Nigerians Still Don’t Understand What Trustees Do – Adegbola

Yinka Adegbola

Mr Yinka Adegbola is the managing director of Meristem Trustees. In this interview with Bukola Idowu, he discusses trustee business in Nigeria, challenges and outlook.

Could you explain what trust business is all about?

Trust business has been in existence for a very long time. It was usually taught in the universities in those days. It was a subject for the law students.But coming to the practical aspect of the business, I want to say that trust business has a triangular relationship where you have three parties involved; there is an aspect of the owner of an asset, there is an aspect of trustee who holds an asset in trust and there is an aspect of beneficiaries.

Typically, you will see us in financial transactions where you have somebody that wants to borrow money from a bank, for instance. The owner of the asset has a particular asset from which he wants four or five banks to share. The trustee would come in because the title document cannot be domiciled in a particular bank. So, he would give it to a trustee who is going to be the link between the owner and the beneficiaries. The owner of the asset is the man that has approached banks to borrow money, the beneficiaries are the banks that have interest ultimately. If he doesn’t pay the loan back, the trustee will sell the asset and pay up all the banks. So you will see us doing commercial transactions of that nature. And again, in the private aspect of the business, you will see us coming into play in the area of an individual. You want to set up a trust, you don’t want to write a will, you want to distribute your assets among your family members and yet, you don’t want to write a will, you can set up a trust.

Simply, what you are doing is to transfer the asset to a trustee, like Meristem Trustee, who would hold the asset in trust for the benefit of the children, the beneficiaries. Usually, we use it to escape problem of probate, which happens after the reading a will. You know what happened to the family of a minister of finance in this country after several years? We also know what happened to the will of one legal luminary in Nigeria today. His will is presently a subject of legal contention why? This is because when you write a will, it gives room for grounds to challenge. A child may come up and say look, if my dad was alive, my dad could not have given me land in Okokomaiko and give my brother the one in Banana Island. He could bring up an action. And the issues start. Of course, the man who had set up the will is gone. These are the issues we have seen over a period of time. Probate is another problem. After the man has died, you cannot touch his asset, until a court gives you the power to do so. Now, trust will come up. Trust is being used to remedy all those problems in will administration. A trustee will come in when the man who set up a trust over his asset is alive to transfer his asset to a trustee.

What a trustee does is to manage the asset when the man is alive, everybody will see how it is being run. And when the man is not alive again, no problem. This is because when the man was alive, everybody had seen how the asset was being run. So, we use trustee to offset the probate problem, we use it to eliminate the problem in will administration and even in commercial transaction. That is the aspect of corporate trustee. It is used in commercial transactions especially when there is the need for borrowing money of huge size from multiple of banks. If a customer approaches a bank and says he wants to borrow N5 billion. The bank would tell him “I can’t give N5 billion because of the single obligor limit.” It would tell him, “Don’t worry, whatever assets you have, give it to a trustee, go to this bank let it give its own, go to that bank, let it give its own. Then, the collateral will be managed by trustees.

How would you describe a trustee?

I would say a trustee is like a triangular relationship in which you have somebody transferring his asset to a trustee to hold in trust for the benefit of other parties. In any trust relationship, there must be three parties, the owner of the assets, the trustee and the beneficiaries.

What is the industry size of the trustee business in Nigeria?

If you look at the market size of trust business, it is very huge because in major commercial transactions, there must be a trustee. For example, trustees are party to all the bond transactions of state governments, which run into trillions of naira. So, the assets that are currently under trustee management run into trillions of naira.

What are the challenges facing the business in Nigeria?

Some years ago, when I came to the industry, the awareness level was very bad. One of the problems we have had over the period of time was that people saw trustee as mortgage transaction, especially in the area of private trust. The first question you even ask yourself is, ‘how many people will like to write a will in Nigeria?’ In other jurisdictions, the market size of trust is very huge, even sometimes bigger than that of banks.

More importantly, the level of awareness is very low, but in the area of commercial transaction, the awareness is very high. For instance, a state government that wants to borrow money from the public by way of bond, it has no other choice. It is a matter of compulsion, it must have a trustees because trustees will represent the investors. You are drawing money from about 50 to 100 people from the public. Yes, somebody has to represent their interest to make sure that the money the state governments are borrowing is used for that particular purpose. It is a matter of compulsion in corporate and commercial transactions. The laws are there, the laws are clear, that there must be a trustee in bonds issued by government, in some borrowings too, there must be trustees. Even in public-private partnership (PPP), there must be trustees. But in private aspect of life, the awareness is very low. People don’t even think that they are going to die.

Generally, one of the problems which we have is the issue of awareness in the market, which is very low. We have our association, the Association of Corporate Trustees (ACT), that is trying to address the issue. Another problem is in the area of clients. The clients generally are reluctant to pay commensurate amount for the service.

Even on the part of regulators, most of the transactions are generally pegged, that beyond this, you can’t charge because they want the market to grow. So they usually cap it. Another problem is gestation period for trust transaction. It is not a day transaction. You have to sit down with the man and draw up the plan for him to provide all the data. For instance a man said, “I don’t want to set up the trust for my children, they are all okay. In fact, I am even annoyed with my first two children. They conspired and sold my assets in the United Kingdom. The trust I am setting up will not include them as beneficiaries, but I want to set up the trust for their children because they did not offend me, and my other children, they have been very good, they would be partakers.” So that is how a trust can run. When it comes to those issues, it involves a lot of processes, you go back and forth. So the gestation period is generally long. That is one of the challenges we have.

Another challenge is the attitude of people towards setting up a trust. “I can’t die now everything is fine; I am not even up to a ripe age, not to talk of setting up a trust as an alternative to a will. Again, one of the challenges is capacity because of the nature of the profession. Lawyers generally are the practitioners. I am a lawyer. Even right from the university, if you ask an average lawyer which course did you hate most in the university? By the time, you asked 10 lawyers, at least seven of them would say, don’t mention trust. This is because it is very abstract. Things that you can’t imagine, they keep teaching you. So that is one of the problems abinitio with the profession.

People are reluctant to come to trust profession. So capacity is one of the main challenge. What we have done mostly is to keep training from time to time the few people that have chosen that line. So you have to keep training the people you are working with.

What is the outlook for the business in Nigeria?

I can see a brighter future for the business. As each day passes, the awareness level is increasing. You see more and more transactions coming up that will require trust business beyond the conventional things around. There are lots of opportunities.

So the future looks very good for the market. On the part of the government, most of the laws that regulate the business are obsolete and they are due for overhauling.

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