"Capital Markets key to Development in Africa" Onoriode Reginald Aziza
African governments should be developing policy that enables capital markets to fund infrastructure projects instead of always going cap in hand to development agencies. This is the view of Oxford University doctoral student in law Onoriode Reginald Aziza who is researching regional securities law in sub-Saharan Africa.
“Infrastructure financing caught my interest because I don’t think African countries are getting it right. For so many governments it is easier to ask the World Bank for money than to look to the markets, especially for domestic capital.”
While there was inflow of capital from the developed world, Aziza said he was not convinced that the policies governing the inflow of funds worked to the advantage of the country concerned.
“We are not seeing the impact of this money in the creation of better institutions, better infrastructure or improved quality of life. There is something that is not happening.”
With appropriate policy, capital markets could change how infrastructure was paid for – a power plant for instance could be built more efficiently and effectively by the capital markets than with aid money or a high cost loan to government.
“It happened a lot in the developed world. In New York and London during the industrial revolution, infrastructure – railway lines, tunnels, bridges - were financed, in substantial part, by the capital markets. Development is being driven by the capital markets which are putting up the cash. But, for some reason, this is not happening in Africa.
Maybe the problem is that governments don’t know how to do this. They don’t have policies enabling this kind of investment nor protecting it in the event of political change.”
Only South Africa, through the JSE, had significant market capitalisation (currently more than US$1 trillion) and the wherewithal to fund massive infrastructure.
“Nigeria might be the biggest economy in Africa but unfortunately, it appears more concerned with sound-bites that don’t speak to fundamental issues nor go very deep when it comes to overhauling legal and banking institutions and developing policy for deep and liquid capital markets.”
Until proper thought is given to policy development in Nigeria, South Africa would perform better and Nigeria would not reap the benefits of its own wealth.
Market development, Aziza pointed out, did not have to come at the high price of international money but could be domestic money.
Interestingly he said China, which had grown in influence across Africa through its involvement in infrastructure construction, was not participating heavily in the capital markets in Africa.
“There don’t appear to be many African firms with securities cross-listed on Asian stock markets. Thus, if a Chinese investor wants to go into Kenya, for instance, his approach is not through buying securities of the Kenyan firm on the Hong Kong Stock Exchange, but is far more direct.”
While Aziza’s focus has been to grapple with how to enable Africa to take its share of global funding, he is mindful of the risks that come with investment.
“In any business decision care has to be taken so that the risk is managed. One of the big challenges for African countries is assuring investors of political continuity. That’s why it is important that institutions like the banking sector and the legal system are well functioning. People need to know that the courts will uphold the rule of law and that banks are safe.
While Aziza is currently at Oxford, he is a triple first-class lawyer who graduated with his Masters in Corporate Law from the University of Cambridge. Securities law is the subject of his current thesis but his expertise are also in dispute resolution.
Last year he spent six months with Shearman & Sterling in Paris and before that a short spell at Olaniwun Ajayi LP in Lagos. He was also briefly an associate with Herbert Smith Freehills in London. This placement in the London office was the culmination of the bursary awarded to him by the law firm to study at Cambridge.
He was born in Warri, the oil hub in Nigeria’s Delta region.
“I love going back to Nigeria. When you arrive in Lagos the warmth and humanness of the place hits you and you think ‘I am home’. It’s relaxed, the people are friendly and the food is wonderful.”
His love of the UK though runs deep. “My favourite place is Cornwall. I love the countryside, the walking and the views.”
When Aziza has time to relax he reads and favours books on economics and philosophy. He is a disciple of the American economist Joseph Stiglitz especially his views on spreading wealth and ending poverty.
“Stiglitz has made me think there can be another way for Africa, that there are alternatives to how wealth is shared.”