Indigenised Ekiti Investment Trust Fund by Seye Adetunmbi

INDIGENISED EKITI INVESTMENT FUND: A Collective Investment Scheme Initiative of Ekitipanupo

By

Seye Adetunmbi, 6/3/2024

(Being an essay written to mark the 19th anniversary of convening Ekitipanupo Forum)

If and when a system works properly to serve larger interest, the state's resources will be applied optimally on the creation of an enabling environment and the provision of basic social amenities for the good of all. Consequently, jostling for various shades of political appointments and all forms of ignoble patronages are bound to be minimal. As a matter of fact, it is the good purpose-driven government officials that will be headhunting quality people to serve in government. Okonjo-Iweala, Ezekwesili, Aganga, and Adesina are examples of a few technocrats in this category. Once the task was done, the appointees went back to their vocation and did not lurk around for another appointment. That's the difference between the developed world, cum a purpose-driven disciplined government and the chronically corrupt nations or state governments that have been cornered by the rent seekers, political jobbers and establishment elements who feed fat on the failed system. 

This also explains why those who have the means to relocate to the better structured communities outside Nigeria opt for it. The reasons are not far-fetched. Once they have a source of income, no matter how humble the job they do, they live well with peace of mind. What Nigerians need are righteous leaders at all tiers of government who will facilitate a workable system that will serve collective interests better on a continuous note. Consequently, "japaring" would be a matter of choice and not compulsion to make ends meet and live decently because whatever you are looking for outside is available in bounds too, within. Also, taking up government appointment would amount to making a sacrifice to truly serve in the real sense of it and not that the appointees' survival depends on it.

    Let us be sincere with ourselves. For as long as there are fundamental flaws in the Nigerian system, going about an election at all tiers of government will be hugely monetised. Whoever gets the party ticket is massively indebted to those who facilitated candidacy. It amounts to imprisonment in a way because their hands are tied. The situation becomes more compounded if the incumbents are products of their political benefactors. Rocking the boat or deviating from pact is out of the equation. It is rather unfortunate because it is a kind of a vicious cycle. Yes, the cost of getting to the office has to be recouped while preparing ground for the resources required for the next election. In essence, the government affairs would be gone about or managed in the manner to ensure continuity of the political structure in office, perpetually at the high expense of the poor masses. Unlike the olden days when plausible and the well executed cardinal programmes ensured continuity of political parties in government, it is something else these days.

    By the time the benficiaries of such setting or any compromised political arrangement are elected/selected to office, an enduring productive government is bound to be absent, or it practically becomes illusive. Jostling for the government appointments and patronages become the order of the day. Invariably, godfatherism is kind of systematically entrenched with a multitude of hangerson and palace jesters. The parasites of the status quo would do everything possible to prevent anyone who will effect changes that will serve the larger interest and give power back to the poeple from getting elected to the office, or be in government. The status quo of a warped system is their pot of soup. The base and source of their afluence and influence is being a politician. They don't have other means of sustaining their lifestyle and trips outside government machineries. It would be tough for them to let go. This is the disturbing reality of our situation in Nigeria.

    In as much as the basic standard of living is assured for the majority, then most people will be contented with their vocation. When the citizens have access to electricity, pipe borne water, adequate policing/security, gainful employment opportunities, good healthcare, and quality educational system in their wards, corruption will be easier to curtail. Also, the rat race to be part of government or play party politics to make a living would be prone to run out of fashion, especially among the discerning citizens. The albatross of the desired paradigm shift to the achievable best practices are those who have hijacked the political system for personal gains and the benefit of a small clique of cronies.

    Whoever the warped system and the compromised political party arrangement throws up at any tier of government will be bound to be inequitious to the larger interest of the society in the utilization of the state's scarce resources The unfortunate arising government and its administration is characterised by projects that can aid the diversion of state's treasury to private pockets, sectional appeasement, "settlement" of all shades of "middlemen", and segregated patronage, instead of the efficient allocation of the commonwealth to effectively serve larger interests. What can restructure the infamy paradigm is a kind of conscious jettisoning of double standard and deliberate progressive actions that will end the very disturbing trend and change the narrative.

    Any self-serving political group will tilt towards the person that approximates the ideal of their sponsors and the conclave of other members to lead them. A group of yahoo-yahoo scammers or fraudsters are not likely to elect a law enforcement officer as their leader. Those who live on or exploit the leakages in the system will not let anyone inclined to block stealing and philandering to be elected to office. We can only pray for more outstanding upright persons to infiltrate their ranks, who will have the option of either joining them or doing the right thing. It will take a lot of guts to effect change and make the difference. Good purpose driven leadership is required to take people through the desired transformation process. Time will tell if the current dispensation will take us there in Nigeria at all tiers of government.

    Considering this reality and the difficulties associated with reversing the uncharitable cancerous political trend too soon, despite the genuine integrated efforts of the conscientious Ekitipanupo Initiative (EI) over the past years, it now becomes imperative for the well-meaning indigenes to continue to explore avenues on how to improve the lot of our people outside the government machinery. While keeping hope alive that the political pharoahs holding down the progress of Nigeria and the potentials of the state in the jugular will let the people go at some point that no one knows when. Ekitipanupo can not give up on being the conscience of the harpless kinsmen. Hence, whatever can be done by way of a strategic ongoing intervention without any interference by government magic becomes imperative.

    I was spured by the recent stock position statement of the investment portfolio of Ekitipanupo and its excellent performance. It was the balances of the various monies contributed by the financial members of the prized indigenous intellectual roundtable for different projects in the past 19 years. The EXCO, under the leadership of alagba Gabriel Akinyemi, FCS, a native of Osi-Ekiti, had been managing the fund efficiently. The initial balance was invested in the FGN bond, and thereafter, the portfolio is now a mixture of equity and government stocks.

    My modest investment banking intuition prompted me to put on my thinking cap and explore the possibility of actually going all out for an Ekiti indigenous collective investment scheme. I once did a presentation on this model for an Ekiti Venture Capital Fund at the Ekiti Summit hosted by the Ekitikete International Forum in the USA in 2006. You can find what I wrote then to read below this article. There couldn’t be a better time to actualize this than now. Where there is will, there is a way!

    The nomenclature for what is being proposed is tagged Ekiti Investtment Fund (EIF), which will be promoted by Ekitipanupo Forum. The fund will be professionally managed in gratis by a team of very competent volunteers facilitated by Ekitipanupo Forum. The fund will first have a base that will be grown from time to time through strategic portfolios that will generate considerable returns on investments over time. The focus of the fund will be to create wealth in Ekiti-State with trickle-down effects for the benefit of the majority. It will fund the identified good business ventures in both the formal and informal sectors of the Nigerian economy that will create employment for Ekiti indigenes within the state.

    I couldn’t think of any other thing to write on the Ekiti project on the 19th anniversary of Ekitipanupo than to bear out my mind on this thought process that has occupied my consciousness recently It is my hope that members of Ekitipanupo with relevant skills set will constitute a committee to look into the legal framework and work out the modality on the Ekitipanupo Fund Project (EFP). The goal of the Ekiti Investment Fund is to be proficiently managed by volunteers who are tested professionals with cognate experience. To the glory of God, Ekiti is blessed with quite a number of technocrats in the required professional fields who shall willingly serve. It is hereby humbly proposed that the fund should be launched to mark the 20th anniversary of Ekitipanupo on the 6th of March 2025. We have a year to plan ahead.

    It is essentially going to be a private sector initiative without any political party affiliation and interference of government. Primarily, every networth indigene will be expected to cheerfully contibute out of freewill to the purse. Voluntary grants or contributions without any strings attached from the government and various donors from far and near (within and outside the state) will be appreciated. The current value of the Ekitipanupo portfolio should constitute the first subscription/seed money for others to build on. Ekiti people at home and abroad shall take ownership of the fund while Ekitipanupo will manage it in trust for the people.

Happy 19th anniversary to Ekitipanupo Forum

1

EKITI VENTURE CAPITAL FUND IN PERSPECTIVE

Being a presentation of Seye Adetunmbi in 2006 at the Ekiti Summit hosted by Ekitikete International Forum in the USA. Also an extract from Financial Intermediation and Practice, a boo written by Seye Adetunmbi, published in 2020

Background: Ekiti as a state is indisputably endowed with natural resources. The challenge of Ekiti-State government and the indigenes at home and abroad is how to harness and channel multi-faceted resources for the integrated benefit of Ekiti community at large. In essence, when the indigenes with the support of the government through provision of the right incentives can convert business initiatives/thoughts into business ventures, the fortune of the state will look up on the path of self-sustenance with little or no dependence on allocation from the federal government. This is why floating of an Ekiti Venture Fund is proposed to pool funds for the indigenes to engage in more economic activities in the state.

    Ekiti Venture Capital Fund (EVCF): It is an initiative to foster entrepreneurial culture among Ekiti people when they have access to funds that can be invested in various productive ventures. More inventive people can set up their own businesses which will translate to provision of more jobs and creation of wealth for the indigenes. Ultimately, this will have a multiplier effect on the Nigerian economy.

    Why the Venture Capital Fund Option: Globally, small business sector is an integral part of renewal/regeneration process for turnaround of most economies in the world. This is evident in Bangalore, the “Silicon Valley of India”. New waves of small high-tech businesses have overtaken the old “chaebol” - the big firms. Venture capital is a classified private equity fund or risk capital. It is a specialized form of funding which provides equity instead of debt or bank finances for new business initiatives. It is also a long-term investment fund for start-up companies and growing businesses.

    Approach: Collective Investment Scheme (CIS) - Collective investment scheme is an arranged pool of funds managed on behalf of investors by a professional money manager. The fund can be invested in venture capital, portfolio of equity stocks, bonds and other securities. The subscribers to any CIS will receive shares or units that represent the investor’s pro-rata share of the pool of fund assets. The Nigerian Investment Securities Act (ISA) No. 45 of 1999 backs this instrument in the financial market. CIS is defined as; “any arrangement with respect to property of any description including money, the purpose or effect of which is to enable persons taking part in the arrangements whether by becoming owners of the property or any part of it or otherwise to participate in or receive income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits”

    Types of Collective Investment Scheme: CIS discussions herein are based on what obtains in the instance of Nigerian ISA No. 45 of 1999.

• Mutual Fund: Mutual fund is a public company incorporated solely to hold and manage securities or other financial assets in line with the laid down investment objectives
• Open-end Fund: An open-end fund is a CIS structured to issue new shares or redeem outstanding shares as a going concern. The price would be determined by the net asset value per share from time to time at the point of valuation.
• Closed-end Fund: This type of CIS issues fixed numbers of shares and does not repurchase the shares from their shareholders when they decide to sell them. Investment trust funds are often structured as a close-end fund which distinguishes it from unit trusts schemes.
• Unit Trust: The funds of investors are pooled together and deployed to invest in a portfolio of securities and other financial assets with the beneficial interest in the assets of the trust divided into units. The unit trust instrument is backed up by a document known as the trust deed. In Nigeria, unit trust is structured as an open-end fund

The Venture Capital Fund or A Specialty Fund

This a pool of funds invested in specific areas e.g. an Ekiti venture trust fund. If such fund is floated in Ekiti-State it is bound to provide more jobs if invested in the right sector of the economy. Funds invested in specific industries/sectors (petroleum, high-tech/IT companies) for instance will provide more jobs. However, venture capital funds are subjected to certain risk-level related to their sector in which they specialize.

Parties to Collective Investment Scheme: The professional parties to a Mutual Fund include:

The Mutual Fund Company – The mutual fund company is strictly established as a legal entity to operate as a mutual fund company. The SPV will be duly registered with SEC.

Mutual Fund Manager – The Fund Manager is a professional entity appointed by the mutual fund company.

Custodian – This is the specialized firm appointed by the mutual fund company to keep custody of all securities owned by the fund. It is usually a bank, insurance company, or financial institution duly registered by SEC.

Other Parties are: Reporting accountants, solicitors to the fund and issue. The coordinator is the issuing house/underwriter; the firm will package the prospectus, marketing and make proceeds available to the mutual fund.

Parties to a Unit Trust

Manager – It is a company duly registered by SEC. The company establishes the unit trust and it is required that the fund is managed by same company.

Trustee - This is a company appointed by the manager to take in custody or under its control the property of the unit trust and hold it in trust for the investors. Trustee must be a financial institution duly registered with SEC

Other parties are Reporting Accountants, Solicitors to the Fund and Issue under the coordination of the Issuing House/Underwriter that will package the prospectus, marketing and make proceeds available to the Unit Trust.

Structuring and Ekiti Venture Fund

There are standard procedures for packaging collective investment schemes. The investment instrument must be duly registered with SEC. For as long as circulation would go to more than 300 people and the subscribers’ register would be more than 50, then SEC must be involved. The objectives of the Ekiti venture capital fund must be clearly stated in the prospectus. The amount of fund to be raised and the specific areas in which the fund would be invested would be clearly stated in the offer document. It is imperative for any promoter of Ekiti Venture Capital Fund to carry the state government along such that it is not politicized and the machinery of government is deployed to enhance success of the fund.

    Also, Ekiti State Council of Obas would be consulted appropriately to facilitate an effective reach out to the people in their respective constituencies. Communities that have no Community Development Associations (CDA) would need to commence processing such without delay. Decide on the most appropriate SPV. In recognition of the fact that Ekiti Venture Capital Fund would fall within the class of a Specialty Fund, a closed-end arrangement is recommended. Appoint an issuing house/investment banking firm to package prospectus, coordinate listing, marketing, and interface with the fund manager. The Ekiti Venture Capital Fund should be structured such that Ekiti people in Diaspora would be in position to subscribe. Minimum subscription could be N10,000 $50, 40 Euro, or 30 pounds.

    Who can subscribe through CDA? High net-worth individuals and low income earners. CDA of Ekiti towns and villages can encourage every household to contribute a flat levy e.g. N1000 per landlord or compound to a common purse which will be invested in Ekiti Venture Capital Fund. A typical CDA can be constituted by a town; two or more villages/hamlets can also come together and form a community development group.

    Managing an Ekiti Venture Capital Fund: Investment Objectives - Typical collective investment schemes, be it a mutual fund, unit trust, venture capital fund or any other form of investment trust fund, they are generally categorised according to their investment objectives and policies. It could be aggressive, active, concentrated, diversified or defensive. The investment timeframe could be long-term - 5 years plus, medium term – 2 to 3 years or short term – less than one year

Ekiti Venture Capital Fund can be managed from two perspectives.

1. One arm would be on a continuous basis. This is the period that the fund would reside with the fund manager before it is disbursed into Venture Capital Projects (VCP)
2. The second arm of managing the fund would require articulating and clearly defining the criteria for VCP that would qualify for Ekiti Venture Capital Fund.

The appraisal of request for funds is an aspect of the fund management that should be ceded to a neutral body. There would be option of exit from VCP after a given period of time.

Benefits of Collective Investment Scheme and Ekiti Venture Capital Fund

• Subscribers - Enjoy the benefit of affordability, professional management of the fund, diversification of investment portfolio, flexibility and liquidity.
• Ekiti-State – Stands to empower indigenes through wealth and employment creation.
• Nigeria – The gross domestic product would be impacted
• Ekiti Indigenes – Subscription give them sense of belonging, to contribute their quota to the economic development and growth of Ekiti

Conclusion: No doubt, an Ekiti Venture Capital Fund is going to be a peculiar financial vehicle and it has to be packaged as such by putting into consideration, the realities of its characteristic nature. The choice of an appropriate tested investment banking firm would go a long way in facilitating its success by guiding the promoters appropriately. Ekiti venture capital fund is going to be a bold step and a pace setter in the Nigerian capital market if this concept is eventually realised. While wishing the progenitors of Ekiti venture capital fund a “dream come true”, this landmark initiative is laudable and should be encouraged by all well-meaning Ekiti indigenes. All the best!