by Sterling AYEBAEMI Ellis; ACS, Chartered MCSI.
When I left Nigeria on a Rivers State Government Scholarship in the year 1977 to get a solid education in the United States of America, the economy was relatively stable and productive. Then, the Exchange Rate of the Nigerian Naira to the Dollar was almost at Par. The country produced its own food through ‘Operation Feed the Nation’ Program and manufactured most of its Finished Goods, boosting its Gross Domestic Product (GDP) comprising of the final value of all Goods and Services produced in the Country in a given year. It assembled customized Products that could not be locally manufactured; and, it was an exciting time for a new independent Nigeria.
While I was busy getting my education in Economics and Finance in the United States, I was remotely monitoring events in Africa’s economic arena and especially with a special cognizance for Nigeria.
Several years after my departure from Nigeria to acquire cutting edge knowledge asset in the United States of America, I was bewildered at the news of how African economies, Nigeria inclusive, were precipitating. I noted in comparison with the United States of America that leaders had development plans and economics was getting buoyed through the Capital Markets and liquidity was constantly guaranteed through investment banking platforms who raise Capital for businesses at competitive rates but observed that as interest rates were being reviewed downward in first world countries, it was being increased in the 4th (fourth) world, especially Africa.
In the 1980s, African countries became bogged down in heavy debt with most countries spending nearly 50% (Fifty percent) of their GDP to service debt which made any kind of expenditure on Capital Projects impossible with the consequence of existing public utilities becoming dilapidated coupled with inability of these countries to maintain or build much needed Infrastructure to cater to the needs of the exploding population.
Naturally, as a Cradle African, I craved for a solution to this Debt Trap and ensuing Infrastructural Deficit. Thus, I gravitated from my Research Assistantship chores at The University of New Orleans, Lakefront, Louisiana, including lecturing assignments at Southern University of New Orleans, Louisiana and veered towards the Capital Markets as the first African to become a Licensed General Securities Representative in the Pelican State called Loiusiana. I traversed from seasoned companies like John Hancock Financial Services and Prudential Bache Securities in New Orleans, a journey that plateaued at Merrill Lynch & Co., Inc., Fifth Avenue & 56th Street, Manhattan, New York City, New York, United States of America, next to the Trump Tower, at 717 Fifth Avenue, New York City, New York, USA.
In order to obtain my requisite professionally geared pragmatic qualifications cum Licenses, I was sponsored by a plethora of Wall Street specific firms, namely, United Securities and Futures Corporation domiciled at 100 Wall Street, Manhattan, New York City, New York, USA, including Merrill Lynch & Co., Inc., New York City, New York, USA, an endeavor that lasted about 20 (twenty) years following which I established an Investment Banking firm –Sterling Ellis & Co., Inc., New York City, New York, USA. Eureka! The journey has essentially been a ‘Work in Progress’ and half done. I resigned from Merrill Lynch & Co., Inc., New York City, New York, USA, and returned to Nigeria observing how the economic arena was comatose with companies falling apart and Nigeria becoming a frontier economy for first World and second World economies.
I have been quietly educating the Government of Nigeria serving as a member of the Research & Technical Committee of the Financial Markets of Nigeria. Clearly, deepening and widening Nigeria’s Capital Markets remain the bane of Nigeria’s economy. The more I studied the economic arena and the Capital Markets mixed with the lackluster political leadership, the more I was convinced that I have the solution in my New York City incorporated firm –Sterling Ellis & Co., Inc., New York City, New York, USA.
An article by Elliot Smith of the CNBC posted on the CNBC website 1 Tuesday, the 26th of July 2020 titled, “We Are On Our Own: Experts Call for an Overhaul of African Markets Post COVID–19”, took the breath from out of my mouth when he wrote, –
“African countries are not borrowing as those in developed countries but are charged at much higher rates for debts due to demands for higher risk premiums from international investors”
Elliot Smith writes further in the same article that’ –
“despite [Africa] offering some of the highest yielding Government Bonds, investment in Africa has been limited by a presumption of risk from international investors, a situation of bias”.
It took Nigeria, my beloved country, to be brought to her knees by the COVID–19 Pandemic for the eyes of Nigerians everywhere to be opened to the reality I had been selflessly trying to make them see.
Crude Oil, the mainstay of Nigeria’s revenue stream, needed to become almost valueless for the Politicians to stop and listen to an alternative narrative different from selling crude oil and sharing the Dollar derived proceeds and waiting for the next round of selling and sharing through a vicious and untenable cycle.
Borrowing is inevitable in the existence of every country. African nations are simply not borrowing as much as the advanced Countries; and, if Africa must borrow at rock bottom rates, it needs an African channel domiciled at the cross roads of global financial markets activities for efficient and effective procurement of Infrastructure Projects finance deals.
Clearly, African nations are charged exorbitantly higher rates for borrowing arising in unfair stepped up risk premiums from International Investors – private investors, institutional investors and sophisticated investors. 2a Thus, prudent efforts must be made to position a Local Content brand with cross border tentacles at the renowned World Financial Center, New York City, New York, United States of America, in order to effectively deal with Infrastructure Project Finance related transactions exclusively directed at nation building in Africa.2b
In mitigating or eradicating the existent bias against African countries, through a presumption of heightened risk, a truly focused firm with commensurate patriotic zeal is necessary to maintain stability in Africa’s cross border lending efforts. Without mincing words and glaringly so, there exists a rather serious challenge for Investment Banking professionals in Africa to change the perpetuating narrative of bias against Africa. Hitherto, wither Africa!
Worst still, the shortage of Dollars3a in contiguous Africa make it difficult for Cross Border Investors to withdraw or exit their investment positions, commonly called ‘Dollarization Effect’; thus, further compounding an already debilitating international economic quagmire, especially, for African countries.3b
Deterrents to international investments in Africa include, but are not limited to, excessive and seemingly unimaginable corruption in most African countries, almost nonexistent Infrastructure, unnecessary bureaucracy and governmental Red-Tape, at the regulatory level. An urgent and sustained need to address the cankerworm called ‘Corruption’ is sine qua non in our collective effort to reign in equity, balance and stability among our common humanity domiciled in Africa.4
Agreeably, African countries need to coordinate, cooperate and collaborate in order to map out a progressive agenda for a sustainable long run. Let’s get busy! I currently remain in the global constructive mix with an Investment Banking platform in New York City to effect the requisite transactions to deepen and widen Africa’s financial markets, moving forward.
PROFFERED SUGGESTIONS AND OPEN COMMENTARY
African nations need to reduce the exorbitant Cost of Borrowing.
We understand our markets, thus, will dedicate resources to get it right devoid of any external influences or interferences that perpetuate historic biases.
Africans deserve to tell their stories in Africa from a wholly African perspective with Data sources on systematic issues loaded with Local Content flavor in order for us to change the recurring decimal.
COVID-19 is clearly a golden opportunity for Africa to start a trajectory of exponential rise.
Africa must create and perfect its domestic Capital Markets and make its Supply Chain laden with Local Content simplicity and sophistication that are uniquely African.
African Central Bank Governors and Authorities need to develop their domestic Capital Markets, local Pension Funds, local Mutual Funds, local Unit Investment Trusts with Insurance Companies and Banks persuaded to engage in developing the real economies.
Unbearable and demoralizingly high risk premiums can be rapidly mitigated immediately Local Content driven investors who are tooled with knowledge asset of the sociopolitical and economic space that is especially African decide to change the narrative through their own ‘Domestic Bias’ by requiring justified lower Risk Premiums and set the pace of reengineering Africa’s Capital Markets.
COVID-19 has clearly created the rare opportunity for African convergence in order to dig deep and discover the long lost creative energies for building home grown enterprise, regional trading blocs and internal trading systems, rather than the weighty dependence on intercontinental trade and financing agreements.
Identifyand utilize a firm that is incorporated in Manhattan, New York City, in order to effectively and efficiently execute cross border Investment Banking activities that has undiluted Local Content branding to serve as the fulcrum for handling all Infrastructure Project Finance deals for African Countries.
The said platform will have a corresponding ‘Issuing House’ in Nigeria specifically for introducing and executing guarded Infrastructure development deals to Wall Street, New York City, New York, USA, for Africa’s sustained and concrete Development.
Nigeria’s Central Bank will provide the appropriate credentialing for establishing the Infrastructure related ‘Issuing House’ that will be the Infrastructure related Sovereign Advisory platform for all Nigeria bound cross border Capital Project Finance deals with the Apex Bank supervising and regulating the said firm within the framework of the Securities & Exchange Commission of Nigeria, as necessary.
A proven Local Content brand that is Chartered by the Institute of Stockbrokers of Nigeria including Membership in the Chartered Institute of Securities & Investment of the United Kingdom with steeped professional tentacles at the cross roads of global financial markets activities –Wall Street, New York City, New York, United States of America, can quite readily, be the equilibrating qualifications for sustainable advancement of the attendant imperative for summarily deepening and widening Africa’s financial markets, with Nigeria serving as the Gateway.
Undoubtedly, a multifaceted approach to assuage the current despicable economic situation in Africa is needed but, principal among them is the positioning of a focal private financial platform at the World Financial Center, Manhattan, New York City, New York, USA.
All other Capital Markets and Speculative Markets related strategies to stabilize and grow the entire African financial markets, with Nigeria serving as the Gateway to Africa are highly necessary but secondary.
Breaking News like ‘Banks raise Lending Rate to 30% (Thirty Percent)5 and ‘Nigeria cannot plead Sovereignty’ by renowned Professor Akinyemi6 can quickly be reversed with the appropriate political cum goodwill.
Let us not deceive ourselves, ‘if it is to be, it is up to us’, according to Pastor Robert Schuller of the landmark megachurch called the Crystal Cathedral, California, United States of America, whose iconic teachings hinged on ‘Self Belief’. It is worth stating that during the beginning of the COVID-19 Pandemic, it was projected that tens of millions of Africans will succumb to the centennial virus. Factually, we seem to have rescued ourselves, after all. So, let’s get busy with a credible economic agenda that realistically assures our emancipation from the claws of perpetual mediocrity.
Amid the backdrop, clamor and credible concern of Nigeria’s Sovereignty being mortgaged, Nigeria’s Capital Markets professionals deserve to be doggedly unwavering and fully resolved to rapidly change the increasingly unpleasant and debilitating narrative while productively engaging in an environment that must be sustained through a governance mechanism that is real and impacting.
The aforementioned well thought out suggestions, ideas, and solutions are sin qua non, if African Sovereignties must survive and perpetuate far into the future and possibly forever; else, we certainly become endangered species with no capacity to tell own stories, sadly so.
We must correct this despicable narrative in order to rise above the evidential bias and eclectic short comings of the past.
1 – https://www.cnbc.com/2020/07/28/we-are-on-our-own-experts-call-for-overhaul-of-african-
The Author is Founder/President, Sterling Ellis & Co., Inc., New York City, New York, USA (a Transnational Domiciliary Business Flows Firm) and the MD/CEO, Sterling Ellis Global Consultancy Limited, Nigeria (a Global Financial Institutions & Sovereign Advisory Group).
Sterling AYEBAEMI Ellis, ACS, Chartered MCSI, is also a Member of the Research & Technical Committee, Chartered Institute of Stockbrokers of Nigeria and Chairman, History of the Capital Markets of Nigeria, Subcommittee, Chartered Institute of Stockbrokers of Nigeria.