Exchange Commission calls for more retail investors

The Securities and Exchange Commission (SEC) has called on the Nigerian media specifically capital market correspondents to intensely cooperate with the capital market regulators and other stakeholders to foster more domestic investor participation in the retail Market.

The Acting Director General of the Securities and Exchange Commission, MS. Mary Uduk, said this while giving her speech as the key note speaker at the just concluded forum organized by the Capital Market Correspondents Association of Nigerian (CAMCAN).

Uduk who was represented by the Head, Office of the Chief Economist, SEC, Mr Okey Umeano, said “We are indeed pleased to be part of the discourse today as fora like these afford us the opportunity to collectively think and formulate strategies to deepen retail investors’ participation in the Nigerian capital market. This is because there is a correlation between increased market participation and capital market growth.”

The forum which was themed “Strategies to deepen retail investors’ participation in the Nigerian Capital Market” had as it’s focus, the need to come up with ways to encourage citizens of Nigeria to invest in the Capital Market.

The norm in the market had always been more participation from foreign Investors who end up dominating and dictating the activities of the Market, so that whenever the foreign Investors decide to withdraw their investments, the Market suffers.

Giving a ray of hope, the Acting DG said “In January 2020, the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by approximately 40%. These transactions stood at N165.14 billion and N70.32 billion, respectively. However, the domestic institutional transactions which stood at N83.47 billion outperformed domestic retail transactions which stood at N81.67 billion in January, 2020. This trend re-emphasizes the need for increase retail investors’ participation in the market.”

While answering questions from participants, Mr. Umeano explained that for new or would be Investors, it is advised that they come in through the Collective Investment Schemes, CIS also known as the Mutual funds.

CIS also known as Mutual Funds is an arranged pool of funds managed on behalf of investors by a professional money manager which may invest in; ventures capital, portfolio of stocks Bonds and other securities.

“We want to grow that segment of the Market. This is a lot safer because the fund managers will only invest in products that are making gains based on statistics and professional analysis not on mere sentiment or hearsay.” He stated.

To buttress this point, The Head, Economic Research, SEC, Dr. Afolabi Olowookere, said “While this might not give Investors too much profit, it will not give them too little either, however, it is safer because no matter the outturn of events in the Market, the Investors makes gains.”

He said the Mutual funds segment of the Market experienced it’s biggest growth so far in 2019 where the total value stood at about 1 trillion Naira at the end of 2019.

Olowookere also estimates that the segment will grow in 2020 to 1.5- almost 2 trillion Naira by the close of the years as there are presently about 450 to 480 unit account holders as Investors.

Furthermore, Uduk said “the 10-year Capital Market Master Plan (CMMP) was developed in 2015 to map out strategies for improvement of the Nigerian Capital market in areas such as investor protection and education, professionalism, product innovation etc, and for the expansion of the capital market’s role in the Nigerian economy.”

“The CMMP Identified 101 Initiatives. At the forefront of these initiatives is the e-dividend initiative, dematerialization of share certificates, development of non-interest products, responsive rulemaking, transaction cost reduction, financial literacy, and financial inclusion. Others include: the establishment of the National Investors Protection Fund, the Complaints Management Framework, recapitalization by Capital Market Operators, Direct Cash Settlement, among others.”

Uduk stressed the importance of not allowing uncertainties dampen the resolve to attain the strong capital market of the nation’s dream.

“In spite of these trends, clearly, the fundamentals of our markets and economies remain solid and promising as astute investors know. I therefore, urge retail investors to leverage on this and invest in the capital market, which is one of the avenues to build sustainable and long-term wealth,” Uduk noted.

She noted that the commission in conjunction with other self-regulatory organisations (SROs) had continued to enhance the regulatory framework through various policy reforms and initiatives to boost investors’ confidence.

“There is therefore the need for increased participation of local (retail and institutional) investors in the market and for foreign investors to have higher confidence concerning the safety of their investments,” she added.

The SEC Acting DG said the commisison this year would drive several market initiatives in a bid to restore investor confidence thereby increasing participation in the market.

She listed the initiatives as deployment of Real Time Automated Market Surveillance System; driving the growth of Collective Investment Schemes (CIS); capital market literacy and completion of the infusion of capital market into schools’ curricula.

Uduk added that SEC would ensure robust engagement with sister agencies like the Central Bank of Nigeria, PENCOM, National Insurance Commission and others to ensure consideration of the capital market in policy making.

She stated that the commission would leverage the success of the e-Dividend initiative to drive Direct Cash Settlement and solve the multiple subscription problem in the market.