Minister of Finance, Dr. Ngozi Okonjo-Iweala
By Goddy Egene
Domestic investors should be encouraged to participate in the Nigerian equities market through Collective Investment Schemes (CIS), Head of Markets, Sterling Capital Limited, Mr. Sewa Wusu, has advocated.
Speaking in Lagos at the weekend, during the Finance Correspondents Association of Nigeria (FCAN) Roundtable on the Economy, Wusu said that many domestic investors were still scared to return to the capital market due to losses they incurred during the last stock market meltdown.
However, he said investors should summon courage and key into the market now that it is recovering, adding that the best way to do that is through CIS otherwise known as mutual funds.
According to him, regulation of CIS by the Securities and Exchange Commission (SEC) has been strengthened in such a way that investing in the market through the schemes is safer.
“Apart from the fact that SEC has strengthened the level of regulation of CIS, investing in the schemes helps investors to diversify their risks and have access to professional management of their investments by experts whose job every day is to manage the funds of clients for higher returns,” Wusu said.
Currently, foreign investors still dominate the Nigerian equities market, accounting for over 60 per cent.
The Committee for the Resuscitation of the Capital Market set up by the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, last November recommended that retail investors should be encouraged to go through CIS only.
The committee explained that following the near-collapse of the Nigerian capital market at the heels of the market downturn, it is important to implement changes to better manage investors’ exposure to market risk.
According to the committee, the minimum subscription amount for capital market transactions should be significantly raised such that only qualified institutional investors, market makers and high net-worth individuals could directly access the market.
“This would prevent vulnerable retail investors lacking in-depth understanding of the risks associated with the market from directly exposing themselves without the guidance of licensed asset managers. The investment strategy for such investors should be through managed funds, whereby individual stock selection is done by professionals who understand the risks inherent to the capital market,” the committee said.
The committee noted that there were currently 26 managed funds listed on the Daily Official List the NSE, stressing that these funds provide exposure to various asset classes and investment strategies that meet investors’ different needs.