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Several Nigerians, including Vice President Yemi Osinbajo, called on key banking and financial regulators, the Central Bank of Nigeria and the Securities and Exchange Commission (SEC) to implement a regulatory framework for cryptocurrency transactions in the country.
In this interview with Nairametrics, Sonnie Ayere, CEO of DLM Capital Group, a company that has been at the forefront of creating alternative financing solutions for businesses and delivering innovative ideas tailored to access to funds for growth, showed his mind on the matter.
For him, without a cryptocurrency status as a medium of financial exchange by the majority, it could suffer setbacks and continue to trade within speculative limits linked to commodities, such as gold.
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What growth path do you foresee for the Nigerian economy in 2021 after exiting the recession?
We believe Nigeria’s post-recession economy in 2021 would reflect significant growth as the effects of the Covid-19 pandemic on the economy diminish with the resumption of vaccinations to halt its spread. Businesses requiring customer visits were hit hardest in 2020 by loss of business. As manufacturers and traders have continued with stable and unthreatened levels of production and supply of goods; the challenge was how to get customers to choose and buy them. This has inspired an increase in demand for delivery options, by both customers and sellers; thus, we have indications of additional potential in new and existing delivery and logistics businesses, online retailing and online payments for sales beyond fixed locations or outlets.
We expect the post-recession economy to exceed its current state in terms of economic performance, as it is a state for which most restrictions on movement have been relaxed and the conduct of business for physical transactions. resumed. We believe that the opinions formed previously on the Nigerian economy predicted a more than transient period of recession compared to other countries facing the same situation. We believe this was based on significant negative expectations of low anticipated government responsiveness, high infection rates, and perceived challenges in financing and managing the pandemic.
READ: Here’s what to expect in Nigeria’s fixed income market this week
The year 2021 has resumed with increased activity in the global economy which has led to higher price levels for raw materials following a rebound in demand. In the case of Nigeria, this relates to the country’s crude oil exports. Nigeria is timely again with increased income and a chance to increase its savings.
Despite the disruption caused by the COVID-19 pandemic, the agriculture, ICT and financial services sectors have remained resilient. What do you think is responsible for this and which sectors do you think will be the engine of growth in 2021?
For these three sectors mentioned, the most profound contributions have come from ICT services, as they have largely facilitated higher levels of transactions for the financial sector, especially with regard to the growth of electronic payments and online merchandising. Agriculture has particularly flourished as supply chains have faced few threats with restrictions on movement and, unlike most other sectors, enjoy constant demand. The price of value should go to ICT-related services to facilitate sales of goods and services away from the physical markets where people would normally transact.
The federal government presented a budget estimate of $ 13 trillion with a historic deficit of 5 trillion naira. How well do you see the 2021 budget in line with the assumptions?
Overall, the rise in oil prices is translating into stable expectations on the financing of crude oil production and sales. Performance expectations should be met by increased global energy consumption. Rising revenue from sales also provides the country with a greater capacity to service future debt financing payments, which also translates into lower borrowing costs.
What would be critical is the government’s success in increasing tax revenues in the face of depressed economic activity and its ability to take on debt and sell assets if necessary.
What is your assessment of the investment climate in Nigeria in light of COVID-19?
The investment climate in Nigeria after the Covid-19 epidemic is designed to reflect the economic situation following the impact felt among average households, and it is about lower average income per household, a reduction businesses that can achieve balance and a need to preserve wealth.
For financial markets, the trend is downward in returns for all fixed income investments; these cover treasury bills and bonds, corporate debt, ie commercial papers and corporate bonds, and even rates on bank deposits. For the stock market, 2020 was marked by a strong recovery, although company performance was mixed, clearly reflecting the differences in customer base of the underlying sectors. We believe this was a clear search for yield as there were many companies offering attractive dividends relative to their trading prices.
What will be the outlook for the Nigerian fixed income market in 2021 in terms of regulatory landscape and opportunities for investors?
For the bond market up to 2021, we anticipate an increase in corporate issues from companies familiar with the financial market and âpipelineâ transactions from new business perspectives. The focus would be on accessing current lower market rates for different terms and refinancing their existing debt at those lower rates. We also anticipate increased commercial paper issuance to strengthen working capital for inventory financing.
We anticipate the support of our regulators as we push for the inclusion of more companies in the space of opportunity for all stakeholders in our national financial markets. However, there appears to be a push for higher rates from major traders on the buyer’s side, resulting in an increase in FGN yields.
The Nigerian stock market was on a rally that tripped a circuit breaker on the NSE recently, what does this mean for the market outlook?
The impressive stock rally in 2020 was sparked by investors looking for higher yields. It is only rational that some investors reconsider their aversion to stocks and seek the advantage offered by rich dividend income over fixed income investments at the time. Institutional investors have recently favored fixed income securities and retreated to equities; bond yields in the market had sufficed for the performance of their managed portfolios. We have seen this change with the rally and are hoping for better company performance to maintain strong fundamentals for each component industry represented on the Nigerian Stock Exchange All-Share Index.
From an investment perspective, what investment options would you advise investors (individuals and institutions) to focus on in 2021?
2021 presents opportunities for value investors, as some stocks of domestic companies remain undervalued relative to similar companies in other foreign stock markets. A domestic investor should focus on companies that have supported better or increased their sales channels beyond pre-pandemic levels.
In the area of ââfixed income securities, it is important to note that future transactions will seek to capitalize on current market rates as some sectors of the Nigerian economy return to profitability due to increased activity. economic. Currently traded debt securities would be more attractive and priced lower depending on improving economic conditions.
The theme of investing should be the location of the trade front. Many location-based businesses that a person traditionally visited to view and buy marketed products have had to step up their sales efforts by expanding sales channels beyond their physical location by promoting brands and products through social media, their e-commerce sites and offering online delivery and payment options.
The distribution frontier has been extended to include mobile devices with online payments; investors should look for where income is guaranteed with an emphasis on distribution costs.
What is the future of crypto regulation in Nigeria and what are the gains for Nigeria by adopting a digital currency?
Finally, on admission as an acceptable means of exchange; some form of regulation under the aegis of the monetary authority and the stock exchange commission would be transmitted to manage its effects on the economy as currencies do. Adoption of cryptocurrency as an acceptable means of transactions included in monetary resources in more countries would most likely precede its adoption in Nigeria; we believe these issues would soon be addressed by individual countries and the International Monetary Union, as the full adoption of cryptocurrencies literally portends some shift in international currencies currently accepted in international trade, a developing country that has the major currencies would most likely resist; and of course, countries whose currencies are not in this group would most likely be favorable.
Without a cryptocurrency status as a major financial medium of exchange, it could suffer setbacks and continue to trade within speculative limits linked to commodities, like gold.
Some critics have argued that there are other ways for the CBN to curb illegal transactions instead of banning crypto transactions. What is your opinion on this?
There is no argument that there are other ways to reduce illicit flows, but with an unregulated status, it would be natural for the umbrella bank to view some transactions as ârogueâ; that is, operate without monitoring, controls or data on the source and destination of transactions. Until the monetary authority has put in place its infrastructure to monitor and regulate this, cryptocurrencies would be considered to support parallel transaction ecosystems.