A Review of the Nigerian Energy Industry

Why oil giants won’t invest in Nigerian Stock Exchange — Apostle Hayford Alile

HONG KONG-STOCKS-CLOSE15 December 2013, Lagos – Born on April 24, 1940, Apostle Hayford Alile briefly attended University of Ibadan as a scholar in physics and thereafter proceeded to Howard University, Washington DC, where he earned his B.A. degree in economics and mathematics. He later attended Rutgers Graduate School of Management, New Jersey, USA for his MBA programme before proceeding to the Harvard Business School where he bagged his AMP.

Alile’s rich working history began as an economic and financial consultant to Louis Berger Inc, East Orange, New Jersey, USA in 1968. In 1973, he returned to Nigeria to head the Management Consulting Department of the Centre for Management Development, Lagos, and was later appointed in 1976 as the Executive Director/CEO of the then Lagos Stock Exchange (LSE). He later became the Director-General/Chief Executive of the Nigeria Stock Exchange in 1979. He retired from that position in 1999 and was in the same year appointed to the Board of the Central Bank of Nigeria, CBN. He subsequently joined the Boards of the Nigerian Security Printing and Minting Co. Plc, and the Central Securities & Clearing Systems Limited (CSCS). In this interview, the Spiritual Leader of St Joseph’s Chosen Church of God speaks on why multi-national oil firms won’t invest in the Nigerian Stock Exchange. Excerpts:

Three years into the economic meltdown, any hope for Nigerian investors in the stock market?
It may take time. Stock market is built on confidence. It just happened as an accident of time; you wanted to put your resources into the stock market and suddenly the meltdown which not peculiar to Nigeria happened. I will be surprised even if President Barack Obama did not lose money in the American capital market as a result of the meltdown. Nigeria was not an exception, we tried very hard to cautiously link the Nigerian Stock Exchange to global market, but, unfortunately, what happened was at a stage when we were opening our market to the global interactions to attract what they call Hedge Fund Managers, international port folio managers, to bring their money into our market. I believe in competitive market or market force, but, at the same time, the perfection in our economic environment is not there. You can’t call the Nigerian environment a perfect market.

In a perfect market, foreigners come in with their money and go out at will; but one little thing I learnt in life while working was the British situation. Prime Minister Margaret Thatcher started a privatization programme. A lot of companies in Britain were under the control of the British government but she opened up and privatized as much as possible. The process of privatizing the British Petroleum was concluded while she was out of the country. I remember the deal was done giving 15 per cent or so to a Kuwaiti investment organization. When she came back and found out what had transpired, Thatcher said no! She was running one of the most open markets but she intervened in the interest of Britain. That was the role I too had to play in the interest of Nigeria.

So, I used to sit down with stock brokers of any Hedge Fund Manager coming into the country to invest in the Nigerian market, and ask them: how long will the funds remain in this country? If he says anything less than two years, I tell the broker, ‘Nigeria is in your hand, protect our country, we are not going to allow this money to come here because it will disturb our market’. So, there is no perfect market in the world. What is perfect is your country.
Unfortunately, my colleagues who took over from me made a mistake. They allowed free entry and free exit. So, when these Hedge Fund Managers brought about over $1 billion into the Nigerian market, the thing grew within a period of two to three years to over $3 billion, and immediately they heard regulatory authorities speaking in discordant tunes, they immediately sold out. Secondly, they knew that the international market was crumbling; they quickly sold what they had here in Nigeria and exited with over $3 billion which created a huge hole in our market.

We would not have been negatively affected by the global meltdown had this thing not happened. I put my retirement benefit in the stock market; all the time I spent at the stock market, I banned myself and my staff from buying and selling because of insider information. It was when I left that I invested my little pension in the market and they all perished. You would have imagined that if this man with all the knowledge that he had on the market, how come he lost his money?

Those are the dangers of life. This is not the first time this kind of thing has happened globally. In the 30s, the American economy almost collapsed with the meltdown of the market. It repeated again in 1981-82 or so. So, all of us, a lot of the banks suffered. I could see a lot of the stock brokers, up till today, some of them are still not able to pay salaries. They should forgive us, but if they have to do it again, this is the best time to invest in the stock market. That’s my little advice. The prices are down and they must surely go up again.

The Nigerian situation is unique in a way. For instance, Nestle Foods has been investing in Nigeria; now, it is moving to Ghana. Many other industries are moving to Ghana because of cost of production and other unfavorable factors. When do you think there will be confidence in the Nigerian market?
There are two issues we are looking at here. If you take a company like Nestle, it is the most prized company in our market, selling 50 kobo shares listed at the market at over N1,050.00. Somebody must have bought those shares with patience, perhaps at N5, and today, it is worth N1,050.00. If they are moving to Ghana, they are going to use the Nigerian resources and expertise to drag up the Ghana market. As a matter of fact, let me tell you that I set up the stock market in Ghana; trained all their staff free of charge in the interest of Africa but that’s a different story.

Nigeria has tremendous resources and we have not started to exploit them. We just discovered oil and we put everything in it. We are now finding out that the gas reserve we have is one of the largest in the world. If you convert the gas energy into liquid energy of petrol, we have more reserve in gas than petrol.
Three years ago, I said that Nigeria is an essentially agricultural country because 70 per cent of the population live in the rural areas, but we jumped the graph and are now operating and pretending to be a post-industrial society which is not. We have to go back to the realities of our lives—agriculture.

How can a country like ours be importing billions of dollars worth of rice? I was reading a book, Abundance, and it talks about vertical farming. Small countries like UAE that have no land have converted top of their buildings and verandas to farms for rice and tomatoes. But there is plenty of land here and we haven’t exploited it. Look at what the new Agriculture Minister is doing today; fantastic! We should be exporting cassava in large quantity.

In 50s or 60s, people came from Malaysia to take our palm nuts. I don’t know if you’ve been to Kualar Lumpur? As you drive from the airport into their main town, you look at miles of palm plantation. They are not taller than me. They have, over the years, done a lot of research to see that their palm trees don’t grow higher or taller so that from the ground, you just pluck without having to climb. We are now importing palm oil from those places; which is laughable.

If we do the right thing within the next five years, we will be exporting flowers, fruits, vegetables. It is from the surplus of the agricultural products that you now have raw materials for your factories and then call yourself an industrialized country. And with that, we start the type of thing that we are having at Allen Avenue—shops, selling other people’s manufactured goods and our own manufactured goods. But today, the little of the money you save, you want to transform yourself into Allen Avenue, that’s not real.

Our textiles are all imported from China and some of those textiles, in fact, I will say 90 per cent of them are manufactured from hydrocarbons, oil and gas, they are not cottons. When you wear cotton, you will feel 100 per cent of oxygen-fresh air but all these things you are seeing are synthetics. That’s not what God made us for and let’s do things as God wants it. This country is blessed, this thing you are sitting on (referring to a round seat in his living room) is leather from Sokoto and Kano; the best in the world.

Can Nigeria get there?
Why not! In any sector…Chike Obi did not go to university but became one of the best mathematicians in the world. We have Wole Soyinka, a Nobel Prize winner in Literature. Some of the best brains that are making the astronaut machines and other things at the National Aeronautics and Space Administration (NASA) in America are Nigerians. I was in my office at the Stock Exchange House about 25 years ago, a Nigerian came from Chicago and said he just wanted to come and say hello and have a feel of our stock exchange. So, we talked. He was an Efik gentleman. He said he gave his money to one his relations to…by that time, they just opened UBA House, to get him a floor there because he wanted to move out of his office from Chicago to that place. So I asked him, ‘What do you do?’ A computer man had the largest software company and one of the things he discovered was used by NASA, this Global Positioning System (GPS).

It is now being translated and commercialized and most cars now use it to track their routes (navigator). Who discovered it? A Nigerian and there are many like that. The fastest and most powerful computer was founded by a Nigerian. In all aspects of life, go around the whole world, you see a Nigerian there. All we need is something that will attract them here. The environment that we can put together that will attract them here! Most of them are not looking for satisfaction in the quantity of money they have, it’s satisfaction on how they can impact on you and I positively.

– Sam Eyoboka

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