Boosting retail participation in the capital market will improve the volume of transactions. One of the key challenges facing the Nigerian Stock Exchange at the moment is that of volume of business.
Trade in the market has been largely done by institutions (mainly foreign) while domestic retail investors have not sufficiently returned to the market since the financial crisis of 2008/2009.
There are a few stockbrokers working with these foreign institutions who collectively control the major volumes traded in the market. Foreign investors are also very sensitive and any information that reflects uncertainty in politics and government policies trigger a fast withdrawal from the market, which results in high level of volatility.
Thus, the market still suffers from confidence issues within the domestic sector. This is the major reason the market needs increased level of domestic participation to improve the volume of trade and to contain the high volatility currently being experienced.
Attractive retail investors
The Chairman of the Nigerian Exchange (NGX) Limited, Mr. A.B. Mahmoud, had disclosed that the exchange had all it takes to make the capital market attractive to retail investors, especially through technology. Speaking at the listing of Access Holdings Plc’s shares on the bourse recently, he said the NGX boasted of products that will interest retail investors, especially the youths.
“The exchange is better positioned to lead government advocacy efforts for listed companies, promote technology advancement and digital innovation for the capital market and increase retail investor participation in the capital market aimed at building a market for the future and addressing the prevailing challenge of financial inclusion,” he stated.
Speaking recently at an event, the Divisional Head, Trading Business, NGX, Mr. Jude Chiemeka, stated: “At NGX, we remain committed to creating awareness around the diverse investment instruments available on our platform and how these can help investors achieve their financial objectives under any condition. “This is particularly important given the unprecedented changes brought about by COVID-19 and how it has changed the way individuals, organisations and economies operate today.
The Retail Investor Workshop will, therefore, stimulate conversations around ethical investing, maximising returns on investors’ portfolios and minimising risks through portfolio diversification.” Through platforms such as the Retail Investor Workshop, the Exchange continues to respond to the growing need for increased retail participation.
With its plethora of innovative products and services, it continues to build a vibrant capital market, deepen activity, improve liquidity and create longterm value for all stakeholders.
While listing its efforts and imstrides to enhance investors’ participation in the Nigerian capital market, Chiemeka noted that the Exchange was keen on collaborating with organisations with proven and reliable technological solutions to adapt to digital trends and technologies as well as innovate with new business models and products/services.
“An example of this innovation was experienced in December 2021, when the Exchange facilitated the public offer for sale of 575 million shares held in MTN Nigeria by MTN Group to investors particularly retail investors through the NGX PrimaryOffer app. The offer was priced at N169 per share and over-subscribed by 139.47 per cent.”
Speaking on the topic, ‘Understanding Millennials in the Capital Market,’ the Chief Operating Officer, Bamboo Invest, Yanmo Omorogbe, said: “The millennial investors are interested in companies with great fundamentals and compelling narratives, companies that make consumers rethink their behavior, and companies building the next set of critical digital infrastructure.”
She also spoke on increasing millennial participation in the capital market. Expounding on ‘The Journey into Digitilization,’ the Chief Technology Officer, Africa Prudential Plc, Mr. David Ogunsola, went through the various investment instruments available for digitalisation transformation.
NGX continues to respond to the growing need for increased retail participation in the market through its products and services, advanced strides in the use of technology and more frequent engagements across touchpoint.
The market continues to look forward to initiatives such as this that will ultimately deepen the capital market and improve liquidity.
Nigerian Exchange Limited (NGX) and MTN Nigeria Communications Plc (MTNN) recently announced the signing of a Memorandum of Understanding (MoU) to further promote financial literacy and enhance retail participation in the Nigerian capital market.
The announcement was made at the signing ceremony led by the Chief Executive Officer, NGX, Mr. Temi Popoola and the CEO, MTNN, Mr. Karl Toriola.
The MoU is a two-year partnership that will see NGX and MTNN collaborate to develop capital market solutions, leverage technology to support data dissemination and technology-as-a-service, promote capacity development, and eliminate barriers to retail participation in the capital market. Speaking on the MoU, the CEO, NGX, Mr. Popoola stated:“In building on our rich heritage as the first and foremost multi-asset securities exchange in Nigeria we are resolute in our commitment to democratise finance in Nigeria by leveraging current advancements in technology and relying on strategic partnerships.
“With its customer base of over 68 million customers, MTNN provides invaluable access to a large pool of potential retail investors who can play an important role in Nigeria’s capital market, deepening their own financial resilience in the process. “This collaboration with MTNN aligns with our aspiration to build an open, professional and vibrant exchange and we are indeed excited about this NGX era.”
The CEO, MTNN, Toriola added: “At MTNN, we believe we have a responsibility to ensure that our customers not only stay connected but can access increasing value and better services through our network, deepening their participation in the digital economy.
“Our collaboration with NGX gives us the opportunity to empower our customer base with the tools and the knowledge to engage effectively with the capital market and meet their financial and investment objectives. “There is no better way to demonstrate our commitment to this than through the just concluded public offer for sale of MTNN shares, designed to enhance retail shareholder participation in the value that we create.
We continue to identify other areas of cooperation with NGX and we look forward to a mutually beneficial partnership that will contribute to the inclusive growth of the Nigerian economy.”
Education key to deepening participation
Since education helps in im proving financial literacy of investors, the most effective investor protection starts with a well informed and educated investor. Speaking on the importance of investor education, the Chief Executive Officer, NSE, Mr. Oscar Onyema, said: “Investor participation is central to the growth and sustainable development of any economy.
“The Exchange is, therefore, committed to facilitating conversations that will expound on the retail investment opportunities available in the capital market and the channels through which they can be accessed. “We recognise the need to drive participation in our market, especially among millennials and will, therefore, continue to take advantage of the vast opportunities to equip existing and potential investors with the necessary skills to effectively manage and grow the financial resources at their disposal.
“The Exchange has shown its clear determination to ensure that investors have a better understanding and appreciation of investment products offered in the Nigerian capital market in its efforts to become Africa’s preferred Exchange hub. “The Exchange is working assiduously to ensure that investors understand the characteristics of various securities and how they are issued or traded to maximise their benefits.”
Market analysts also called on the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) to collaborate with market operators for a better structured public awareness campaign about the stock market.
The Managing Director/Chief Executive Officer, Crane Securities Limited, Mr. Mike Eze, said that public apprehension of the capital market would substantially be allayed with a better structured public awareness campaign to be jointly anchored by NSE, SEC and market operators for the education of shareholders and the protection of their interests, especially the small stock holders.
He said the average Nigerian investor suffered considerably, with many losers being first-time investors, essentially unaware of the workings of the market and relying on rising share prices, hunches and herds syndrome for their share-buying decisions.
“While considerable efforts have been made by NSE and SEC to educate shareholders and address some of their complaints, I believe the public apprehension of the capital market will substantially be allayed with a better structured public awareness campaign to be jointly anchored by NSE, SEC and market operators for the education of shareholders and the protection of their interests, especially the small stock holders,” he said.
For the nation’s capital market to enjoy more retail investors’ participation, the regulators should ensure the much needed sanity in the market as both local and foreign investors will feel protected and confident to participate when a market is perceived to be fair, efficient and transparent with a strong enforcement regime.