Financial Intermediation

INFORMATION AND KNOWLEDGE ARE STRATEGIC TO 
MARKET DEVELOPMENT AND GROWTH 
By, Seye Adetunmbi 
Being remarks at the public presentation of his book on Financial Intermediation and Practice on 21/7/20

While appreciating everyone who joined us at the virtual presentation of my book titled, Financial Intermediation: Operations and Practice – A Guidebook for Financial Market Operators and Practitioners, let me formally acknowledge all the dignitaries that honored my humble invitation and everyone who made this remarkable event a reality to the glory of God. I like the company of people of good character and integrity, this explains the basis of all the distinguished people I contacted on the zoom presentation. I appreciate your esteemed presence.

I hereby formally express my gratitude to the Chairman of the zoom presentation, Dr AlimiAbdul-Razaq, my very good egbon. I have come a long way with the Abdul-Razaq family of Ilorin. Virtual presentation was not on my radar after getting the financial intermediation guidebook published on Amazon. It was his immediate reaction to the extract of the foreword written by Mr Atedo Peterside that resulted to my hosting the zoom presentation of the book to the public. He wrote on June 24, 2020 and I quote: “Congratulations Seye. I cannot wait to order a copy on Amazon. Going by Atedo’s recommendation and your professional pedigree I’m confident it will broaden our knowledge of the capital market. Quite a shame we can’t have it presented formally to an audience with fanfare, due to COVID19. But you should consider a Zoom presentation! Well done!! - Dr Alimi Abdul-Razaq” There we are today! The event was put together in one month with 1000 copies of the book printed because Amazon was yet to start shipping to Nigeria. Thanks for accepting to be the Chairman of this august event.

I must acknowledge oga Atedo Peterside, the investment banking guru that I admire a lot. Thanks for marking my manuscript and for the reassuring foreword to the book sir. I am too delighted to have you and my oga, Sir Uduimo Justus Itsueli as the Special Guests of Honor of this epoch virtual presentation of book in my professional calling. Dr Itsueli is our pride in Nigeria and the very distinguished President of Christ’s Alumni Association. After oga Yemi Akeju practically made me as his P.A. on Christ’s School alumni matters, oga Itsueli has always been there for me. Thanks for accepting to be a Chief Guest of Honour sir.

Chief Dele Fajemirokun has always been an inspiration to me right from when I met him at Anglican Church of the Ascension, Opebi where I have been worshiping since 1990. He made his mark as a distinguished entrepreneur and today is a major stakeholder in the Nigerian stock market with one of his foremost companies AIICO PLC, quoted in the insurance sector. I couldn’t think of a better person to be the Chief Presenter of the book to the public. Egin, Odidimade, thank you sir.

Thanks to the distinguished Senator Ibikunle Amosun, Committee on Capital Market for being a Lead Presenter of the book to the public. He sits next to my brother in the hallowed chamber at the upper house of the National Assembly in Abuja. Likewise, my friends, the Deputy Governor of Kwara and Osun States, Messrs Kayode Alabi and Gboyega Alabi, thanks for associating with the book presentation as Lead Presenters while appreciating the moral support of Governor Rahman Abdul-Razaq and Governor Gboyega Oyetola.

How can I present a strategic book on the financial market to the public without the headmaster of capital market in attendance? Alhaji Lamido Yuguda, the Director-General of the Securities and Exchange Commission, thanks for honoring my invitation as a special guest. Likewise, the distinguished technocrat and Oxford scholar, Ms Arunmah Oteh and other former D-Gs of SEC who graced the zoom presentation, I appreciate you all. Ms Yewande Sadiku, the Director-General of Nigerian Investment Promotion Commission, thanks for honoring my invitation as a special guest. By extension, I appreciate your coming, Oscar Onyema, the CEO of Nigerian Stock Exchange and for your concise commentary on the book. I have always admired the brilliance of Bola Ajomale, the Managing Director of NASD PLC, this is why I am delighted that he reviewed the book and did justice to it clinically and professionally too. Likewise, Tayo Shenbanjo who did the initial review from USA, thanks my beloved professional colleagues, in whom I am very pleased.

When I joined the capital market in 1990, I saw the need for a guidebook for operators and practitioners and started taking notes. Had it been that the book was published when it was ready in 1994, a section of it would have been analog based and it would have been necessary to review it now. The debut of the book now, has made the book to be digital era compliant and loaded with additional contemporary financial market and economic related matters. All that I have to say about the financial market are in the book including my tour of the sector on a professional note. Let me reiterate here the essence of this book with relation to facts, information and knowledge which are key to market development and growth. Information is a significant ingredient of a perfect market. Information drives the market, it engenders efficiency and a competitive market. Knowledge also aids efficiency and facilitates professionalism. For instance, when an issuer or client is adequately informed about the workings of the market, it makes service delivery timely and mutually beneficial to all parties concerned.

I must also acknowledge members of the Capital Market Roundtable in Nigeria. I develop myself by associating with people who are better than me so that I can learn from them. Thanks for believing when I approached you the distinguished professionals and senior colleagues to join the forum. I have been privileged to work with some brilliant senior colleagues whose wealth of experience rubbed on me, High Chief Luyi Rotimi and Mr. S.O. Ibitoye; I learned a lot from them within a short space of time, thank you sirs. Let me use this opportunity to recognise my very brilliant friend, Abi Adigun an expatriate with ExxonMobil, he was instrumental to my consultancy assignment with Databank Zambia in 1994 during which I organized a national workshop on IPO (Initial Public Offering). Abi and his wife (Vivien) joined us for the zoom presentation from Houston, Texas. Also my friend, Chanda Chileshe and his wife (Tanya) joined us during the zoom 

presentation from Zambia.

    I am wearing two caps as the author and the publisher of the book. Mindscope Africa as a publisher is getting better with each publication as evident in the latest book. We will continue to improve in necessary quarters in response to feedbacks towards raising the bar in the publishing business while counting on patronage from everyone.

My sincere appreciation goes to my Lord Bishop in Ekiti-Oke Anglican Diocese, Rt. Rev. Isaac Olatunde Olubowale for the episcopal blessing on the book launch and Baba, the Venerable Archdeacon L.L. Eso, one of my mentors who always associates with whatever concerns me. I wish to mention Chief Biodun Shobanjo, Dr Ayo Ajayi, Otunba Akin Osiyemi, oga Macaulay Iyayi, Chief Kole Lanlehin, oga Oluwole Komolafe, Baba-Ijo Segun Ogunkua, oga Banji Ogungbeni, Mrs Folusho Olaniyan, Professor Dupe Adelabu, Ambassador Eniola Ajayi, Bode Ojo, Ropo Dada, Dr Bola Malomo, Mrs Moni Alade, Princess Moradeke Ajibade, egbon Ayan Kolawole, Yinka Sanni, Tunde Amolegbe, Duro Omogbenigun, Mallam Isiaka Abdul-Razaq, Yinka Adekunle, egbon Femi Adefope, Venerable Adewole, Bolade Oyebolu, Charles Iyore, Niyi Laosebikan, Victor Odunsi, Biodun Oyemade, Mrs Yewande Taylor, Tolu Olugbamila, Sola Akeredolu, Mrs Nike Iyoha  and many others who graced the virtual presentation of the book. In the same vein, I acknowledge all the various constituencies in which I have been active over the years. You are part of my DNA.

    To my wife (Olabowale), children (Oluwabunkunmi, Oluwadara, Oluwasemilore and Mobowofoluwa) and other family members, your immeasurable support is appreciated. Thanks to my older brother, Senator Olubunmi Adetunmbi for his remarkable support on this project. Thank you all for the rare honor you have done me, God will honor you many folds and may the grace of God be sufficient for us all.

HANDBOOK FOR FINANCIAL MARKET OPERATORS 

By, Seye Adetunmbi 

(Prologue of The Textbook on Financial Intermediation: Its Operations and Practice)

Background: I started my working career in the capital market as Deputy Manager, Corporate Finance in 1990 after leaving MBA School in 1989, and my first assignment was the private placement of the divesture of the controlling holdings of Ondo-State Government in Araromi/Aiyesan Oil Palm PLC. I was privileged to have two brilliant and experienced chartered accountant bosses as my Chairman/Managing Director and General Manager respectively. However, the financial intermediary service firm I worked for had not handled such a capital market issue before. In fact, there were very few investment banking mandates that had been consummated in the Nigerian capital market in the late 1980s and early 1990s. This was coupled with the fact that some of the regulatory policies were just evolving and they changed at short notices. This meant that there was no precedent for me to follow with respect to procedure in-house to see my assignment through in a regulated capital market setting. The implication of this was that I took it upon myself to develop my knowledge on capital market issue process through papers presented at seminars and workshops. It was imperative for me to be on top of how best to go about the private placement procedure in line with the requirements of the Securities and Exchange Commission (SEC).
    The private placement brief, I must admit challenged me a great deal from the beginning to the end. In the process of seeing through the brief, I developed passion for investment banking and lasting career in the capital market. There and then, I found the need for a standard pragmatic manual for capital market operators and corporate finance operatives. Naturally by instinct, I started taking notes on financial market operations and practice within and outside Nigeria which culminated into this textbook. The initial manuscript was first concluded as far back as 1992 which I updated for this edition. I received inquiries from people who read my research work on Real Estate Investment Trust, Debt Securitization and Asset Backed Securities which also prompted me to see this book through.

Contemporarily, the financial market sector of most developing economies in the recent past recorded a remarkable development and growth as a result of embarking on strategic economic liberalization schemes. Structural Adjustment Programme (SAP) was one of such schemes. This is evident in the increasing numbers of operators in the financial intermediary services in the economy of these nations. In Africa for an example, there were more financial market operators in Ethiopia, Kenya, Nigeria, Zambia and Zimbabwe in their SAP era than it used to be in the pre-SAP days. With the increase in the monetization of these developing economies, commerce and industry have been developing side-by-side with their financial system respectively. However, one area that is yet to come of age in spite of the imponderable potentials in the sector is the capital market of most these developing economies which still leaves so much to be explored. Financial market professionals may agree with me that the strength of the financial sector cannot be divorced from a developed, functional and vibrant capital market.
    

Essence of the Book: The essence of knowledge and information cannot be overemphasized because they are keys to any edge. It is an apparent fact that, lack of adequate business information on developing nations is one of the major barriers to their economic development and growth. It is also becoming very evident that economic reforms and liberalization programs being adopted by some of these developing countries, are not yielding the desired results fully for diverse reasons. Poor implementation is perhaps one of the key causes, and this is due to lack of credible and available information on contemporary environments with similar peculiarities. On the other hand, the sudden surge in the financial market activities in the world emerging markets did not match with the available expertise. The implication of this dearth in resource persons and relevant procedural information is trial and error approach to the professional needs of the financial market resulting to an inefficient market.

     Nigeria is the case study in this book because activities in the money and capital market between 1980 and 2020 had been quite remarkable and should be documented, such that, it will serve as a guide for other emerging markets, government technocrats, intending practitioners, existing financial market operators and individuals who wish to know how the financial market operates and works. In January 1995 for instance, the federal government of Nigeria revoked the Exchange Control Act of 1962 and the Nigerian Enterprise Promotion Decree of 1989, as a bold move to integrate further, its economy into the global economic system.

    I have read a number of publications on financial intermediation and its practice in developing economies which I found very informative on the activities in the sector. However, I deem it necessary to put a textbook together which will not only review the activities of the Nigerian financial market to date, but to serve as a practical guidebook for intending operators and participants who have been eager to be involved but have been constrained by lack of information and the technical knowhow. The book should also clear misconceptions on the operational procedure in the financial market, particularly the mix-up of the identities and the respective functions of the various registered financial market operators and players.

    The prevailing inflationary trend in most of the developing economies made money market funds expensive for the financial engineering of the formal sectors of the economy until recently in Nigeria. This apparently makes it necessary for most of the Nigerian manufacturing companies to explore the capital market window. Activities in this sector are inclined to grow continuously and it is against this background that I have been inspired to put this guidebook together with special reference to the capital market operations. 

Information Source: In my working career, I have been directly involved in securing registration as a capital market operator for four different companies. I was also actively involved in taking public liability companies to the capital market under the auspices of the Securities and Exchange Commission. I also had integrated exposure in stockbroking operations and corporate finance. I have at one time or the other coordinated various capital market workshops and seminars on multifaceted financial market issues while I have presented several papers in Nigeria, Zambia and USA on financial market operations, specialized products and services. I participated in the second conference of the African Stock Exchanges Association (ASEA) in Johannesburg, South Africa in 1994 and the 10th Conference at Sandton City, South Africa in 2006; some of these experiences were reflected in this guidebook. Most of my specialized seminar papers constitute the section five of this textbook.

    Therefore, in view of the practical approach of this book, most of the materials in this maiden edition other than the statutory information are informed by my functional involvement in the financial market operations. In addition, I carried out a detailed research into a select literature, workshop and seminar papers on the capital market operations of some active markets. Necessary clearance of facts was done at the appropriate quarters on the relevant areas of this textbook. Hence, most of the procedural information in this book might not be found in theoretical finance textbooks.

   On August 15th 2008, the inspiration to convene Capital Market Roundtable in Nigeria resulted to an interactive e-Forum. The roundtable parades the best of professionals in the Nigerian financial market. It is an online platform where past and present operators, tested practitioners and regulators converged to cross-fertilize ideas for the good of the market and the national economy. The last section of this book brought out some of the best moments in the forum. The various relevant issues discussed and debated were highlighted for ease of reference and application as the need arises. I am a follower of the school of thoughts of Warren Buffet, the oracle of value investing; the pages separating each section of this book contains some of his timeless quotes which readers may find refreshingly instructive.

Representative symbol of Capital Market Roundtable in Nigeria

Target Readers and Benefits of the Book: This book is not an end in itself. However, the 20 chapters should be able to inform the financial engineers, formal sector players and practitioners, proprietors, entrepreneurs, investors and company executives on the opportunities that abound for them in the financial market as well as the challenges too, and how to benefit from this sector in a developing economic environment. Section one provides an incisive intro to the world of financial intermediary services. The book also articulates functions of the professional parties that are relevant to typical market issues in an emerging or a developing market. Thus, solicitors, management consultants and accountants who are often faced with professional callings in the financial market would also find section two of this guidebook useful.

    The technocrats in government that are confronted with the problems of how to fund capital projects would also find this book relevant. Section two and section four would enable them to understand the step-by-step of long-term capital raising alternatives available to productive government capital projects in an organised stock market by exploring various financial market instruments and integrated capital market product derivatives. Likewise, the owners and managers of private sector companies with growth potentials would find the book useful. Practitioners pursuing careers in the capital market should also find the book functional, while those individuals aspiring to be stockbrokers, companies seeking quotation on the Nigerian Stock Exchange or prospecting registration as capital market operators should benefit from reading this guidebook. Furthermore, this book should enhance or facilitate the induction programme for new employees of the financial market operators. Students of accounting, banking, business management, economics, finance and law should find this book very relevant because of its practical approach to financial intermediation and practice in Nigeria, particularly in the capital and money markets. The glossary of financial market terms was well researched, quite educative and should be beneficial to all and sundry.

Conclusion: In spite of my efforts, I still feel that some information which some readers may wish to find in this textbook may have been left out. Nevertheless, I consider this book as an insightful compendium on financial market activities in Nigeria. It is also important to note that the guidelines articulated in this book were valid as at the time of publication. In subsequent editions changes in operational procedure and the directory of operators shall be effected accordingly. This is why this publication is a continuous exercise which should be reviewed periodically. Financial intermediary service has a broad spectrum, this textbook is therefore limited to the areas which I have competence professionally, adequate knowledge and modest exposure. This I deem fit to share with my professional colleagues, article clerks in the capital market and all inquiring minds.