The Managing Director / Managing Director of Capital Trust Investment and Asset Management Limited, Seyi Oke, during a meeting with Festus Akanbi, spoke about the investment climate prevailing in Nigeria and the fear that the start of political activities, including campaigns, doesn’t make the stock market unattractive. to companies seeking to raise funds in 2022
The state of the Nigerian economy
With the devaluation of the naira and the downturn in the economy, it was quite difficult. There is less money for investment and there has been pressure from government spending. The private sector has also been cautious. We have been monitoring certain risk factors. The election is fast approaching and it has had an impact on our ability to attract foreign currency investment because let’s say you took a dollar investment in January and now, even though you were able to execute it from Profitable way in naira, the moment you want to revert to the dollar, you will find out that you are at a loss. So that was also a challenge. In the health care business where we play, for example, we have a lot of clients who have taken money from banks and investors denominated in dollars and they have to give dollar returns. You can understand how difficult it was.
Part of what we have offered is to give clients the alternative of exiting their dollar exposure and replacing it with naira exposure thereby removing currency risk from their business and that is a huge part of our value proposition and this is part of the services we have been able to provide effectively rendered over the past year. We are optimistic that the government will have to spend a little more, the elections are approaching, there is increased pressure for capital spending, the government seeks to completely deregulate the oil sector with the intention of removing subsidies on petroleum imports. It will also have an impact on the purchasing power of Nigerians and the only thing that can be a relief is an increase in government economic activities and we expect this to happen mostly in the election year.
Decline in portfolio investments
You can’t eliminate the concerns that have always been associated with currency risk. The biggest challenge for me is the tracking effect on this request. Due to the uncertainties, foreign investors are withdrawing their money, and you will also find a lot of local investors, because of this they are taking naira and the switch to dollar, putting even more pressure on the naira against it. dollar. Yes, there is this pressure, yes, which has had an impact in particular on the capital market in regards to foreign direct investment through private equity investments and stock market investments and I think that the greatest pressure comes from the follow-up effects on Nigerian investors who panic or fear because of this sudden flight of capital.
State of Capital Trust Portfolio Management
We believe that private equity is an emerging and growing opportunity in Nigeria. The market is saturated with many conventional asset classes like stocks, corporate and government bonds. But where the market is going, it is alternative investments in securities. So being able to come up with alternative investments that have returns that are hedges against inflation because they have much higher returns than inflation is the direction the market is going.
We identified it in 2015 and started to work in this direction. The infrastructure fund approved by the Securities and Exchange Commission in 2015, we spent the next year and a half working with our partners for this fund, we started raising funds in 2016/2017. In more than three years, we have been able to effectively deploy capital in the infrastructure area. And again, it is the infrastructure that generates the income, so you will find that the value of these assets has increased significantly and has also increased.
Investors who put their money in this type of portfolio will be excited about the level of return they are getting. Likewise in the health sector, we have the N100billin Nigeria Health Development Fund, which is also a private equity fund, and the strategy in both cases is to get local capital, the money is with the pension funds, the money is with insurance companies, which already have a high exposure to government securities and
ordinary capital and stock market options in terms of shares in blue chip companies, providing them with underlying alternatives to investing their money in the health sector. We have a lot of retirement assets, PFAs that have subscribed to the infrastructure fund. We also have a lot of PFAs that have subscribed to healthcare funds and the idea is to deploy this big pool in the space and in both cases we were able to generate returns above inflation we are giving. therefore good returns to our investors.
Raise equity in 2022
To quote or come to the market to raise funds in this climate will in my opinion be difficult in 2022 given the risk associated with preparing for the 2023 elections.
Investors tend to be very conservative as the election draws near, so I won’t advise my client to put on financial unfairness. Investors will prefer to identify with the short to medium term returns they can once again earn under this particular tenure of this administration because of the natural uncertainties that accompany elections. I predict 2022 will be a year where there will be a lot of debt issuance, pre-financing, syndication as a stopgap rather than stocks coming into the market to raise funds.
Has the real estate potential been fully exploited? The answer is no. The housing deficit is a clear indication of this effect. I think the problem is not whether the opportunities have been fully exploited, it is really the offers in the market. So many of us are developing properties and we’re targeting the upper and upper middle class. We have a lot of houses in Ikoyi and Lekki, but how many people can afford them. Where the affordability gap is and part of what we’re trying to do as a business is focus on that area. If we do this, we will make money and we will have an impact. For our infrastructure fund, for example, we will not build houses in Ikoyi or Lekki. We have only one transaction in this axis, all the others that we carry out in the field of real estate concern affordable housing for civil servants and the target has been the men and women who work hard in the service of immigration and this project is already underway in Abuja and other parts of Nigeria. Our goal is affordable housing. This is where the opportunities are and we believe this is where we can make money and make an impact as well.
Capital Trust Achievements in 16 years.
We started out as retail investment managers focusing on creating opportunities for small funds to be pooled and invested in assets. This was our strategy when we started in 2006 and then we evolved into a full time wholesale investment banking business where we have been able to retain our clients from retail to wholesale investors. Over the years, we have increased our capacity.
Concretely, during this period, we were able to set up an infrastructure fund. It was the first private equity fund in Nigeria to be fully private equity. We are also the primary promoter and fund manager of the first dedicated naira denominated healthcare fund and interestingly this fund was created before Covid and we anticipated the opportunity in healthcare and we offered a model even before Covid hits.
Capital Trust is an authorized capital market operator and that means we operate in the capital market. We are licensed by the Securities and Exchange Commission to act primarily as fund managers and also as corporate investment advisers. This means that we are authorized to manage structured funds and also to provide financial and investment advisory services, as a company. The company was incorporated in 2006 and we obtained our license in the same year. We are 16 now and over the years today we have three structured funds: the N100billion The Nigeria Healthcare Development Fund; we are co-fund manager of Nigeria N20.5billion Africa Infrastructure Trust Fund, and we are also the promoters and managers of Capital Halal Fixed Income Fund. The Nigeria Healthcare Development Fund, a private equity fund focuses on investing in healthcare. The Africa Infrastructure Fund focuses on infrastructure investment and the Halal Fund focuses on Sharia-compliant investment opportunities.
Capital Trust, as an organization, has a DNA of innovation. We have always been very creative from the start of the company and have been innovative in the delivery of our products, regardless of what the market offers. That’s not to say that we don’t face the challenges that other financial institutions face, but we can find a way to create products that retain our customers.
Over the past year this has helped keep our heads above water. We have been able to do very well and this year has been a better year or looks like a better year than last year. Over the past year, performance has improved.