Fintech: SEC rules not a threat but about protecting value of naira – NASD CEO, Bola Ajomale

Bola Ajomale is the Chief Executive Officer and Managing Director of the NASD OTC Securities Exchange.

In this interview with Nairametrics, he explains how the over-the-counter exchange operates, what drives its financial performance, recent listings and the potential for fintech startups in Nigeria.

According to him, the NASD is a central structure in the market focused on trade in terms of creating liquidity and also creating an avenue for rights to be raised and public issues and other instruments that could grow a company. Excerpts:

So, what is the NASD all about? 

Let me start off by saying NASD is a market infrastructure. It is a central structure in the market. Ours is focused more on the trade side although we also touch on the mobilization or capital mobilization side. In other words, trade in terms of creating liquidity for investors and those who want to come into investments and on the growth side, we create an avenue for people to raise rights and public issues and other things that will grow their company. We work on both the growth and the trade side.

Now, on the trade side, the most important to use is liquidity for investors. The other critical thing for us is the transparency of transactions. We were borne out of the need for investors to have an avenue by which they can trade their shares when those shares don’t have an organized outlet. In other words, any share that is not on the Nigerian stock exchange, be it that they are better shares than what you have on the Nigerian Stock Exchange or be it those shares that are not qualified to enter the Nigerian stock exchange, the point remains that any shares that is not trading on the stock exchange, the shareholders at one point or the other will want liquidity and if they want liquidity they are still entitled to have an environment where they can buy and sell their shares and so we create an avenue for that, the infrastructure is deliberately focused on creating an opportunity for that activity to take place.

Another thing we have on this side of the market is a crowdfunding platform, however, we did not open up for investment crowdfunding and that was deliberate. We found that the rules that SEC put in place were not encouraging growth in that segment of activity. The rules say that an enterprise can only raise 100 million in a crowdfunding effort.

When should we expect the NASD Audited FY 2021 result?

The Audited Financial result for 2021 would be published after the company’s Annual general meeting scheduled to be held in June this year.

When we looked at the Q4 2021 Audited result, we saw that the company was able to deliver profit from a loss position in 2020. What was the driver of this?

With the state of the world in 2020, the last thing you wanted to do was put money aside to buy shares. There just wasn’t any activity. In 2021, we actually saw significant activity, most of the activity we saw was the shares of NGX that came into the market for four months. That was significant in the operations and activity of the market because there was so much pent-up illiquidity in the market. As soon as it came into this market, it started trading quite heavily and then exited the market.

We also had one or two other securities come into the market. 2020 was a year that just didn’t happen. 2021 was a recovery of some sort. What we are seeing in 2022 is actually better than even the last quarter of 2021.

Can we say it is the same circumstances for the growth in Fees and Commission income?

The thing is that, if you are going to do a big deal in which you are going to pay fees, it will usually take 6 months of operation before you then incubate. So, there were no mergers and acquisitions and hardly any transactions in 2020 up until June 2021 when all the paused processes for new listings and transactions were revived.

We are beginning to see more of those activities that normally take the 6 months gestation period, we are beginning to see them coming through now because people are starting to make those deals again.

Have there been any recent listings on the Exchange?

It is not circumstantial, we actually do know in advance, and we like to keep it until the day when it comes. We have to be sensitive about how people might react to information. We expect a listing to happen between now and next week.

Have there been any recent changes in corporate governance and appointments?

Individuals have changed from the different representative companies. The representative of Chapel Hill changed just after the AGM but Chapel Hill is still on board. The addition we made to the board is Mr. Longe as Executive Director, and of course, there have been Directors stepping down and offering themselves for reelection.

Did the NASD Chairman, Olutola Mobolurin, sell any of his stakes recently?

We have the register of shareholders as of the 16th of March 2022, which shows that Mr. Mobolurin the Chairman, never at any point held shares in NASD directly in the name Tolu Mobolurin. The company he is representing is Capital Bancorp, of which he is the Chairman and Founder. Capital Bancorp had, as at March 16th 2022, not sold any shares in NASD. There is nothing that provides any comfort that Capital Bancorp has sold any of its holdings in NASD.

Would you say the SEC rules are preventing Fintechs from raising money locally rather than abroad?

I wouldn’t say that. I will put it in the hands of the community, I’ll say community support. In a village, if you want to raise a successful venture, who are the people who would be the first investors? The people around you. However, a lot of this money that is required for expenditure is in a foreign currency. Our currency is declining very sharply with no prediction whatsoever. You cannot hedge against it. So, you might raise Naira and find that you’ve suddenly lost 10% of it. On the other hand, if you do want to do the expenditure abroad then maybe it makes sense for you to raise capital from there. Considering, as well, that a lot of the income you are generating is in that same currency.

However, again lack of community support on this side is a problem because as they are raising this financing outside the country, as they are making these returns and growing the economy, the returns and dividends are not staying in this economy, they are going out. The policies are not doing anything to hamper or hinder it at all. It is not a policy problem, it is also an investor problem. There is a trust issue, there is a fundamental disposable income move.

Are you expecting an increase in share price in the course of the year?

It is not for me to speculate. It is for me to do my work and make the company profitable, what the shareholders want to do with the price, they would do.

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