The Nigerian Stock Exchange is stepping up efforts to ensure more investors patronise the capital market by introducing new initiatives and investor education, writes Goddy Egene
One of the reasons for the high volatility of the Nigerian stock market is the low level of domestic investors. Despite the huge population of the country, those who invest in the market remain very low. While the country boasts of a population of over 160 million people, those who invest in stocks are less than five million.
Although the level of domestic transactions increased by 42.1 per cent from N355.2 billion in the first half of 2016 to N505 billion in 2017, stakeholders said there is more work to be done to raise the bar.
This low level of participation not only inhibits economic growth but exacerbates the silent crisis of inadequate retirement savings
Whereas capital the market is becoming increasingly accessible to many retail investors with the advent of new technology and complex financial products, many of these products have proven to be difficult for financially unsophisticated investors to master.
However, there is growing evidence that household stock market participation has significant effects on savings and on the financial development and performance of an economy. Individual participation in the capital markets is limited and quite heterogonous both among and within several countries.
It is evident that one of the barriers to increasing participation of retail investors in the Nigerian capital market is low financial literacy and education. Today, many potential investors simply do not know how to access the market to invest in securities.
The role of financial literacy in changing this narrative cannot be overemphasised. It goes without saying that financially literate investors are knowledgeable about opportunities in the capital market and are therefore in a better position to make informed investment decisions. So, greater awareness about the capital market is required on the part of retail investors to evaluate the choices available to them.
As part of efforts to boost capital market literacy, the Nigerian Stock Exchange (NSE) recently launched a knowledge platform, X-Academy, which offers bespoke capital market training programmes to equip individuals who will lead and transform businesses for sustainable growth.
Speaking at the launch, the Chief Executive Officer of the NSE Mr. Oscar Onyema, said: “X-Academy would help in strengthening financial literacy and enhance investment in the capital market. It will offer a wide range of courses geared towards bridging the knowledge gap of dealing members, issuers, investors and the general public about products and services of the capital market”.
He stated that the establishment of X-Academy is consistent with NSE tradition of pioneering far-reaching innovations within the Nigerian capital market. Onyema added that the product feeds directly into the National Financial Inclusion Strategy (NFIS) which was launched by the Federal Government of Nigeria in 2012 to reduce the number of adult Nigerians who were financially excluded, from 46.3 per cent in 2010 to 20 per cent by 2020.
According to Onyema, X-Academy would provide individuals and businesses with a robust and effective array of training solutions that would ensure participants were abreast with trends in the rapidly evolving financial markets. â€œAs a socially responsible organisation devoted to enhancing the fortunes of Nigerians and our investors, we are confident that participants of programmes offered by X-Academy will be better positioned to make informed financial decisions,â€ he said.
Also commenting on the launch of the X-Academy, the acting Head, Human Resources, NSE, Mrs. Chinelo Chukwuma-Onwujei, said the exchange will continue to enter into strategic alliances and collaborations with domestic and international institutes and professional associations in developing and deploying structured programmes aimed at creating value for individuals and businesses while delivering superior performance.
â€œWe will also continue to leverage on our affiliations and membership of international bodies to promote the programmes of the Academy and attract participants from across the globe to subscribe to them and further project X-Academy as the learning destination of choice for capital market programmes and financial literacy education,â€ she said.
The programmes offered by X-Academy are facilitated by seasoned and certified subject matter experts with both domestic and international exposure to practical experience. These programmes are built around six broad themes, which include: Listings and Trading on the NSE, Products of the NSE, Market Data and Technology, Financial Education, Corporate Governance, and Risk Management and Compliance.
Between June 12 and 15, 2017, NSE via the X-Academy, held a workshop to train corporate lawyers and risk managers on the Legal and Risk Aspects of Derivatives and Counter Party Clearing (CCP)Transactions in preparation for the launch of derivatives in Nigeria. The training was designed to provide participants with a broader understanding of the concept of derivatives from the two main perspectives of Exchange Traded Derivatives (ETDs) and over-the-counter (OTC) derivatives.
Also, in July 26, 2017 and August 02, 2017, NSE via the X-Academy, held a workshop on the process of listing a company on the NSE and Enterprise Risk Management. The workshops provide the participants with up-to-date knowledge on the NSE listing process and a Practical guide to the development and implementation of enterprise Risk Management respectively.
In continuation of its efforts to deepen retail investorsâ€™ participation, the NSE last week organised another investor clinic to educate capital market stakeholders on â€˜The role of Dematerialisation, Direct Cash Settlement and E-dividend in the development of the Nigerian Capital Market.â€™
The investor clinic was targeted at sensitising the investing public and brokerage community of contemporary initiatives in the market.
That edition of the clinic shed light on the importance of dematerialisation as a necessity in the trading of shares. Participants were also made to understand the advantages of direct cash settlement and e-dividend processing in the consolidation of returns on their equity investment as well as the overall benefits to the Nigerian capital market.
Speaking at the event, the Executive Director, Market Operations and Technology, NSE, Mr. Ade Bajomo, said: â€œThe NSE investor clinic brings to the fore the importance of dematerialisation in ensuring improved market velocity and integrity as well as the role of direct cash settlement in enhancing investor confidence by ensuring that proceeds from the sale of securities are remitted directly into investorsâ€™ accounts. He stressed the importance of e-dividend in not only reducing the perennial issue of unclaimed dividend growth, but in ensuring that investors derive the full benefits of their investments by having their dividends paid directly into their bank accounts as soon as these are disbursed by issuers, regardless of whether these are savings or current accounts.â€
According to him, at the NSE they are committed to improving overall financial literacy and inclusion in the country, and ensuring we implement efficient processes that provide investors easy and intuitive access to grow their wealth. â€œThis commitment is expressed in the various initiatives undertaken by The Exchange. In 2016 alone, we executed over 200 free capacity building workshops, aimed at enhancing investor understanding of the workings of the capital market. The multiplier effect of these workshops are phenomenal, as over 25,000 participating investors have been equipped to make better investment decisions,â€ Bajomo said.
Over 200 participants attended the event which had seasoned and certified subject matter experts, such as Director, Capital Market Development, Securities and Exchange Commission(SEC), Mr. Henry Rowlands, CEO, United Securities Limited, Mr. Seyi Owoturo, and Operations Manager, Market Operations, NSE Mr. Kenneth Nwafor as facilitators.
Market stakeholders opined that the NSE, SEC and other stakeholders need to sustain investor education so as to deepen the patronage of the market by retail investors.
â€œWhile the NSE should be commended for the series of investor clinics and education to expose investors to the capital market, more efforts should be put in so as more investors see the reasons to key into the market and enjoy the numerous,â€ Moses Igbrude of Independent Shareholders Association of Nigeria said.
He said there is the need for regulators to work closely with shareholders association to reach more investors.
â€œI believe, changing its strategies and working with shareholdersâ€™ associations will reach more grass root investors and eventually deepen market patronage,â€ he added.