Yemiisii Shyllon

IT WILL TAKE A GREAT EFFORT TO RESTOR CONFIDENCE IN THE STOCK MARKET

I understand you were once an active and successful investor in the Nigerian Stock market. What would you describe as your rules for investing in the market, especially the ones that helped you personally? What do you think is the future of the Nigerian stock market? Will we ever get out of the current fluctuating situation?

Imust first admit that investment in stock was my first preferred vehicle for building my wealth, and it was a very rewarding one. I started buying shares when I was in the University of Ibadan (UI), Ibadan, in Oyo State, which over time earned me fortune. They were selling shares then, 60 or 68 Kobo. As a student, I would just buy about 100 shares, 200 shares. Guinness was selling at 60 kobo when I bought it and I sold it at N283 per share. I bought Nestlé at N17 and the price rose to N360 when I sold it. Nigerian Breweries was selling for N4 when I bought it, but it was N200 when I sold it. That strategy of buying when the price is low and selling when it appreciated reasonably made me fortune. My Rules For Investing The rules came in phases. At the initial stage, I relied essentially on accurately interpreting the impact government policies would have on the economy. At that time, there was this indigenisation policy in which shares being held by foreigners were being transferred to Nigerians. Some of the companies also Nigerianised by transferring their operations to Nigerians. I used to read newspapers a lot from where I was able to gather a lot of information to analyse the situation of things. My perception then, was that the stock market would grow and the value of the shares would increase. So, I started to buy shares. I was right After some time, interpreting the government policies was not enough .I had to train to become a chartered stockbroker; I had to apply strict rules of professional practice to my investment in shares by subjecting the stocks I wanted to invest in to both trend and fundamental analyses. Trend analysis allows you to look at the trend and regression lines of the value of the stock. If it points upward combined with the perception that it would continue to grow, then, you would buy. Fundamental analysis enables you to analyse the financial accounts of the companies issuing the shares to determine what the real value of the shares would be vis-à-vis the market value of the shares. The Nigerian Stock Exchange, at a point, gave Nigerians confidence to invest their hardearned money based on false promises. Initial Public Offerings (IPOs) were issued. Prices were manipulated and investors bought the shares. As it turned out, some of the companies did not even issue share certificates. Indeed, some of the companies went bankrupt, leaving those who invested in them in the lurch. Some investors even committed suicide. And when you have a situation as this, from experience, people lose confidence in the stock market. Don’t forget, stock investment anywhere in the world is governed by perception: that the value of the stocks they are investing in would grow in future. So, when that hope is affected, people would not invest and that is where we have found ourselves in Nigeria. Some people have suggested that a way out of this is to diversify your portfolio. But this may not necessarily bring any relief because in a situation where the bulk of the stocks are going downward, regardless of where you diversify to, you would still be affected. Don’t forget that some of the investors invest in stocks because of the regular income they hope to get from the companies through dividends. But what we have experienced is that because of mismanagement, some of the companies could not give them the regular income they are expecting. Future

There is a problem. Government policies are not helping matters. From my observations, the returns on the money market instruments are far greater than what you have in the stock market. So, any reasonable investor would always put his money in the money market, and preferably in the mutual funds which are based on baskets of money market investment instruments. Until government is able to put in place policies that would restore investors’ confidence and also protect them from infractions, you would continue to see people shy away from the market. In terms of the short-term horizon, it is not encouraging but in the long run, if government can put in place enabling policies, perhaps the stock market can regain its lost glory. Government should also consider putting long-term investment such as the pension funds in the stock market. That would attract institutional investors and also boost confidence in the market. My final advice is that anyone who wants to invest in the stock market successfully must study the market. He must train himself. I had to train as a stockbroker, and that gave me better understanding of the market”.