speed,

(a) the CBN has saved and will continue to save as long as the naira value falls that portion of the foreign exchange reserves that will have been used for such interventions. These savings can be monetized for direct use by the government (depending on the understanding and arrangement) and; (b) all government’s proposed dollar earnings in 2009 would have become higher in naira terms which in a way may plug the holes to be created

(1) should the Federal Government lose the contested revenue sources and

(2) should it have to re-do the clearly unrealistic assumptions that underscored the revenue side of the budget proposal.

Government’s expenditure plans far outweigh its earnings prospects. In the past, the deleterious consequences of this historically traditional policy indiscretion have been cushioned by good oil prices. Government is not an investor and in a highly corrupt environment such as ours and particularly now that it appears that the fight against public sector economic and financial crimes are seriously waning, most of these proposed deficit spending will definitely find their ways straight into the pockets of some powerful predators.

So having lost the opportunity to successfully execute the projects for which the funds are meant, we shall in turn suffer the inflationary and other economic-price consequences of these actions. Who feels the brunt? The firms continue to suffer lack of competiveness in the face of the inclement operating environment where basic infrastructure remains inadequate, firms will equally not able to effectively plan over a longer time horizon because of the heavy degrees of uncertainty injected by policy-induced inflation, distortion of relative prices and inevitably rising interest rates. Firms will equally suffer demand losses because of the reduction in the real worth of incomes in the hands of households (private consumers).

Take for instance, the issue of naira devaluation. Who benefits? Who suffers? More than 70 per cent of all intermediate input into industrial production that take place in this country are imported: raw materials, machinery even technical expertise, etc. With massive naira devaluation, how competitive can these entrepreneurs be? Yet the Central Bank has pitched the reason for naira devaluation on mercantilist premise: to promote exports? Which exports? Unfortunately the export industry in this country has as well been destroyed by exactly the same reasons which we have provided above.

What has happened in the devaluation game in effect therefore is the deliberate sacrifice of the economic well-being of majority of Nigerians and Nigerian businesses in order to meet a pre-determined motivation of government’s short-term financial objectives: a consequence of many years of deliberately neglecting to put in place policies and processes that will make the economy prosper along a natural path with minimal fruitful interventions.

What of the other factors that equally contribute to the prosperity of the economy such as efficient justice system and ease of taxes. We are definitely far from these. This administration which started off with a great promise on the pursuit of the rule of law appears to be pursuing a contrary objective. In recent times we were witnesses to the executive threats meted out in the name of justice to clearly guilty government thieves. Some received N3.5 million as fine for practically wrecking their states.

Some of the accused’s files are already joining the archives of the forgotten documents without even being called up after baton change at the EFCC. For genuine vanguards of the campaign to rid the country of this mess, his reward is bouts of inglorious dishonour culminating in an ultimate sack from the service.

On the area of taxes, my suspicion is that mid-way into 2009, the government will likely invoke the dropped raise in the value-added tax rate. It is my sincere wish that this does not happen. But what can possibly prevent its occurrence is the rebound of good oil prices. The Federal Government has already recognized the massive effects that taxes from non-oil sources can play in its finances in 2009. Thus if oil prices do not stabilize at more than US$45 per barrel, the government are most likely to raise the rate of VAT as it earlier intended.

The current desperation which resulted in the sudden devaluation of the naira justifies this position. Unfortunately, VAT if well implemented and at a higher rate has even more devastating consequences on businesses. Whereas corporate profit taxes are imposed on businesses that have already made profit, there is no such discrimination with VAT and thus firms are forced to internalize in part or full – the additional costs imposed by VAT rather than allowing its transfer to the customer in order to remain competitive in a tough operating environment. In effect many firms may have to give way in 2009 and many more will proceed to the fringe of extinction.

In all these, government still intends to use the capital market to finance some of its deficits. Because the returns on government bonds are much more certain than those that can be expected from firms in a highly uncertain environment of business – as the one we expect in 2009, – entrepreneurial activities will be massively crowded out.

With many foreign investors already gone; with many investors badly hurt in 2008; with prospects for laundering of government funds in the capital market very bleak etc, the level of participation in the capital market will obviously decline. With declines in participation, the hitherto demand pressure that have led to rapid price appreciations will be absent. The crowding out effects of governments’ capital market bond participation will not only limit the capacity of businesses to access fresh funds but will equally raise bank interest rates. Can market makers change the prospects here?

Let us start with the primary market. Market makers cannot fundamentally alter the current trend in the primary market. There is a seeming cessation and poor outing in new issues segment primarily because of the overall lull in the capital market owing to

(a) recent previous massive losses,

(b) heightened market and macroeconomic uncertainty,

(c) massive investor withdrawals particularly foreign investors and short-term speculators.

Market makers, by restoring short-term demands for securities in the market place can trigger equally short-term speculations in the market. Barring any major shock in the market place, market makers can enable the market to coast albeit at a low level over a reasonably long period of time. In the absence of good company fundamentals and income which drive long term investment (following harsh macroeconomic environment of business), market making may have very limited impact on the market. If however, the market regulators over-use market making process and thus create herd reactions, the system will be temporarily ballooned and leave more participants much more hurt.

In summary, the outlook for the year 2009 is that of low productivity (and of course low income) and high macroeconomic uncertainty. These are not consistent with the forces that enable the market flourish which we enunciated at the beginning of this work.

Since the Nigerian economy is umbilically tied to crude oil, reduced earnings from it relative to governments spending plans equally means reduced spending of the Nigerian masses and businesses; majority of whose incomes are tied to such public consumption levels. The peculiarity of this year’s proposed spending is that the present administration must show strong and determined commitment to its promise on infrastructure for it to regain its fast crumbling reputation as non-performer.

If that is the case therefore, unless there is a deliberate policy to use Nigerian firms for the provision of these infrastructure with attendant high performance risks a good percentage of these expenditures will flow into the accounts of expatriate engineering firms. To quickly correct an impression, the high performance risk alluded to here does not refer to any perceived technical inferiority of Nigerians but the high levels of possible compromise due to corruption.

Let me quickly add that the Siemens case equally proves that such compromise is not limited to Nigerians alone. Our conclusion however is that; reduced government spending will affect private consumption levels with consequences for the demand for goods and services supplied by firms.

Similarly, there shall as already stated high uncertainty with implications for high inflation, interest rates and low naira value.

What should stakeholders brace up to? In rough seas, sailors can take a variety of options: abandon the ship altogether and escape on lowered boats, struggle to salvage the ship or do nothing. The present condition of the market approximates a rough sea situation and participants have variety of options which may approximate sailors’ actions in rough sea depending on their specific contexts. For instance, many investors have already abandoned the equities market following the relative shock levels that they experienced in 2008. On the other hand, many market operators together with the regulators are bent on salvaging the market. The question is: which options should various stakeholders take in approaching the capital market in 2009?

Investors as we know are in purposeful pursuit of profit. How much profit that satisfies an investor is subjective and depends on each individual investor. Consequently how much more risk an investor is prepared to take for more returns is equally subjective and depends on investor risk preferences. Thus investors with high return; high risk profiles who have a longer time operational dimension may find the capital market in 2009 worth it. But that is given the scenario that alternative opportunities/markets such as the markets for properties, currencies, solid minerals and other commodities do not offer better returns.

A proxy measure for the returns in the capital market is the expected yields on government bonds which many smart operators will aggressively leverage on to play on in the market place given the possible poor outing of the equities market. This area will be a tough battle ground in which only well funded and technically aware operators can achieve meaningful success. Few operators in the Nigerian capital market meet this desiderata.

Recall that government will be a major player in the 2009 market with the issuance of bonds to finance its huge deficits. If that is therefore the benchmark return expectation, it is my considered opinion that in the short-to-medium term speculating in many other alternative markets will offer better returns than the equities (or capital market) market which will make it clearly not very attractive for the short-term high risk-taking investors.

Another way to look at it is that those who were most hurt in the market last year were the high risk-taking cum short-term inclined investor groups. This is where most of us (over 90% of the investor-side participants in the stock market in the last two years) belong to. At the time it became obvious to many Nigerians that the equities market had become an ATM of some sort where you simply slot your card and draw money, millions threw caution to the wind concerning the associated market risks and ‘went for the money!’. Many more persons borrowed their lives and used it in the gamble. Consequently, when this supposed ATM machine got bad, they were the most badly hurt.

Now this category of short-term inclined and high-risk-taking groups are not going to gleefully run back to the equities market without serious meditation and sophisticated professional guidance. The reasons are many:

(a) their fingers have been burnt and they are yet to recover from it. The nasty experience is enough discouraging factor;

(b) they have lost their own past savings and are using their current incomes to pay the interest due on the margin facilities used to build the now decimated portfolios;

(c) even though they are high-risk taking, the global uncertainty and domestic macroeconomic outlook are very indicative of the need for serious caution;

(d) the outlook for the market is not consistent with the typical risk-return calculation. Thus the expected return by the end of the day, may not justify the attendant risk if they decide to take a chance once more. Perhaps, because this group constitutes the largest proportion of the investor-universe in Nigeria, their indisposition to the market is in fact the ‘market sentiments’.

Naturally, the short-term focused but risk averse investor groups have naturally retreated further into their shells.

The high pro-risk investors with long term focus may want to stay on and wait for a longer period of time to see if the market will rebound. Unfortunately this category of investors with strong waiting power constitutes not more than 2% of the entire investor-universe in Nigeria . Another side of that coin too is that if this category dominates the market, they scarcely engage in aggressive short-term price speculations – which create market ebullience. On the contrary they speculate with a focus on the long-term which equally implies that less of the tradeable instruments are brought to the market.

On the other hand, if many of the investors in the Nigerian market who are largely short-term inclined decide to move into alternative markets, the likely obstructions include poor development of these markets as well as limited technical expertise to profitably speculate in them. For instance the commodities and solid mineral markets may provide very good alternatives but these markets are not yet well developed in Nigeria and there are limited technical know-how as regards how to successfully operate such markets.

This therefore provides some kind of opportunity for the professionals and regulators of the capital market. The immediate development of the Nigerian commodities market has become indispensable as this can provide credible alternatives in situations such as this. The situation equally calls for increased attention to the bonds market. Since this has more guaranteed returns as well as generously involves government with high capacity to honour debt securities issued, many more investors that are relatively risk averse and many more high risk investors who want to diversify their portfolio holdings will find that outlet more reassuring.

It is evident from the market gloom that many operators in the Nigerian capital market will die within the next few months. At present, many of these firms are finding it difficult to pay the salaries of their members. This therefore calls for many likely initiatives. One of such is mergers and acquisitions as well as organizational refocusing and repositioning. For the former, the question is: what is there to acquire in many of these firms? Some of these firms are set up just to deliver dealing activities. And thus their expanse of skill availability ends with stock trading. Regrettably too, in most (up to 80% of all) instances, these firms are equally poorly capitalized.

Now with the recent calamity already wrought on proprietary portfolio of capital market operators such as in the described firm who are forced to repay margin facilities taken at about 33% while the portfolio value for which the facility is taken in the first instance is worth less than 40% of their cumulative purchase value because of rapidly dwindling prices, what strategic impact will the merger of firms in this category have? Very limited too! It could be a merger of liabilities! The funds are not there. The technical expertise that could enable the strategic navigation of these companies into alternative opportunities is equally lacking.

Inevitably therefore, many firms will be sold at much lower value to stay afloat while many lay-offs should be anticipated. Over the years the research and strategy capabilities of the firms in the market never exceeded the writing of reports and were not very much encouraged by the management. Today this works against many of the companies as they have to pay more dearly with non-existent funds in order to refocus and reposition.

Operators in the market who are well capitalized should begin a refocusing and broadening of their business areas outside of core capital market activities. Massive retraining of staff in what it takes to successfully operate in alternative markets is imperative. With a devalued naira for instance, the commodities export market will be a good option.

In Conclusion. The regulators have a critical role in the entire process as they can either aggravate or ameliorate the current crisis in the market. In an uncertain environment, the quality of monitoring and fine-tuning of the market rules and procedures shall go a long way in minimizing the risk exposure of majority of the participants.

I personally do not believe that market decisions based on the sole discretion of one man can produce such high quality. For instance, for quite a long time, the Nigerian equities market has been run at the discretion and whims of one person. Although there may be semblances of collective deliberation and output, closer examination of the decision making process reveals very much the contrary. Such monopoly needs to be broken.

Perhaps the establishment of more Exchanges may be an answer as it will engender necessary diversification and competition. It is equally very important that the market regulators cooperate among themselves so as to always minimize prejudiced decisions that usually fallout from their personality wrangling and disagreements. Whereas such disagreements are inevitable, it should at best be to further the cause of market development.

The regulators also need to generously seek as well as process the informed views and ideas of many stakeholders before arriving at their ultimate decisions. Patriotism should be the watchword here. For instance, decisions taken by the regulators should always be at the interest of the larger number of market participants and not to protect the sectional interest of few, which for instance may have rightly or otherwise been behind the initial decision of the NSE to put a wedge restricting downward movement of share prices by 1%.

To end this piece, what if things do not fall out as predicted? What if oil prices get back to about US$60 per barrel? That obviously is my prayer. Welcome to year 2009.

Martin Oluba, Ph.D., DBA, is the President/CEO of ValueFronteira Limited and an advisor to Proshare. He can be reached at martin@valuefronteira.com

Customer Protests e-Banking Fraud at GTBank

 When Mr. Friday Musa, made the extra effort to track sums of money allegedly illegally transferred from his account with GTBank to two accounts with the same bank, he thought he had resolved his banking woes that had made him about N1million poorer. The resolution of his tiff with the bank over the illegally transferred fund was no near resolution even as he presented argument that since there were evidence that the money fraudulently transferred from his account can be tracked to accounts within the bank should have made it easier for the bank to investigate the fraud and refund him his money accordingly.

Musa’s one million naira travail commenced this past Sunday, 6 July, 2008 when he noticed that his email password was not functional. According to Musa, he had rushed to the Opebi-Ikeja branch of the bank where he usually conducted his banking services, on Monday 7 July, 2008, to inform the appropriate official of his fears and suspicion over the non functionality of his email password.

“I was directed to an officer in the bank branch who took my complaint after which he gave me an update form for a new email password.” Musa said. “I had sincerely thought that the email password malfunction was just a mere glitch so I thought nothing of it after I had filled the update and was rest assured the password would have changed.”

“But three days there after, I was at the bank to make some withdrawals from my account only to be told I could not make withdrawal of the sum I required. I was told that four transactions involving withdrawals had been illegally conducted on my account via the internet banking platform of the bank, even as I was informed that the email password change that I had earlier requested had not been effected.”

The simple explanation of the banking troubles of Musa is that he had fallen victim of e-banking. e-banking is supposed to be a convenient banking platform that enables a bank customer to transfer funds at anytime of the day from his account to another accounts or other accounts.

Musa said he did not make such transaction and was even more bewildered when no SMS Alert of the transactions was sent to his mobile phone as it is the practice with GTBank.

Musa’s account was systematically raided between Friday 4 July, 2008 and Sunday 6 July 2008. Naturally, Musa took issue with the bank through a letter dated 10 July 2007. In the letter, he insisted that he did not conduct any form of e-banking transaction during this period and pleaded with the bank to HELP him out of the trouble.

GTBank, through a letter dated 14 July, 2008 gave a terse response to Musa’s pleas. Enyinna Mbagwu and Lanre Kasim, signatories to the letter informed Musa that after conducting an investigation occasioned by Musa’s letter, they were able to ascertain that the sum of N250,000 was debited to the account on 4 July, while on 7 July, three debits were made on the account: N249,000, N250,000, and another N250,000 totaling N999,000. They explained that online transactions done on weekends and other non-working days usually have a value date of the next working day. This addendum might have been highlighted in the letter to explain the fact that the notification of the need to change password made by Musa on the made he reported the malfunction of his email password to the Opebi branch of the bank was belated.

The authors of the bank’s letter to Musa further submitted that the internet transfers were made using his profile.

“To this end, we believe your details must have been compromised…In view of the above, we regret to inform you that the bank cannot accede to your request of a refund of N999,000…Please accept our sympathy on your loss.” The letter concluded just before sarcastically thanking Musa for his continuous patronage of the bank.

But then, Musa won’t be assuaged. “See, I suspected something suspicious was going on because I had always refused the e-banking platform just as I detested using even the ATM, I like to be conservative about my banking transactions because of my fears of fraudulent issue like this.” Musa opined

“Now knowing that I may not be able to make any headway with the bank this way, I demanded that they should track the transfers. At least, that should be simple enough, this is different from a cash withdrawal where the fraudulent person would have taken the money and walked out of the bank into thin air. In this case, the bank can easily track which account the money was transferred to and identify the owner(s) of the account. But GTbank refused to budge in this regard. To effect this, I asked my lawyer to write them resulting in the lawyer’s dispatch to the bank on 22 July, 2008 only for them to reply by a letter of 7 August, 2008 that merely asserted their earlier position on the matter.

“My worry now is that I am sure the money was transferred from my account to other accounts domiciled in GTBank and all I expect them to do is to investigate these accounts and come up with conclusion. If they are reluctant to do these they should simply refund my money so I can concentrate on my business. The distraction is affecting me negatively.” Musa said.

When Fortune and Class Weekly sought to check the allegation with the corporate affairs department of the bank, the front office officials insisted that was no need to see anybody at the corporate affairs department because the matter was a private issue between the bank and its customer, and it is our believe that Mr. Tayo Aderinokun, GTBank’s MD, will not be all pleased about this.