Diekola Onaolapo: The new face of Africa’s top-gun dealmakers

Strategic thinking, influence, purpose, winning. Those are the words anyone would hear as they step into Diekola Onaolapo’s office, if walls could talk. Evenly arranged on his walls are portraits of three great leaders who were serial winners in their prime. Looking at those portraits would set the right tone for any day. But not to be lost in the illusion of winning after recording a few victories, the three leaders on Diekola’s wall overlook a board of chess, reminding everyone who faces that part of his office of the importance of strategic thinking.

One would think the investment banker has been found out after looking away from the special wall and seeing books about leadership, business, investment banking, and corporate finance, neatly arranged on a shelf that sits above a cabinet where soul music is always playing. But his office does not sum up who he is; there is more. Diekola studied engineering at the university. He was a music artiste and a producer. He writes poems and loves teaching. He could be the perfect character for a romantic fiction, but he’s a dealmaker betting big on Africa’s future.

“Eczellon Capital is about a particular region. It’s about the continent of Africa which we see a lot of potential in,” Diekola tells The Nerve Africa. He is the CEO of Eczellon Capital, a Lagos-headquartered investment bank, with focus on Corporate Finance and Advisory Services.

“At some point, we found out that finance could be a missing link between ‘what is’ and ‘what should be’. So, finance becomes a very good tool that can aid the development of this market [Africa] and really make the potential manifest.”

He continues: “The Africa Story is somewhat engaging and it’s one of the things that has been empowering us as a team of people and as professionals.

“One mystery [about Africa] is that a continent so rich in resources — mineral and even human — could be somewhat left behind and could be seen as backward. But ultimately, the trend that we are now seeing is that a lot of young people, despite all the limitations that they are subjected to, has aided themselves with the new technologies that enable them to see what is available outside of Africa. Therefore, the gap between what is possible and what they currently experience makes them so determined to get to the next level and it’s one of the main things that will ultimately drive growth in Africa”.

“So, we see that these things can be leveraged and ultimately that would happen when we have professionals who are able to advise private parties as well as government, and who can use their expertise to create opportunities for these diverse stakeholders within the African community.”

Eczellon Capital falls in this space. Till date, the seven-year-old company has structured more than 60 mandates and deals worth an excess of $1.3 billion.

The Visionscape deal

Last year, the company successfully raised N28 billion ($92 million) for Visionscape Group in the First Series of a N50 billion Medium Term Note / Project Bond programme. The environmental utility group had been hired by Lagos State to run its Cleaner Lagos Initiative, a program aimed at improving the management of solid waste in Nigeria’s most populated city. Visionscape required significant financing to make it happen and had to source the funds needed independent of Lagos State.

Following discussions with Visionscape, Eczellon Capital put together a debt instrument that was well received by the investing community.

“So, there was a lot of engagement with the investing community,” Diekola says, explaining why he thinks the first series of the medium-term note was successful. But there’s more: “good client, good structure and right timing”. These three, he believes, worked together to ensure the first tranche of the program went well.

The success of the bond issue could also be attributed to the Lagos State Government’s guarantee. The state, whose GDP is bigger than that of some countries in Africa, guaranteed and secured the bond by an Irrevocable Standing Payment Order (ISPO). On the back of this guarantee, ratings agency Agusto & Co. rated the debt offer an A+. However, Diekola downplays the impact of the government guarantee.

“The guarantee is just one feature of that instrument,” he says. “A number of other things were contained in the structure. For instance, you have an instrument with the same risk profile as another instrument, but paying better returns. Also, we structured the deal in such a way that it suits every member of the investing community.”

The N50 billion green bond with a five-year tenor was issued at 17.5 percent interest. The closest to it, in terms of returns, is Lagos State’s 2017 N500 billion debt issuance programme, with a 7-year tenor and an interest rate of 16.50 percent.

Eczellon Capital

Setting the records straight

As expected, the genius of the company that structured the award-winning deal hardly made the news, but the controversy surrounding the deal was widely reported. While not knocking assertions, rumors and critical analyses of the deal, Diekola states that most of the people who commented about the deal did not know enough to arrive at the conclusions they made. “So, all they were using to evaluate and discuss it was essentially hearsay that had a lot of propaganda and political twist within it,” he says.

“Going by the details of the transaction, one of the things I heard is that the government of Lagos State essentially just gave money to a private company and wrote the name of the company into law. We need to understand the way the government does business with the private sector. So this is a public-private partnership transaction in which the state requires a particular solution and then, they […] published request for expressions of interest and conducted the whole concession exercise to select a concessionaire, which is usually the private company that gives them the best chance to execute the proposed project,” Diekola explains.

“Now, the private company was required to spend its own money to put in place all the hardware required, fund the operation of the project. All the company is holding is essentially the promise of the ultimate contract employer to pay. So, what that means is that Lagos, being the ultimate employer of the contract only gave the guarantee to pay upon the contractor meeting its obligation and I don’t think that’s unheard of in transactions of that nature.”

He adds: “I think, eventually, the client did what they should do in managing those narratives, to actually present the real story behind the transaction.”

Asked when the second tranche of the bond is coming on stream, Diekola says it’s a factor of many things. “So the project itself a multi-phased project and we are working with a phasing strategy. Upon completion of a phase, we get into the next phase.”

Insight to insure 

One of the strengths of Eczellon Capital is its research depth. The company’s intelligence unit releases periodicals with memos about their findings on different sectors of the economy. Usually, they follow trends and use their expertise to project possible policy actions and expected reactions by those concerned.

In 2016, the unit wrote a memo about the insurance sector, projecting a call for recapitalisation of companies playing in the insurance space. Two years later, the National Insurance Commission (NAICOM) which regulates the insurance industry in Nigeria announced that the implementation of risk-based recapitalization of insurance companies would commence in October, 2018 (it had earlier announced January 2019). Insurance companies will be classified into three categories based on their capitalization. The category a particular insurance company belongs to will determine the kind of business it can do in terms of coverage of the market.

The companies that are lucky to have Eczellon Capital as advisor saw this coming and they are prepared.

“We are currently working with a number of insurance companies, helping them to develop strategies towards meeting the classification,” Diekola says.

The Eczellon chief executive adds that his company is helping a number of insurance firms that may need some investment to achieve their desired capitalization, to explore the best options available to them. He foresees mergers in the local insurance space and possible investment from foreign insurance companies that see the huge opportunities the sector offers.

Although Eczellon started advising insurance companies about capitalization early enough because of insights from research, Diekola doesn’t see this as a competitive edge over other advisory firms. Rather, he believes that clients choose Eczellon Capital because of the undeniable value the company offers across board.

“I think one of the things that Eczellon clients see in us is that we have that mix of the kind of thing that they would need, because the value we bring is proven,” says Diekola, who keeps weighing his words in a bid not to sound immodest. “Number one, we do know what we’re talking about, we know what they need and we have the ability to think through and create structures that can help them achieve their objectives. So, it’s a compelling case enough for them to want to work with us and I’m happy that up till now we have not disappointed.”

Eczellon Capital CEO - Diekola Onaolapo

Working for development

As the company continues to break new grounds, it holds dear infrastructure financing, with which it seeks to help Africa overcome its dearth of infrastructure. With government the main provider of infrastructure, Eczellon Capital has had to work closely with governments across Africa, helping them to structure deals to raise funds for much-needed infrastructure, and advising them on how to make Africa a better place through projects that improve livelihoods.

Eczellon Capital also reaches out to policymakers in different ways. “Sometimes, just an opinion is written into an article,” Diekola explains. Also, “attending a conference or meeting with some of these policymakers where one can bring some of the things they need to do to their attention can be very impactful.”

He adds: “We support dialogue between the corporate private sector and public sector because policymakers cannot roll out relevant policies if they don’t really understand where the pain points are.”

The Nigerian company has been involved in several projects across Africa over the years. While these projects are spread across different sectors, they are all tied to Eczellon’s commitment to the continent’s development.

Everyone who works at Eczellon Capital share a common commitment to Africa. They seek to connect leaders of corporations, governments and enterprises, who are primed for the next big thing, with ideas and the right capital. They hope that this will help to create and advance an economically vibrant and progressive African Story. Hence, as they work hard at infrastructure financing, they are also keen on energy, financial services, and manufacturing.

Noting that the top economies in the world are built on production and consumption, Diekola says: “Now in Africa, we are consumers, we are not just producing enough.

“If we have the ability to produce enough to consume and even export, then what would be the story? “It will be the beginning of the story that would spark into the future.”