Opening Up Nigeria — Piece by Piece
Just two weeks ago, the CBN banned the use of Naira to acquire or trade Crypto currencies. This decision was based on concerns around KYC, AML (anti — money laundering) and terrorism etc. But all fiat currency is used for that too. Secondly it’s only a small fraction of the population that have access to crypto usage capabilities, but the impact of this decision can be huge. A pretty insignificant fraction of the population has been responsible for Nigeria being the second largest trading spot for Global P2P player, Paxful [trading $566m over 5 years].
Why don’t we channel these energy levels into applying it more to impact the greater good? Crypto is here to stay, but it is not going to replace existing payment systems in my time. It’s a bourgeois payment platform — we haven’t even moved away from cash yet, let alone crypto. It’s just another choice. It will be another form of payment and not for everyone. Just like gold was and still is — it’s just another means of trading and transacting, which is also what I want to gist about today
Nigerians trade; we want to do business — all day, every day. But the current climate makes it harder and harder for most Nigerians to make international moves. Yes, we can buy things from the abroad — it’s easy for us to acquire consumer goods and even assets in foreign territories. In that respect, the world is very much open and we have capital flight. But when it comes to inbound deal flow — it’s not as easy and we are missing out on a lot of potential investment. So I ask, why is it easy for Nigerians to spend abroad, but not the other way? How is it hard for us to invest in our own?
To start with, our investment systems and frameworks to invest in companies are closed and pretty opaque; there are many barriers to entry. An example — with a few clicks on my phone, I can go and buy a fraction of Tesla today, make Oga Musk a little richer and invest in a company that is headquartered over 12,000km from me. I sit in my office, I have a drink, I play tennis, and I can watch my stocks go up and down. Now, if I want to invest in MTN shares — and a business that is located just a stone’s throw away from my office — it is wahala. You have to buy a whole stock [expensive and a barrier to entry] and the high taxes added on to the transaction and lots of regulations to navigate is another barrier to entry for most Nigerians. It’s just all a bit complicated. What’s the incentive for me to invest in Nigeria, when I can invest in the US — hassle free?
And I know that there are opportunities to invest in Nigeria; we are an emerging market — we need and should want people and global businesses to invest in our growth and grow with us. That’s the only way we will even begin to reach our economic potential. We have multi-billion dollar markets that are ripe for [and need] investment.
So how do we make Nigeria a more attractive prospect for investors? Yes — there is infrastructure and big ticket investment taking shape on the continent [in the usual sectoros — oil & gas, agro etc.] but the deals are slow and [rightfully] complex and, in most cases, shrouded in mystery. The information that potential investors need in order to make an informed decision before they commit their dollars, pounds or yen, doesn’t really exist, yet. So as with most things, in order to move forward and provide more opportunities, we need to educate people on the scale, potential, and realities of the markets our listed companies are operating in, by providing a detailed and transparent overview of analysis and answering the questions before they arise. Public companies are subject to more scrutiny than, say, the start-ups that we’ve seen receive a significant amount of investment in in recent years — as they should be. But if outsiders had a better understanding of the companies, and there was a more forgiving investment structure, then we would be able to attract more international interest.
And not just from institutional investors. The wave of digital platforms that have been unleashed onto the market over the last few years, making armchair stocks and shares traders of millions of, dare I say it, ordinary “consumers”, has added enormous value to the international trading markets. By allowing the average consumer to purchase a piece of the world’s biggest businesses, we have witnessed the consumerization of trading. How? By tearing down the barriers to entry [digital] and breaking up the market into smaller, more palatable pieces for potential investors, a satchetisation approach to buying stocks, I suppose. This has been possible through the creation of an informative and relatively transparent framework of news, data and analysis around companies listed on international exchanges such as NYSE and LSE, whereby millions more people can make informed decisions regarding their investments. Yes, some will lose, some will win — but importantly, they can have a go. They can make well informed decisions. They can be part of the system. Trading needs no longer to be the reserve of the pin-striped suited elite.
In Nigeria, if you want to find out specific or detailed information about a listed company, you are likely going to have to confer with someone you know. Not find it in a public place, but actually speak to a friend, a friend of a friend or pay an investment advisor. But this model isn’t scalable and it keeps the investment community for a country of our size too small, too insular [in terms of Nigeria and internationally]. I go back to my first point; Nigerians trade. Let us trade at every level, not just in terms of purchasing consumer goods. Let us own and have vested interests in parts of our own companies. Let us also open the doors more forcibly to international investors — their money is good for Apple, Alphabet and Tesla, why can it also not be deployed for MTN, Transcorp and Honeywell?
So, my thoughts on what the NSE can do to start creating this type of wealth and access to opportunity [that in turn will lead to significant value creation]. We need information symmetry (everyone has the same information at the same time, and removing the arbitrage opportunity that exists for only a few)combined with a simpler system to invest in the NSE — now. Tolu from Yaba needs to be able to buy a percentage Seplat, via her mobile phone, on her way to a meeting. Internet service permitting, she needs to be able to complete this transaction in minutes, not days, and certainly not via a broker and certainly not reliant upon physical papers being signed or issued.
We have seen the beginnings of a digital approach to trading in Nigeria with wealth.ng — they are doing good work, although I think they need to go a step even further in terms of providing more relevant and timely info on the listed companies, so that outsiders can make better informed decisions. Access to transparent information to make informed decisions builds trust; and trust is what will be the key sticking point, if we are to rethink and scale our investment structure in Nigeria. Until we break the secrecy around our listed companies, 99.9% will be excluded. And where’s the value in that?