Many Nigerian youths have invested in cryptocurrency and other digital assets as well as foreign stocks but they see the country’s stock market as a place to eschew.
Finder’s latest report on cryptocurrency ownership and adoption shows that Nigeria has the second highest number of Bitcoin owners as of October at 48 percent, up from 16.1 percent in the same month last year. Australia sits atop the table, with 61 percent of crypto owners holding Bitcoin, the world’s most popular cryptocurrency.
Finder’s Cryptocurrency Adoption Index measures the growth of cryptocurrencies worldwide through an ongoing survey of internet users in 26 countries.
A report by Coingecko, a global crypto market platform, showed that Nigeria beat other global counterparts surveyed to emerge as the country with the highest search ranking in crypto since the bear market in April with more than 371 key search phrases.
Ibrahim Shelleng, a wealth management and business development expert, said traditionally, investments in the local stock market have been seen as the preserve of older and rich men and women.
“The perception that the market is highly susceptible to manipulation by the few powerful gatekeepers also makes it even less attractive to younger retail investors. The market crash in 2006 to 2008 could be argued to have finally sealed the nail in the coffin,” Shelleng said.
According to him, the Nigerian Exchange Limited and the capital market regulators have continued to address some of the barriers by adopting technology and embarking on a market education campaign to encourage younger investors.
The cryptocurrency market, according to Shelleng, has usurped all efforts of traditional stock markets.
He said, “The volatile nature of the market, with its booms and busts, provides a more attractive proposition to a younger demographic with a higher risk profile. This same demographic would happily invest in Ponzi schemes despite numerous warnings. The plan is to ‘cash out’ before the scheme crashes. The decentralised nature of the cryptocurrencies also gives investors more confidence that markets are not being manipulated and are purely supply-demand driven.
“Traditional markets may look to adopt aspects of the crypto market in order to sustain relevance in the future. Technology is a young person’s industry and it has been reflected in the level of investments from the same demographic. The disruption that technology is causing is a major challenge to traditional institutions.”
Ebuka Anichebe, managing director of Jean Paul and Associates Consultancy, said the crypto market has more control over how and when to enter or exit a specific trade, which remains a huge deal for millennials and Gen Z in terms of autonomy and freedom.
Anichebe said the continued depreciation of the naira makes investment oftentimes seem like a waste.
He said: “Even if your stocks should do an 18 percent uptick in gains within a calendar year, that ‘profit’ in reality is already eroded by the 25 percent depreciation of the naira against the dollars.
“So we invest in cryptocurrencies as a new asset class because during the bull run, stupendously fabulous profits can be made there. I once did a $100 bet and got $4,800 within a week, which a Nigerian company listed on our stock exchange can never boast of, even in five years.”
He said many youths believe that prices on the local stock exchange can be easily influenced more by insiders here in Nigeria than they can be carried out in the global crypto market or the London Stock Exchange or the New York Exchange.
“Trust when broken is hard to replace. Nigerians (millenials and Gen Z) can still remember the famous Otedola and Dangote battle for stock prices supremacy using the stock market as the battle field. The internet never forgets,” Anichebe said.
However, experts in the crypto space also cited lack of proper awareness as a major factor responsible for the youths’ disinterest in local stocks.
“Nigerian youths are more familiar with cryptocurrency. Some are not even aware that they can acquire local stocks but there is hardly any youth that hasn’t heard of bitcoin or ethereum or NFTs. Digital assets are very popular among this dispensation of Nigerian youths compared to local stocks,” Chidozie Michael, founder and CEO of Olitech Exchange, said.
Michael said investing in local stocks will help in boosting the country’s economy.
“Investors in local stock can remotely monitor the development of the company they decide to invest in. There are companies that can fold up and some that can exponentially improve the value of one’s investment portfolio, it’s actually down to doing good research and being comfortable with the gradual outcome of your investments and making thoughtfully prompt decisions to minimise losses,” he said.
Anichebe said the NGX must make a move to consciously tell their own stories to woo this class of investors using new media and influencers.
“A story must be woven around how small companies with bright ideas can be turned into a global powerhouse with increased capacity when we all come together and support our own with fusion ideas, capital and a shared sense of ownership,” he added.