ARMCHAIR REVOLUTIONARIES

Nigeria 2019 | FINANCE | INTERVIEW

By setting up a smart retail investment platform, Comercio is empowering Nigerians to make sustainable investments from the comfort of their homes.

Tosin Osunkoya
BIOGRAPHY
An alumnus of INSEAD, Tosin Osunkoya is a fellow of the Institute of Chartered Accountants of Nigeria and a member of the Chartered Institute of Bankers of Nigeria (CIBN) and the Certified Pension Institute of Nigeria (CPIN). After spending a significant part his early career with Kakawa Discount House where he became Chief Dealer, he left for Zenith Capital in 2007. In 2010, he joined UBA Plc as an assistant general manager and head of group trading, where he was charged with overseeing the bank’s various treasury trading teams. Prior to setting up Comercio Partners, he was head of trading at Rand Merchant Bank Nigeria and in charge of FirstRand’s strategic expansion across Africa.

What was the driver behind establishing the company?

The company commenced operations in 2016. My partners and I had spent most of our working lives in international banks, and felt it was important for us to carve out a niche for ourselves. Over the years, the reality has been such that, particularly in fixed-income markets, the major players are banks, pension funds, institutional investors, and insurance companies, while the retail investing community is shouldered from the benefits of those markets. Therefore, we began a journey of financial inclusion. We wanted to set up an investment banking firm and develop our own products. Comercio Partners has three broad pillars: the trading arm, overseen by Nnamdi Nwizu; the investment arm, which I oversee; and the advisory arm overseen by Steve Osho. Under trading, we cover fixed income, equities, and derivatives markets. The Nigeria derivatives market still remains highly unpenetrated, and it is far from where developed markets are today. We started, therefore, with education of corporate treasurers—the buy-side, as hedging solutions are not readily available and tradable in Nigeria. However, due to our collective experience working in international banks, we can readily buy and sell certain derivative products, having established trading relationships with foreign banks and counterparties. We are also currently advising companies spread across more than five sectors (oil & gas, manufacturing, fashion, entertainment, information technology) on debt and equity capital raising in excess of NGN10 billion (about USD27 million). In 2018, we assisted one of our clients in the oil and gas sector to close a project finance deal worth USD2.6 million, raising a bridge finance in the process. Our short-term focus is small and medium-sized companies with good and well-balanced fundamentals.

What progress is being made in improving the availability of derivatives in Nigeria?

We do not have an OTC market where these products could be easily traded, although I expect one to be established soon. The FMDQ OTC Securities Exchange is unveiling certain initiatives to drive this process. We have decided to localize Nigerian currency futures on an exchange, though it is not yet a standardized exchange, but rather a naira-settled OTC FX Futures with non-deliverable forwards (NDFs). The initiative was intended to address the currency crisis at the time. For any of the foreign capital flows entering the country, you can buy naira-settled futures contracts for up to one-year, which minimizes price risk, although still exposes you to liquidity risk. The Central Bank will subsidize the difference between the spot rate when the contract expires and the price at which you purchased the contract. However, it is your responsibility to source the US dollars from the market through the Investors' and Exporters' (I&E) window. This has been largely successful, as it provides the level of liquidity and fluidity in the FX market for both foreign investors, sellers/buyers of US dollars and exporters, and buyers of US dollars. The creation of the I&E window has indeed influenced the restoration of investors' confidence in the currency market.

How would you split the company's three pillars into percentage terms by revenue?

Currently, the trading arm, which is largely our bread and butter, contributes approximately 60% to the bottom line, the asset management contributes circa 30% while the advisory injects about 10%. We are still new, and therefore that is the short-term perspective. However, in the medium to long term, the company will certainly be poised to drive a balanced and well-diversified sustainable revenue stream. We have recently deployed a retail investment platform called Tradefi which is set to disrupt the retail fixed-income market. Any individual, HNIs, or the affluent can buy government securities at their convenience from the comfort of their living room. We have brought the retail investing community close to the upper market by leveraging technology to offer competitive returns, liquidity, and safety. An average Nigerian investor sees fixed income as a myth, failing to comprehend the dynamics of that market. It is important for us to address this through technology.