Dunn Loren Merrifield on Nigeria’s exceptional economic growth

Transcript

As the largest economy in Africa, Nigeria is a very attractive investment prospect. One company that has paved the way for economic growth in the country is investment house Dunn Loren Merrifield. World Finance speaks to Sonnie Ayere, Founder and CEO of the company, to find out about the country’s financial market, and its opportunities.

World Finance: Well Sonnie, Nigeria has seen exceptional growth over the past few years, but in terms of the financial market, how developed is that?

Sonnie Ayere: The financial market I would classify as still at the frontier to emerging market levels. The real basin of Nigeria’s economy has obviously moved Nigeria into that larger economy spot, the 26th largest in the world today. The financial market, however, does not reflect that sort of composition of what makes the GDP of Nigeria, and that’s why you have today discussions of the telecom companies should be floated on the exchange, in other words the exchange should reflect more of the economy than the banks. Today the banks are actually, well I would say they dominate the financial markets, and I think it needs to be much much broader in terms of its outlook, products and reach.

The key areas that exist medium to long term: the power sector, for obvious reasons, the agricultural sector is also another area that is becoming very,
very attractive

World Finance: Well how involved are you in the development of the Nigerian financial markets and in fact the country as a whole?

Sonnie Ayere: As a person and as a firm, we are pretty much in the thick of things, right from my first role when I left the World Bank, the IFC, in fact when I was actually working with them at the time I helped the Nigerian economy, or the Nigerian government, to develop a bond market. That was actually my first major assignment in Nigeria, and now we’re looking at the housing market. I’ve also served on several committees, from the stock exchange and from the securities and exchange commission, and we’re actually working on one right now to actually revolutionise the way the market players actually operate within the market to make it a lot broader and much deeper.

World Finance: Well you company acted as advisors to set up the Nigerian mortgage refinance company, which was launched earlier this year, why was this so important?

Sonnie Ayere: Housing in Nigeria, if you think about the population, currently 170 million people, mortgages to GDP is about 0.x whatever percent, it’s a nominal number. So the whole idea of having this company, which is as a public private partnership, is actually to now provide that catalyst to help this market grow, and just reading the papers this morning, they’re talking about a market of about 60trn, I think that’s about half a trillion pounds, in terms of even just to cure the housing deficit. So this is quite an important company, that actually becomes that sort of catalyst to bring in both the demand side and the supply side of the housing market together, and hopefully try to make housing a bigger component of the GDP of Nigeria going forward.

World Finance: Well looking at the Nigeria stock market now, and after a poor performance in the first quarter things are starting to pick up, so what opportunities are there for investors?

Sonnie Ayere: The key areas that exist medium to long term: the power sector, for obvious reasons, the agricultural sector is also another area that is becoming very, very attractive. The housing market, certainly is a big opportunity. And then the other areas which have been the normal, mundane areas that investors have normally played in: the banking sector, the telecom sector, etc. So it is a very fertile ground, but again, obviously certain issues and risks do exist, and that’s why it is still to my mind a frontier market, and investors obviously need to be cognisant of the risks that exist, but then the rewards are also compensating for those risks.

[I]nvestors obviously need to be cognisant of the risks that exist, but then the rewards are also compensating for
those risks

World Finance: Well looking to the future now, and what do you anticipate to be the future trends, and challenges in fact?

Sonnie Ayere: In terms of the trends, from an investor perspective, I think it really depends to a large extent on the security situation. Given what’s going on in Nigeria today, one can’t ignore that fact, and I think it largely depends on how that’s handled. If handled very well, I think the potential going forward is absolutely tremendous for both domestic and international investors.

World Finance: Well obviously, we’re coming up to the elections in 2015, so how safe would you say Nigeria is for investors?

Sonnie Ayere: I always like to say to investors, we need to get out of this sort of cyclical, every four years there’s an election and then everything has to stop until it’s over, and then we can start again. It has to get to a point where, there’s the elections, yes, that’s normal, and investors just continue. The one advice I would give to investors is just, generally speaking, to monitor how the security situation is being managed, and if managed well I see absolutely no disruption in terms of investor appetite for the sort of yields and returns they’re getting out of that country today. So my view would be, yes continue to invest, but of course monitor what’s going on.

World Finance: Sonnie, thank you.

Sonnie Ayere: Thank you very much.