Business leaders and operators of the Nigerian capital market say they need to see more policy framework that would encourage all types of investors to take the leap into the market.
This is as they said that the average age of investors in the market is 50 and above with the youthful population shunning the market due to a host of factors including low literacy, the bureaucratic nature of the market, and the fear of getting their hands burnt again.
The experts, who spoke at the 2020 BusinessDay capital market conference, also said institutional investors have largely dominated the market with the retail investors staying far from the market.
“More has to be done to educate people on how best to maximize the benefits presented in the capital market”. Said Ete Ogun, managing director, Anchoria Asset Management.
“A lot of viable investments are in the markets but it has to go with the knowledge given prevalent currency risk and other uncertainties”, Ogun said
Since the financial crisis of 2007/2008, most retail and young investors have stayed off the Nigerian capital market, losing nearly all their investments following the crisis.
Since then, low participation has persisted, with the market struggling to return to its pre-banking crisis days. This has been further heightened by the negative real interest rate on nearly all short term assets were these segments of investors find interesting to invest.
For instance, only about four percent or (564,000), out of the 13.4 million total accounts with the Central Securities Clearing System (CSCS), has been actively traded in the last 7 years, a pointer to the high apathy of investors.
The bureaucratic structure of the market has been a key discouraging factor for many people seeking to invest in the capital market, said Haruna Waziri, CEO, Central Securities Clearing Systems Plc.
“There need to be some reforms seen around timing. How will an investor wait for about 6 months to one year to raise capital from the market, while it can get a loan from the bank in just one week,” he said.
He noted also that reforms to increase retail and young investor’s interest in the market must go beyond just financial literacy and sensitization, to broader macroeconomic reforms.
“For us at CSCS, there were two activities that caused a boom in account openings and they were not about financial literacy”.
“The first was when the Federal Government did privatization of assets based on TCP guidelines. That raised the number of accounts opening from 1.6 million to 5 million, while the second was the banking consolidation, when the banks were raising capital to build their balance sheet, raising account opening from 4 million to 9 million. Those were not financial literacy,” he said.
Nnamdi Nwizu, co-managing partner and executive director at Comercio Partners, while noting that the market is yet to recover from the financial crisis, said market sensitisation and investors literacy are important in order to cause a paradigm shift in retail and young investors perception in short term to long term returns.
“There are a lot of fundamental stocks to invest in the stock market that can give investors good value for their money, but these are long term,”
“More financial literacy coupled with technologically innovative mediums will be more sustainable for the younger, vibrant and more competitive generation to find alternative investments within the capital market as viable,” he said