INVESTMENTS AND THE IMPACT OF POLICIES ON ASSET MANAGEMENT IN NIGERIA
Since the inception of Asset Management in Nigeria in 1991, its relevance to the economy, contribution to society and how it has enhanced the performance of Nigerian banks have been critically questioned.
With regards to its track record and its input to the development of the financial market, asset management, which can be described as a securitisation vehicle, has not done badly.
The present value of Nigeria’s assets under management (AUM) is estimated at N1.2trn. The fastest-growing fund in the industry is the Money Market Fund, which is currently valued at over N800bn. This fund has immensely contributed to the development of the financial market and helped to improve the savings culture of many Nigerians.
In a recent interview, Oladele Sotubo, Chief Executive, Stanbic IBTC Asset Management Limited, expressed his views on investments and the impact of policies on the asset management sector of the fund market and how its opportunities can be harnessed.
Sotubo emphasised the need to urgently diversify the economy to create more broad-based investment opportunities. That way, corporate entities will be able to access the capital market more efficiently.
He said: “When an economy is diversified, the impact will be evident on the number of financial instruments available for investment and also increase the number of companies participating in our capital market. Ultimately, all these will positively affect the tax revenue and by extension, infrastructural development of the nation.”
Sotubo stated further: “There is no denying that asset management has improved the savings culture of Nigerians. Commercial lending policies made by the Central Bank of Nigeria (CBN) affect the rates at which government instruments like the treasury bills and open market operations bills are issued and traded. In turn, this affects the investment space and return on investment yield is also affected by the rate of inflation.”
While highlighting the impact of key statutes and regulations guiding the fund market, Sotubo attributed the successes achieved in the industry thus far to regulations instituted by the Securities and Exchange Commission, guiding the operations of asset management companies, thereby protecting the investors.
He stated that regulations issued by SEC have enhanced professionalism while also promoting healthy competition amongst fund managers. The impact has been very positive on the industry as there has been more collaboration between the operators and the regulators. The positive outcome is also reflective in the continuous growth of the industry.
In 2017, the CBN developed a regulatory framework for the establishment, licensing, regulation, management and supervision of licenced asset management companies in Nigeria.
According to Sotubo, the CBN policy provides a framework for privately owned asset management companies in Nigeria that will be eligible to purchase non-performing loans or classified assets from financial institutions and specialised institutions.
The federal government in 2011, set up the Asset Management Commission of Nigeria (AMCON) to purchase non-performing loans from banks. The upside is the de-risking in the banking sector as banks sold their non-performing loans to these companies. There was also the development of capital markets in the area of structured alternative investments such as Asset-Backed Securities and Mortgage-Backed Securities.
When asked about the effects of the ravaging pandemic on the asset management industry, Sotubo said the sector was not immune from the negative impact and economic uncertainties. As witnessed in many sectors that were affected in various ways, there were drastic changes in business processes, rise in digital and virtual activities as well as the transition to the new normal.
The measures of success in the fund industry will be gauged by how a business stays in touch and how customers are engaged. This simply means there will be more focus on digital platforms for client engagements and product distribution.
From Stanbic IBTC Asset Management Limited’s perspective, success will be measured in terms of positive customer experience and how well organisations support their clients in achieving their investment objectives.
Like every sector faced with risks, the Nigerian asset management industry is not a sacred cow.
The key risk is the fast-rising number of unlicensed money managers and Ponzi schemes luring people with lofty promises of quick financial prosperity.
Their sole aim is to reap unsuspecting victims of their money and the associated risks have doubled, especially because these schemers can reach their victims through various digital platforms.
People fall prey to the activities of plotters largely due to ignorance and in other cases, greed.
To negate and counter these devious activities, Stanbic IBTC Asset Managers churn out ways to educate the public, especially on its digital platforms. Also, SEC does a good job of coming up with actions aimed at checkmating these schemers.
On the notable developments the Nigerian asset management industry has enjoyed in the last decade, Sotubo gave his view in comparison with the industry in other African countries.
According to him, the Nigerian Asset Management industry has witnessed its fair share of growth in the Collective Investment Scheme segment.
Citing the data from SEC in December 2011, the Nigerian funds market had 44 funds with the Asset Under Management circa N73bn and 103 mutual funds with industry asset under management of N1.26tr by May 2020.
An AUM of N5trn would have been possible if there had been a National Savings strategy. Even at the peak period of the COVID-19 pandemic, the capital market including Exchanges, Depositories, Stockbrokers and Counterparties continued to operate via technology-enabled means.
Addressing the New Finance Act 2019 recently signed by the National Assembly which is aimed at strengthening the Nigerian Asset Management Industry, Sotubo agreed that it was a step in the right direction.
As much as there have been remarkable achievements in the industry, more needs to be done especially on the issue of multiple taxations for mutual fund subscribers with regards to withholding taxes and taxes generated by Collective Investment Scheme (CIS).
With the understanding that an efficient tax system will boost the growth of capital and economy, the Act will be reviewed annually and relevant authorities will be engaged on the subject.
Noting that the Asset management industry and the fund market generally is highly competitive, the Stanbic IBTC Asset Management Chief Executive touted that his organisation has a strong brand that rides on the heritage of its parent company, Stanbic IBTC Holdings PLC.
He cited the proven track record of excellence in the fund market business. As reported in an article by Nairametrics, it was stated that Stanbic IBTC Asset Management accounted for 65% of the total AUM of the Nigerian mutual fund industry in 2019.
This identifies the firm as one of the strongest and most efficient asset managers in Nigeria.
Stanbic IBTC Asset Management has popularity and excellence in top sectors like investment banking, pension, non-pension asset management and stockbroking, which gives investors no doubt about doing business together.
Another edge is the parental heritage of Standard Bank Group which provides access to international capabilities in terms of manpower, technology product and related professional services.
The organisation has experienced and dedicated workers who are committed to attending to clients’ investment needs.