Dig­i­ti­za­tion is im­pact­ing Nige­rian re­tail in­vest­ment mar­ket

In­vest­ment ed­u­ca­tion is key to har­ness­ing the power of the Nige­rian re­tail mar­ket, which is backed by the huge pop­u­la­tion of over 180 mil­lion peo­ple, and at­trac­tive de­mog­ra­phy

Financial Nigeria Magazine - - Contents -

In this in­ter­view, Su­laiman Ade­dokun, Deputy Group Man­ag­ing Direc­tor, Meris­tem Se­cu­ri­ties Lim­ited, speaks on the Nige­rian re­tail in­vest­ment mar­ket and the role of tech­nol­ogy in driv­ing it. He spoke with Jide Ak­in­tunde, Man­ag­ing Edi­tor, Fi­nan­cial Nige­ria Mag­a­zine, and , in the se­ries on Fi­nance and Tech­nol­ogy, spon­sored by Sim­plex Busi­ness So­lu­tions Lim­ited.

Jide Ak­in­tunde (JA): De­vel­op­ments in the po­lit­i­cal space have tended to over­shadow the per­for­mance of the cap­i­tal mar­ket in Q1 2017. What is your view of the year-to-date sit­u­a­tion of the Nige­rian cap­i­tal mar­ket?

Su­laiman Ade­dokun (SA): The Nige­rian equities mar­ket has lost 5.06%, year to date (Fri­day, March 24, 2017), rel­a­tive to a loss of 10.14% in Q1 2016. The for­eign ex­change is­sues were more se­vere in the first quar­ter of 2016 than 2017, and thus the rel­a­tively bet­ter per­for­mance of the equities mar­ket can be linked to the re­cent im­prove­ment in the FX mar­ket. These gains in the FX mar­ket have partly off­set the neg­a­tive in­vestor sen­ti­ment from poor cor­po­rate earn­ings. Over­all, macroe­co­nomic and in­dus­try fac­tors have largely had strong bear­ing on the equities mar­ket.

The re­cent po­lit­i­cal de­vel­op­ments have im­pacted the cap­i­tal mar­ket also, to the ex­tent of their im­pli­ca­tions on macroe­co­nomic fun­da­men­tals. Neg­a­tive sen­ti­ments sur­round the non-pas­sage of the bud­get at March end­ing. But on the pos­i­tive note, the launch of the Eco­nomic Re­cov­ery and Growth Plan (ERGP) and is­suance of the $1 bil­lion Eurobond have been as­sur­ing on the fis­cal side.

JA: On March 13th, the Fed­eral Gov­ern­ment Na­tional Sav­ings Bonds was launched as a re­tail in­vest­ment scheme. The FGNSB may be over­sub­scribed, but if the sub­scrip­tion was driven by cor­po­rate in­vestors and high net­worth in­di­vid­u­als, then a key prom­ise of the bonds would have been un­ful­filled. But then, is there ad­e­quate level of ICT in­fra­struc­ture to drive the Nige­rian re­tail in­vest­ment mar­ket?

SA: We do not ex­pect high net-worth in­di­vid­u­als (HNIs) and in­sti­tu­tional in­vestors to con­sider the sav­ings bond at­trac­tive, given the 2-year tenor and 13.01% in­ter­est rate. With higher in­vest­ment cap­i­tal, HNIs and in­sti­tu­tional in­vestors are able to ac­cess other in­vest­ment in­stru­ments with shorter tenors and higher re­turns. Re­tail in­vestors on the other hand would find the bond at­trac­tive, given the in­ter­est rate of­fered by banks which is about 3-5% per an­num.

JA: We see that dig­i­ti­za­tion has made the Con­trib­u­tory Pen­sion Scheme quite

trans­par­ent, and this has helped in grow­ing the pen­sion as­sets. How can we leapfrog re­tail in­vest­ments with ICT?

SA: The im­pact of dig­i­ti­za­tion is al­ready be­ing felt in the re­tail seg­ment of the Nige­rian fi­nan­cial mar­ket. Rel­a­tive to past trends, many more peo­ple are able to ac­cess real-time prices of stocks and shares, trade in­stru­ments listed on the floor of the Nige­rian Stock Ex­change from the com­fort of their homes, and also mon­i­tor their in­vest­ments on­line. The ef­fect of these de­vel­op­ments in­clude im­proved price dis­cov­ery and mar­ket trans­parency, and re­duced in­for­ma­tion asym­me­try.

There is, how­ever, am­ple room for more in­no­va­tive re­tail prod­ucts and ser­vices. There is need for in­creased fi­nan­cial in­clu­sion, es­pe­cially for the grow­ing pop­u­la­tion of mo­bile phone users, who have never par­tic­i­pated in cap­i­tal mar­ket ac­tiv­i­ties. Also, a num­ber of re­tail in­vestors are not in­vest­ment savvy, hence ICT should be de­ployed to aid ef­fec­tive dis­sem­i­na­tion of “easy to use” fi­nan­cial tools and ed­u­ca­tion ma­te­ri­als.

JA: When Ms. Arunma Oteh was Direc­tor Gen­eral, the Se­cu­ri­ties and Ex­change Com­mis­sion was push­ing the agenda for in­vest­ment ed­u­ca­tion in the coun­try as a strat­egy for grow­ing the re­tail mar­ket. I am not sure how ac­tively this agenda is still be­ing pur­sued. What would be the div­i­dend of such pro­gramme of in­vest­ment ed­u­ca­tion in Nige­ria?

SA: The plethora of re­tail prod­ucts in the cap­i­tal mar­ket at­tests to the fact that the agenda is still be­ing pur­sued. In ad­di­tion, the Char­tered In­sti­tute of Stock­bro­kers (CIS), has held sev­eral of such pro­grammes across the coun­try. In­vest­ment ed­u­ca­tion is key to har­ness­ing the power of the Nige­rian re­tail mar­ket, which is backed by the huge pop­u­la­tion of over 180 mil­lion peo­ple, and at­trac­tive de­mog­ra­phy.

JA: How ac­tive is Meris­tem's re­tail in­vest­ment strat­egy, and what is the role of tech­nol­ogy in im­ple­ment­ing the strat­egy?

SA: Meris­tem's re­tail strat­egy is hinged largely on tech­nol­ogy and in­no­va­tion. We strive to un­der­stand our clients' evolv­ing needs and then de­ploy in­no­va­tive prod­ucts to meet and sur­pass those needs.

We pro­vide the in­vest­ing public with user-friendly trad­ing plat­forms that are easy to un­der­stand and use. We also equip our clients with up-to-date mar­ket in­for­ma­tion, thus aid­ing their quest to grow wealth. Mer­i­trade, Di­as­pora Trust and Mer­iFX are a few of the ma­jor in­no­va­tive prod­ucts out of Meris­tem in re­cent times. Be­fore the end of 2017, we will raise the bar fur­ther with the launch of an­other pace­set­ting re­tail prod­uct, aimed at sim­pli­fy­ing ac­cess to fi­nan­cial ser­vices.

JA: It is pro­jected that Nige­ria will re­turn to pos­i­tive eco­nomic growth rate in 2017, af­ter the re­ces­sion of last year. Look­ing ahead to the re­main­ing three quar­ters of the year, what is your out­look for the Nige­rian cap­i­tal mar­ket in 2017?

SA: In the fixed in­come space, the yield en­vi­ron­ment is still at­trac­tive es­pe­cially in the se­condary mar­ket. We ex­pect a yield curve correction some­times in the third quar­ter when we an­tic­i­pate that the Mon­e­tary Pol­icy Com­mit­tee of the Cen­tral Bank of Nige­ria will re­view the MPR down­wards.

The equities mar­ket is still in a lull and there is limit to the power of re­tail in­vestors to drive the mar­ket due to the pres­sure on dis­pos­able in­come in light of the in­fla­tion­ary pres­sures. Not­with­stand­ing, as com­pa­nies get back on prof­itabil­ity track, we should see some de­cent level of par­tic­i­pa­tion. But the sus­tain­able resur­gence will, to a large ex­tent, depend on in­sti­tu­tional and for­eign in­vestors.

Su­laiman Ade­dokun, Deputy Group Man­ag­ing Direc­tor, Meris­tem Se­cu­ri­ties Lim­ited

A road show on e-Div­i­dend reg­is­tra­tion by Nige­ria’s Se­cu­ri­ties and Ex­change Com­mis­sion

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