Concerned by high interest rates charged by banks and other financial institutions, Kayode Falasinnu, chief executive officer of Boston Advisory Limited, an investment banking firm which recently won the Fastest Growing Boutique Investment Banking award, in this interview with Hope Moses-Ashike and Bunmi Bailey, gives an insight into how the firm is currently exploring ways to reduce the cost of funding significantly for private infrastructure. Excerpts.
Give a general opinion on the financial sector in Nigeria speaking from your position as a stakeholder in the sector. What provisions do you feel are necessary to be provided in the finance sector to ensure it performs better?
The financial sector is plagued by several issues which weigh on its effectiveness in the economy. Primary among the issues is the excessively high cost of funding. To put this in context; let’s assume I own a company achieving 20 percent PBT margin without any debt, no one would say the company is doing badly. However, if I need some leverage to significantly expand capacity or operations and I have to pay interest at a rate as high as 23-25 percent, that will potentially harm my business to a point where I will begin to report PBT margins that are negative or within the low single-digit margin. So, until we look at how we can resolve the cost of funding problem, we are not going to see the growth that we want as a country. There is a need to create incentives for financial institutions to fund capital expansion of industries, especially in the real sector at interest rates that support growth and don’t stifle business. Nigerian entrepreneurs are always cautious to expand capacity, this should not be so, given the size of the market and our consumption potential. Working with institutions like InfraCredit, we are currently exploring ways by which we can reduce cost of funding significantly for private infrastructure
Give us a brief history of Boston Advisory Limited and how it has evolved since it started operations.
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Boston Advisory Limited was incorporated in 2010 and began full operations in December 2013. Starting out, the company focused on middlemen-type brokerage transactions. For instance, when there were issuances in the market, we would assist in raising funds in exchange for a fee. Alongside, we also focused on private investment transactions for unlisted companies. However, in 2016, which was the year I came aboard, we began to look for opportunities for collaborations with capital market players on transactions. We also delved into what we called the non-typical transactions which are essentially innovative private solutions for our clients. In addition, we worked on some of the foremost state bond deals, including the Niger State and Gombe State Bond Restructuring.
What were the major challenges Boston Advisory Limited had last year and how did you survive?
We began 2018 with high hopes, given the recovery in the economy experienced in 2017 and the expectations that the economy would kick off in 2018. Unfortunately, the year did not go as expected, as the market witnessed few issuances. However, with our aggressive stance, Boston Advisory was able to secure a good share of the few bond issuance transactions in the market and also executed some bond restructuring deals.
Some of the transactions we executed last year include: the Lagos State Government Series 2, Tranche 3 & Tranche 4 Bond Issuance under the state’s N500 billion Debt Program, on which we were a joint issuing house and C & I Leasing Plc N7 billion bond issuance, where we also acted as underwriters. In addition, we were the issuing house on the restructuring transactions for some states like Bauchi and Plateau States. These were in addition to several private transactions.
So, despite the slow pace of activity in the market, we were able to undertake these deals with the collaborations with other issuing houses, with the goal of seeking innovative value creation opportunities for our clients and executing flawlessly to ensure their objectives were achieved.
Five years after operations, what would be your greatest achievements so far?
We measure our achievement by how we have been able to grow our brand in such a short period of time, where we are now recognised in the market for not only participating in regular transactions, but also creating solutions and adding value to our clients. In my view, our biggest achievement is the confidence our clients have in our ability to execute, deliver timely on transactions, and ensuring a successful close. Our clients are happy with results we have achieved for them, especially given the tough market. As long as we continue to ensure that we are creating innovative measures to ensure client satisfaction, I believe we will be able to achieve much more.
What makes Boston Advisory Limited the fastest growing boutique investment banking firm, different from its other competitors?
The award not only speaks to our operations in 2018, but also reflects the trajectory of the company and how far we have come from an investment banking boutique that was hardly known, to one which now participates in landmark deals and transactions in the market. A very important point to note is that we have closed a significant number of stand-out deals where our participation was pivotal in terms of the amount of money raised for the clients and the value added. When I initially joined, the firm was largely unknown by industry players, with most confusing us for the international firm, Boston Consulting Group.
But we see less of that today; people are beginning to identify, commend, and appreciate us. When we compare ourselves with smaller boutique investment firms in the Nigerian space over the last few years, it is obvious why we were chosen as the fastest growing boutique investment banking firm in Nigeria by the International Finance Magazine. I attribute it to the transactions, collaborations in the market, our engagement with market players such as the Securities and Exchange Commission (SEC), FMDQ OTC, Nigerian Stock Exchange (NSE), rating agencies and other financial and advisory firms.
In a nutshell, our eligibility for the award is a function of what we have been able to achieve in a short period of time.
Where do you see this business in five years?
Critical for us is that we keep doing what we do – continuously seek ways to ensure that we make our clients happy and help them achieve their objectives, such as implementing financing options and alternatives that ensure that they can run their businesses optimally.
What I see as the CEO of this company in five years is a firm that has grown significantly and is a top 5 Investment Bank in the country, leading on landmark M&A deals, IPO’s, PO’s, debt issuances and underwriting among others. We expect to lead the way in creating non-traditional financing options and opportunities for corporations and public sector in Nigeria and Africa.
Do you have any expansion plans in 2019 or do you plan on unveiling something unique to the market any time soon?
In the immediate future, we expect to improve the quality of our market research products significantly to give additional value to our clients. Presently, we send out our periodic market reports to our clients and investors (daily, weekly and monthly). We intend to take this a step further by initiating coverage on specific industries/companies and providing more information tailored to enabling our clients make more informed decisions. Besides that, we are also working on various innovative financing products for our clients in the public and private sector, you will be aware about these transactions in due course.
How cooperative have the regulatory agencies been with Boston Advisory Limited so far?
I cannot overstate the relevance of key regulatory agencies to our business, especially the Securities and Exchange Commission under the leadership of Mary Uduk. The support we have received, from a transaction stand point, has been beyond encouraging. Although we have our concerns with the pricing dictate of the SEC in terms of the limits to fees of issuing houses, which we have been engaging them actively on this via the Association of Issuing Houses of Nigeria (AIHN) and hope to come to a favorable resolution soon. We have also received significant support from the Nigerian Stock Exchange (NSE) and the FMDQ OTC, among others. In my opinion, the regulatory agencies in Nigeria have improved in terms of understanding their importance to businesses like ours and opening themselves up for engagements.
