Winning the NGX marathon

In a surprising turn of events this year, three to four banks in Nigeria decided not to pay dividends to their shareholders. This decision was influenced by the Central Bank of Nigeria’s forbearance provisions, which required these banks to prioritise managing their loan portfolios over distributing profits. While this might sound disheartening to many investors, especially those who rely on dividends as a source of income, it’s essential to understand the broader picture.

For some, the absence of dividend payments could serve as a deterrent to investing in bank shares. The thought of missing out on immediate returns can be frustrating. However, for the savvy investor who understands the nuances of the market, this is merely a bump in the road. A smart investor knows that the stock market is not just about quick gains; it’s about playing the long game. Disappointment may arise, but it should not derail your investment journey.

Take a moment to consider how other countries approach similar situations. For instance, during the financial crisis in 2008, many companies worldwide slashed or suspended their dividends to stabilise their finances. Yet, savvy investors who remained patient and focused on long-term growth eventually saw their investments recover and flourish. The same principle applies here in Nigeria. The stock market can still be a robust platform for both short-term liquidity and long-term capital appreciation, provided you understand the right strategies and timing.

As you navigate your investment journey, it’s important to think about your future. Once you reach retirement age in Nigeria, it might be wise to shift your focus toward shorter-term investments. Imagine using your profits and dividends to fund memorable holidays or enjoy life’s little luxuries. After years of hard work, you deserve to reap the rewards of your investments.

But before you get there, dear young investor, it’s crucial to educate yourself about the market. Start by familiarising yourself with its trends and fluctuations. Don’t shy away from experimenting; every great investor began somewhere. Seek out an experienced stockbroker who can guide you through the intricacies of investing. Remember, it’s perfectly okay to start small—invest what you can afford to lose. This way, you can learn without risking too much.

Consider this: think of investing like planting a tree. You don’t expect it to bear fruit overnight. It takes time, care, and patience. By nurturing your investments with knowledge and strategic decisions, you’ll eventually enjoy the fruits of your labour.

Moreover, take advantage of available resources. There are numerous online platforms and community workshops dedicated to educating potential investors about the stock market. Engaging with these resources can provide you with invaluable insights and boost your confidence as you take your first steps into investing.

Let’s not forget that investing is not just about numbers; it’s also about understanding the stories behind those numbers. Each company has its own narrative, influenced by its management, market conditions, and economic factors. By staying informed about these elements, you can make more informed decisions that align with your investment goals.

Lastly, always remember that while investing can be rewarding, it also comes with risks. Market conditions can change rapidly due to various factors such as political instability or global economic shifts. Therefore, diversifying your portfolio is essential. By spreading your investments across different sectors or asset classes, you can mitigate potential losses and increase your chances of success. In conclusion, while the recent dividend cuts from some banks may seem discouraging at first glance, they offer a valuable lesson in resilience and strategic thinking for investors in Nigeria. The stock market remains a viable avenue for both short-term liquidity and long-term growth if approached with patience and knowledge. So, whether you’re an experienced investor or just starting out, remember: stay informed, start small, and keep your eyes on the bigger picture. Your future self will thank you for it!

Dr Adeniyi Bamgboye, DBA, FCTI, FCA, FCCA, a dual-qualified chartered accountant, tax expert, and policy analyst, is the managing partner of Empyrean Professional Services, an audit, business, and financial advisory firm dedicated to enhancing its clients’ business value. 08060603156. [email protected]