Frontier Capital Markets and Investment Banking: Principles and Practice from Nigeria

315 Pages·2019·2.093 MB·English

by  Temitope W. Oshikoya and Kehinde Durosinmi-Etti

Frontier Capital Markets and
Investment Banking
This book discusses the role of capital markets and investment banking in
Nigeria, the largest frontier market economy in the world by both population
size and gross domestic product.
Offering a systematic framework combining conceptual principles with real
practice, the book enables the reader to gain useful insight into how capital
markets and investment banking work in the real world of a frontier market.
The book provides a synopsis of the economic attractiveness, financial systems
intermediation and capital markets, as well as the regulatory framework within a
frontier market. It explores capital raising through equity and underwriting and
private equity, paying particular attention to putting capital to work on mergers
and acquisitions, project and infrastructure finance and real estate finance.
Furthermore, it analyses asset management, pension industry and securities
trading in a frontier market. The authors use detailed case studies from Nigeria
to illustrate the operations of investment banking in frontier markets. The cases,
tables and charts serve as useful illustrations of the topics under discussion.
With the authors’ combined experience of more than 50 years as economists,
finance and investment professionals and in executive leadership positions in
the financial services industry, this book will interest the academic community,
professionals in the financial industry, retail and institutional investors interested
in frontier markets, development practitioners in international organizations
and policy makers including securities and capital market regulators.
Temitope W. Oshikoya, PhD, is an economist, finance and investment
professional, with more than two decades of experience in private sector, public
sector, consulting and academia. He is the managing principal of Nextnomics
Advisory, an economic and financial consulting firm. He has held executive
leadership positions at Ecobank Transnational Incorporated, the West African
Monetary Institute, Africa Finance Corporation and the African Development
Bank and as a consultant to various institutions.
Kehinde Durosinmi-Etti has more than three decades of management and
leadership experience as a chartered accountant and banker. He has held top
leadership positions as the managing director and chief executive officer of
three different banks in Nigeria: Midas Bank, Eko International Bank and Skye
Bank. Having retired in 2014, he now runs a financial advisory and consulting
firm based in Lagos, Nigeria.
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Frontier Capital Markets and Investment Banking
Principles and Practice from Nigeria
Temitope W. Oshikoya and Kehinde Durosinmi-Etti
For more information about this the series, please visit www.routledge.com/
series/BMIF
Frontier Capital Markets
and Investment Banking
Principles and Practice from Nigeria
Temitope W. Oshikoya and
Kehinde Durosinmi-Etti
First published 2019
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
52 Vanderbilt Avenue, New York, NY 10017
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2019 Temitope W. Oshikoya and Kehinde Durosinmi-Etti
The right of Temitope W. Oshikoya and Kehinde Durosinmi-Etti to be
identified as authors of this work has been asserted by them in accordance
with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or
utilised in any form or by any electronic, mechanical, or other means, now
known or hereafter invented, including photocopying and recording, or in
any information storage or retrieval system, without permission in writing
from the publishers.
Trademark notice: Product or corporate names may be trademarks or
registered trademarks, and are used only for identification and explanation
without intent to infringe.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Oshikoya, Temitope Waheed, author. | Durosinmi-Etti, Kehinde,
author.
Title: Frontier capital markets and investment banking : principles
and practice from Nigeria / Temitope W. Oshikoya and Kehinde
Durosinmi-Etti.
Description: 1 Edition. | New York : Routledge, 2019. | Series: Banking,
money and international finance | Includes index.
Subjects: LCSH: Capital market—Nigeria. | Investment banking—Nigeria. |
Banks and banking—Nigeria.
Classification: LCC HG5881.A3 O834 2019 | DDC
332/.041509669—dc23
LC record available at https://lccn.loc.gov/2019004031
ISBN: 978-0-367-19113-9 (hbk)
ISBN: 978-0-429-20051-9 (ebk)
Typeset in Bembo
by Apex CoVantage, LLC
To my lovely wife, Patience, who has been an anchor and a pillar
of support to me. And to my two glorious children, Morenike and
Oluwatobiloba. With all my love.
Temitope W. Oshikoya
To my loving wife, Abimbola, who has been most reliable and
supportive and especially over the last 29 years. To my two sons,
Babatunde and Oluseyi, who have been a source of inspiration in
writing this book, which will help them become adept business
managers in the future.
Kehinde Durosinmi-Etti

Contents
List of figures ix
List of tables x
List of boxes xii
List of abbreviations xiv
Preface xx
Acknowledgements xxii
PART I
Frontier markets’ environment 1
1 Nigeria: a frontier market economy 3
2 Frontier market financial system 19
3 Frontier capital market 38
PART II
Investment banking in frontier markets 57
4 Investment banking 59
5 Risk management 80
6 Regulatory framework 91
PART III
Raising capital in frontier markets 105
7 Equity underwriting 107
8 Debt underwriting 130
9 Private equity 148
viii Contents
PART IV
Putting capital to work in frontier markets 167
10 Mergers and acquisitions 169
11 Infrastructure and project finance 191
12 Real estate finance 214
PART V
Managing capital in frontier markets 231
13 Asset management 233
14 Pension management 249
15 Securities brokerage 262
PART VI
Future direction 273
16 Future trends and prospects 275
Appendix 282
Index 284
Figures
1.1 Crude oil price and Nigeria’s real GDP growth, 1991–2018 Q2 7
1.2 Nigeria: capital inflows (US$ millions), 2011–2017 9
1.3 Infrastructure stock as a share of GDP (%) 11
1.4 Ease of Doing Business in Nigeria 11
2.1 Types of financial markets 22
2.2 Overview of the Nigerian financial system 23
3.1 Nigeria: long-term trends of the all-share index, 1996–2018 46
5.1 ARM risk management structure 86
5.2 The three lines of defence risk management model 88
7.1 Estimated timeline for primary market offers 114
7.2 Proportion of delisted companies, 2012–2016 127
8.1 Composition of Nigerian bond market 134
9.1 Structuring of PE funds 149
9.2 Number and value of African private equity deals, by year 157
10.1 Trends in global M&A 177
11.1 Schematic structure of project finance 198
11.2 Infrastructure stock as a share of GDP (%) 203
12.1 Real estate sector growth and contribution to GDP 216
12.2 Home ownership: Nigeria versus other countries 217
13.1 Mutual funds (NAV and NAV contribution to GDP) 237
14.1 Nigerian pension assets and ratio of GDP 255
14.2 Ratio of pension assets to GDP 256
15.1 Foreign and domestic transactions trends, 2007–2017 ( billion) 268
₦