Capital market in 2020 was unique amid COVID-19 lockdown — CEO, APT Securities

The Managing Director/CEO of APT Securities and Funds, Mallam Garba Kurfi, has said capital market performances in 2020 was unique amid the lockdown and exit of foreign investors. Kurfi in this interview with Kayode Tokede said the unclaimed dividend trust fund initiative by federal government is a welcome development.

You predicted last year that the capital market was going to close at double-digit. What is your prediction for the capital market this year?

I foresee growth in the capital market this year if the Central Bank of Nigeria (CBN) does not change its money market rates.

As you likely know, banks are giving three to two per cent on depositor, and Treasury bill is trading at one percent.

As long as this trend continues, we will continue to have liquidity in the capital market. Most of the investors will rather stay in the capital market or at least collect dividend by fundamental stocks on the Nigerian Stock Exchange (NSE).

Earning in dividend is much better than investing in money market instruments. If these persist, we are likely to witness growth in 2021 but not going to be like that of 2020. Capital market in 2020 was unique and it is due to decline recorded by the market in 2019 and 2018 will recorded double-digit losses.

The cause of those ones, probably in the capital market, which will always come down and rise—and we don’t see it coming down this time around.

We are likely to close the positive return but the return won’t be that much.

You didn’t mention any FG policies that impacted on the capital market in 2020?

What we witnessed in 2020 was more of the monetary policy rather than the fiscal policy.

The fiscal policy is more of economy. Like FG said anybody that earns more than N25billion does need to pay tax- we are talking about Small- Medium Scale Entrepreneur (SMEs).

Even, how many of these SMEs pay taxes. The answer is almost zero because there is no effective supervision.

Some of the registered companies are not paying tax and nobody is concerned to follow up to look at their activities. These are fiscal policies government should have worked on.

The government should have demanded of the Generating Companies (GenCos) and Distributing Companies (DisCos) to list on NSE or revoke their licenses. This is fiscal policy government should have worked on. Will FG work on having Nigerian National Petroleum Corporation (NNPC) listed on NSE—never will it happened under this administration. I can only see Ease of Doing Business of the government but it is effective on the economy but failed to compel companies to list on NSE.

How can stakeholders attract more listings amid COVID-19 challenges?

In the last two-three years, it is only two companies that got listed -MTN Nigeria Ltd and Airtel Africa and we are happy about it.

If we remove these two companies, we have nothing listed for the year. MTN Nigeria came to the market by the government policy and Airtel Africa decided to join on its own.

Today, the federal government renewed Glo telecommunication, other licenses without any condition for them to visit the equities market.  A lot of the oil companies are not listed. These are ways government can attract more listing on NSE. The government does not have the will to do so and there is nothing much we expect from their end.

Do you think now is time for investors to invest in the capital amid hike in prices of listed shares?

Do you think investors will take their money to the money market for two per cent yield per annum? Even at the current price, Zenith bank will pay nothing less than N2.50 dividend. If you take the current price and dividend payout, investors will be making nine per cent yield on Zenith bank shares.

Are you not better than the nine per cent and invest in one per cent yield on money market instrument. Investors also need to consider inflation rate. As long as CBN policies remain the same, it is likely for us to have more investors remaining in the capital market.

 What are the ways demutualization impacted on the capital market?

We are talking about 226 stockbroker firms and you are giving them nothing less than six million shares each and it will be listed at N20. If you multiply 20 by six million shares, that gives you 120 million shares. You think stockbroking firms will have 120 million and will not play in the capital market? Firms will definitely play in the capital market. So, demutualization will bring about more activities. Also, more brokers will take position. Even the current prices of listed stocks are not high.

What can you say about FG debt services and borrowing?

They will continue to borrow since it is what can trigger the economy.  If you want to cover, you have just spend to get out of recession. If you don’t spend, you won’t recover.

Spending is what triggers or accelerates economic growth and once there is economic growth, we will be better off today.

Do you know how many trillions telecommunication brings into the economy.? If railways are not working, what do you think will add to the economy? Investors are less concerned about debt services. Now the interest rate has crashed to single-digit, the government has to borrow at single digit and pay less for those services.

What can you see about the Unclaimed Dividend Trust Fund by FG?

My take is that we are in the area of democracy where people love to talk. The CAMA Act makes a provision that any unclaimed dividend after 12 years should be returned to the company and it has not changed.

Secondly, the government said they are introducing a Trust Fund for unclaimed dividend after six years. What were such investors doing and failed to claim their dividend for six years? If these funds are moved to the trustfund and the government borrowed it and turns it around for economic growth, I think it should be applauded.

To my belief, the registers in conjunction with the companies are not paying dividend to the right shareholders.  Some are paying to the wrong shareholders and they benefit from such practice.

If the government is demanding for these funds and these people will not benefit, now they are making noise. The government policy will tackle unclaimed dividend in the capital market and it gives some people headaches.

The policy will create room for companies and registers to do the needful they failed to do over the years.

 How can the stakeholders tackle increasing inflation rate?

As long as foreign exchange scarcity continued, we will continue to have hike in inflation. We import everything in this country. As long as there is a scarcity of dollars, we will continue to have the same challenges.

If the global oil prices continue to rise, the government will have enough dollars and definitely, the inflation rate will drop.  Inflation in Nigeria is driven by cost-push inflation.