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Nigeria 2015 | FINANCE | VIP INTERVIEW

TBY talks to Chinedu Onyia, Managing Director of Parsifal Partners Limited, on how economic development is opening up opportunities for consultancy.

How does Parsifal Partners differ from its competitors?

Parsifal Partners is a three-year-old consulting and strategy firm designed to do three things. The first is to provide consulting services. Through this, we provide strategy, business plan development, turnaround assistance, business-process engineering and re-engineering, supply chain management, and revenue assurance. Our target sectors for these services include the following: financial services, manufacturing, energy, real estate, and infrastructure. We have also taken on a few assignments that have allowed us to broaden our scope to include technology and agriculture. Our choice in target sectors is important, because we believe much of the future opportunity for this country lies within these. Technology, in particular, is very interesting because it allows you to leapfrog your problems—just look at what happened in Asia. Our second service is our advisory business, which is basically financial intermediation. We match needs for capital with sources of capital. We help businesses to access the right form of capital for their needs. There is a large market for that here, because, unlike more developed countries, the breadth of capital sources, though growing, is still limited. The third aspect of our business is origination. Here, one of our first initiatives was to establish a wealth management firm, Fiducia Capital. There's a bit of history behind the name but, in summary, Fiducia is translated from the Italian word for trust. Fiducia Capital is an SEC-registered portfolio and fund manager. Ike Onyia leads this aspect of our business, having garnered the relevant experience and track record in that industry, including starting two successful firms from scratch. This combination of consulting and financing has translated, for our target market, into a compelling case. We also pride ourselves on the intellectual capacity of our faculty to engage in finding solutions for our clients. Furthermore, we provide senior-level, hands-on commitment on our projects, which is a key differentiator.

What is preventing Nigeria from fully adopting a strategic vision when it comes to business?

There are several answers. Decision-making is influenced by our country's historical and cultural circumstances. For a long time, we largely operated on a short-term basis, as reflected by our planning methodology (three-year, short-term rolling plans). This was also reflected in our financing sources, whereby three-year financing was deemed to be long term in nature. This is all changing now. First, we have enjoyed some form of political stability having undergone four electoral processes since 1999. These all assist to enshrine democracy, and you can see the results in the evolution in the planning methodology of most public institutions; the federal government and Lagos State in particular all are developing and implementing long-term visions. Next, we need to understand that the profile of several institutions in Nigeria is entrepreneurial and these individuals are approaching a natural stage whereby decisions of reinvestment in the business and/or succession are predominant. When you reach this point, you're forced to think long term. The spate of reforms is also contributing positively to the reorientation to long-term planning. For example, with the reforms in the power sector, the various actors are all planning long term; the federal government has developed a detailed road-map and some states like Lagos have pushed the envelope with even more aggressive plans in this sector.

“Political stability provides the peace of mind that stimulates demand from the populace."

How do you see communications between the federal government and Lagos' state government? Are they harmonic?

There are issues, but they are no different than you what you would find elsewhere. On serious issues, they tend to agree. On issues such as security, sovereignty of the country, and safety of citizens, there is no doubt that the federal and state governments agree. Of course, political influences emerge once in a while. It also helps that, despite existing challenges, we are dealing with a more stable environment. Democracy, as a form of governance, re-commenced in 1999, and one of the first challenges was to successfully transition from one democratic government to another. As democracy matures, so will relationships between different arms of government.

How does government stability influence your sector?

It influences the consulting and investing sectors in several positive ways. Political stability provides the peace of mind that stimulates demand from the populace, such as the demand for improved products and services. This in turn provides the right type of pressure on the elected officials for them to perform. Once you are in this situation, there is adequate scope for seeking professional assistance such as ours. Political stability also provides the platform for innovation, which is a key driver of development. Nigeria is at that point in its development whereby there is a congruence of high demand for products and services, low infrastructure base, positive reforms, and a growing awareness, particularly among the majority younger members of the populace. It's a challenge but a positive one that Nigeria and our sector can take advantage of.

Is there any particular sector that is in particular need of foreign investors?

In spite of the well-known need to diversify the economy, the energy sector remains critical to Nigeria, particularly oil and gas. The industry's value chain comprising upstream, midstream, and downstream sectors requires a significant injection of capital. The scale of capital required, on an ongoing basis, is best obtained from a variety of sources, local and, clearly, international. The Petroleum Industry Bill (PIB), when passed into law, will help to define the fiscal regime, sanctity of contracts, and essentially facilitate access to long-term capital commitments by all stakeholders. The recently promulgated Nigerian Local Content Act has already provided one of the pillars to ensure the swift development of this sector and Nigeria as a whole. The speedy passage and implementation of this legislation will provide the other key pillar and should herald much-needed investment into this sector. If you stretch the definition of energy, you will also want to include the power sector. Nigeria has recently been rebased as a $500 billion economy. This has been achieved on a government-generated output of 3,000 MW of power for 170 million people—power is produced privately and inefficiently through private generators. Imagine if we grew to 20,000 MW. The size of the economy could easily be worth upward of $750 billion. The energy sector is also attractive to foreign investors because it has the full support of the government, hence the reforms. This provides comfort for investors. Furthermore, some of the economic fundamentals are all in place; strong and growing demand. Consulting firms like ours provide invaluable local knowledge for players in this sector. In terms of other sectors, we think agriculture is also a big one. Because of our demographics, food security is going to be a major issue, as it is globally. The Agriculture Ministry has done a lot of work in providing the framework that investors can and are taking advantage of.

Does this also provide for employment generation?

Exactly. The development of each of these sectors provides for several layers of employment opportunities across each value chain.

Nigerians are known worldwide for their peculiar entrepreneurial-minded spirit. But many, especially among those living in rural areas, are still not aware of the opportunities available out there. How can financial inclusion and literacy be achieved?

A number of attempts have been made by the regulators to broaden the spectrum of people included in the financial services universe. For example, the cashless economy initiative, designed, for example, to promote the use of debit cards in business transactions, is gaining momentum. The concept of mobile money transactions is catching on here as well. There is a lot of effort being placed on financial inclusion. Around 60% of our population is below the age of 50 years old, and they are very tech savvy. Whether they are educated or not, they know how to use a phone, which could be a platform for achieving financial inclusion as happened in Kenya.

How can the regulatory framework be improved to suit your business and the people's need?

With the appropriate monetary and fiscal policies in place, regulators in the financial services sector can provide guidelines to encourage a variety of service providers to include providers of long-term capital. Right now, short-term lending is readily available through the commercial banks and, perhaps, to the high end of the market. Financing requests below this tier experience challenges in obtaining even short-term loans. SMEs drive and determine economic growth, therefore financial intermediation has to broaden, and appropriate institutions such as investment and merchant banks, microfinance banks, and private equity and venture capital have to emerge. These institutions are appropriately structured to support the capital demand of both large and smaller businesses whose activities will develop the economy. I think we are heading in the right direction, because it is almost like a chicken and egg situation. The early asset-divestment programs generated transactions that initially struggled to obtain local financing. While there were costs borne by those transactions, the finance sector—both local and foreign—learnt valuable lessons. As this practice has evolved into broader reform programs, there's now more appetite for financing and this is reflected by the profile (local) of several of the successful bidders for privatized assets. However, there's still need for more adequate capital sources, e.g. private equity and venture capital. We're also encouraged that this segment of the financing sector in Nigeria is also growing. We just need for it to develop faster.

© The Business Year - June 2014