Ovia: Stock Market Downturn Not Caused by Politics

The Chairman of Zenith Bank Plc, Mr. Jim Ovia, in this interview on Bloomberg TV, spoke about his new book, ‘Africa Rise And Shine: How a Nigerian Entrepreneur from Humble Beginnings Grew a Business to $16 Billion.’ He also dissociated the downturn in Nigeria’s capital market from political uncertainties ahead of the 2019 elections

What is your new book all about?

Africa Rise and Shine was written to change the narrative about Africa. Hitherto, Africa was portrayed as a hopeless continent as far back as 20 years ago. It was seen as a continent of wars and hopelessness. That was a quote from The Economist Magazine in 2001, the front cover of The Economist. But a decade later, they changed that narrative and they started seeing the bright side of Africa, they started seeing that Africa is rising, and African economies were doing very well.

They started seeing properly elected democratic governments, from once civilian government to another civilian government. Before then, it was lots of coups and they were making reference that Africa was a continent of coups and wars. But not anymore. The narrative has changed and businesses in Africa are doing very well. African economies are rising and shinning. Hence, I thought, to help change the narrative of the perception of the international community and international media about Africa, I needed to do a book: Africa Rise and Shine, and also, to tell some amazing stories of tremendous business opportunities in Africa, particularly Nigeria. That was the essence of the book.

But does Africa have a perception problem and do investors always ask about politics and corruption in determining the underlying fundamentals of the business?

Yes and no. Yes, in the sense that because there have not been too many positive documentations about many countries in Africa, so the international media are completely uninformed and they have the mindset that Africa is still a continent of wars, a continent of famine and hunger. But, that has changed. They are beginning to change their mindset now. The paradigm is changing very rapidly. We have been having successful governments, from one civilian government to another. There in my book, in one of the chapters, I described how African countries have now come of age and how African countries have led successful transition programmes from one democratically elected government to another. That is what Africa is now and many international media are beginning to appreciate that. So, the narrative is changing gradually and the business opportunities in Africa is also tremendous, particularly in Nigeria, and the Gross Domestic Product (GDP) growth rate is rising significantly, which many international investors are very pleased to hear about. They didn’t know about that before. That is why the answer is yes and no.

If President Muhammadu Buhari wins a second term, what does that mean for Nigeria?

One thing that business people, entrepreneurs do all over the world, whether it is in Nigeria, Ghana, United States or any other country, investors and entrepreneurs love to have consistency, certainty and we want to appreciate the fact that the economy would continue to do well. Regardless of who wins, the economy must do well, and the most important thing is that we all love consistency. What business people don’t like is uncertainty. No one likes uncertainty. So, if President Buhari wins, that is consistency and the business community would also love that. So, regardless of who wins, consistency is very important. The business paradigm will continue to improve.

If you look at Zenith Bank shares, it is down 30 per cent since January. Oil price is going up, which is a benefit to Nigeria. So, is it investors that are worried about the presidential election or investors worrying about a lack of continuity?

Regarding the stock market in Nigeria, the capital market in Nigeria mimics the international environment also. Nigeria is not an isolated country. It is a country where you have international investors and when interest rate is rising in the United States of America. Of course, there is capital outflow to the US economy and that is natural. It absolutely has nothing to do with politics or elections at all. Absolutely not! You will see that the that the capital markets in some other emerging markets are also beginning to drop slowly, just because interest rate is expected to rise in the US and other well-developed economies and that is what is affecting it.

It is the same audience, its same market, it is same international market, it is same capital market and absolutely has nothing to do with elections. And this was well covered in my book on the transition programme and how various investors perceive investment in Africa. And that there is nothing to worry waiting until there is a new government and after a new government they also decide to wait for couple months or years before making their investments. They shouldn’t do that, they should come in now and make their investments. That was what gave some of us the opportunity to invest very quickly without waiting for any government to be elected or not elected. Take the risk and move on.

What is the advice you will give the younger ones in terms of how you started and how you got to where you are now. Would you have done anything different?

I looked at it in writing Africa Rise and Shine. The opportunities we had at the time we started the bank, so there were other opportunities that other people had in other industries. It was a matter of time and chance. Time and chance because at that time, many people were scared to invest in Nigeria. They were truly scared because it was during the military. We are talking about late 80s and to be precise, in 1990. Many international investors were scared to invest, simply because we were under military rule and we were in military rule for about 30 years.

So, you could imagine the tremendous opportunities that existed in Nigeria and also, some other African countries. But because we were indigenous people and Africans, we knew that, that meant nothing. We had lived through that and we knew it doesn’t really affect the economy tremendously. Definitely, it was a matter of understanding what you do. The corporate governance issue had improved significantly. So, we were able to invest at a time of uncertainty, when the international investors were terribly scared to invest. So, we were also waiting and waited patiently to reap the benefits.

Hence, according to what had happened over those many years, the book has now addressed why there was that quantum leap and quantum benefits. We started this business with N20 million at an exchange rate of N5 to a dollar at that time. So, we actually started the business with $4 million in 1990, and that has now blossomed. We now have a total asset base of $16 billion. If you look at the simple arithmetic, there have been over 1000 per cent growth. You can’t get that anywhere. Even in the best economies in the world, you are not going to get that kind of growth and benefit. So, that is the kind of risk entrepreneurs, businesses or international investors must take in Nigeria or any other African country and reap tremendous benefits of quantum growth in their investment.

Finally, on the banking industry in Nigeria, is it in a good place and do you worry about non-performing loans?
Non-performing loans (NPLs) always something that banks worry about anywhere in the world. Whether it is in the United Kingdom, in Africa or the US, there are NPLs in the banking industry. We don’t necessarily worry because it depends on how we are able to hedge against some of those risks. It depends on the industry, if it is oil, if it is gas or trading, we would also be able to ameliorate those risks.