By NKIRUKA NNOROM

Victor Ogiemwonyi is the Managing Director,Partnership Investment Plc and a council member of the Nigerian Stock Exchange, NSE. In this interview with Financial Vanguard, he gave insight into some of the recent initiatives undertaken by the NSE since assumption of office by the substantive CEO, Mr. Oscar Onyema. He said that companies will start issuing initial public offers, IPOs, once they are certain that confidence has fully returned, and the market will support the issues. EXCERPTS:

The rate of foreign participation in Nigerian capital market is still high, and that is not good for the market. What do you think should be done to encourage more retail investors’ participation?

When you talk about the proportion of local to foreign participation in the market, you will observe that at the beginning of this year, or late last year, foreign participation was about 80 percent. Now, that is reducing very fast. What happened is that the foreign investors have more capacity to look at the market.

They are experienced with how market comes down and goes up and they make decision base on that. Local investors are just warming up to that; that is why I said that there is a gradually recovery of confidence. Confidence is coming back; it is going to happen.

There is no need to worry, because we too are more interested in ensuring that local participation is increased because the retail market is what has been the bulwark of our market for a long time. Foreign investors are coming first because there is lack of yield in the west and secondly because the prospects are just too good not to invest here.

In the past, nobody will talk about the frontier market in New York, because it was like it was meaningless, but today, we are being forced to talk about these markets. So, we welcome foreign investors; they will continue to come, but local investors will join and they are joining gradually.

As local investors recover and they become clear that this market is coming back, they will join and we are already seeing that. So, I don’t think we have anything to worry about. Confidence is definitely coming back and we are doing everything to encourage local participation.

The first thing to happen in that regard is that those of you who write and give them information, need to also drum into their ears that the market is coming back slowly, but surely, and that some of the things we were worried about in the past are being taken care of and things are working very well.

You see, everybody who joined the party during the boom days was because they were hearing about the market and at a point the market became exciting for everybody. Local investors were will come, but the media should play its own role in doing that.

The current reforms in the Nigerian Stock Exchange, as well as the products being introduced tend to make the capital market more elitist. We tend to emphasize more on the use of Information technology to source for information, but our IT penetration is infinitesimal. Don’t you think some of these are disincentive in the effort to increase local participation in the market?

I think we should look at that a bit; believe it or leave it; Nigeria represents one of the highest areas of the world where people use the internet the most. One of the reasons why the Exchange is emphasizing on the use of information technology is because they want to start saving cost.

Apart from saving cost, you also have to be aware of the current understanding that our carbon old print should be lower. So, you and I know that today, even in your office, I am sure that the papers we used to use in those days, we are not using them any more.

I think there is a twin objective: one is to ensure that we reduce carbon prints and to ensure that there is lower cost. I think it is also to push it, because whether you like it o not, sooner or later, we are going to be glued to that website. So, the earlier we learn it, the better. I think you should praise them for it. I agree that the pace is a little bit fast; they are pushing it very hard, but we should try and run with them and cash up with the pace. I think it is a good idea.

Recently, some markets in the developed economies introduced transaction taxes and investors over there have started scampering to safety as a result of the new policy. Do you think our market is going to benefit from this?

I think you need to be careful here because those markets are already very advanced. They are trying to see that their budget deficits are covered in one way or the other, so they are scouting for anywhere they can find money. Of course, you should know that people who played the most during the last boom were the people who are on top of the economy of the world where they are getting loans to play the market.

There is a tendency to believe that these people need to sacrifice a bit and this is one of the ways of doing that. I don’t think in our local market, we should be looking at that yet, because we are still growing the market. We are actually thinking of how we can reduce transaction charges here, and of course, you can see the advocacy that the Exchange, the brokers and everyone else is doing to do that effect. One of the things that the press has talked about much is the removal of VAT and taxes that we used to pay.

You do realise that our argument has always been that taxes should be consumption tax, not investment tax. Why are you taxing investors for taking risk? I think that is being looked into. We know that they have removed it, once it is gazetted, the market will be happy and will bubble as a result of that. So, I don’t think we have a problem there.

What figure are we likely gong to see in terms of growth prospect in the equity market by the time the year comes to an end

The growth prospects are very good; I am not going to dabble into this figure or that figure. If you remember, late last year, when I was asked what I think the growth prospect will be for this year, I said the last quarter momentum is going to be carried into the first quarter and I expect it to push even further to the second quarter.

I predicted generally that I am very confident that the market will do averagely better than it did in 2012. Right now, the market has even done better than we all expected. I think the growth prospects are there; they are real, because the economy is better. At three, seven percent growth rate compounded annually for two, three years, we will change this economy and we are beginning to see that.

We are seeing per capita income in Nigeria today come back to $1,300 (One thousand three hundred dollars) per person. The last time we had this kind of per capita income was in the 80s, yet there is still the argument that wealth is not evenly distributed. There is no doubt that poverty has increased as a result of the dislocation but whenever there is dislocation in the economy, it also throws up a lot of opportunities. I think a lot of opportunities are coming up.

What is your take on the exclusion of banks from margin list?

Actually, it is not only here. It is not unusual to exclude banks from the margin list because of the fact that their role is like self-serving one. If you are giving money to people, obviously, if you were the one, you will tell them to buy your shares. That was part of the problem we had the other time.

What we are saying is that the margin list should not ignore the value of banks in the total security coverage for a margin facility, because if you do that, you are going to misrepresent a proportionate part of the market, which will affect the way it is done.