Latest data on domestic and foreign investors’ participation in the equities market released by the Nigerian Stock Exchange, NSE, for July 2018, showed that domestic retail investors are raising their stake compared to their foreign counterparts and even domestic institutional investors. In this interview, Mr. Chinenye Anyanwu, Managing Director/CEO, Dependable Securities Limited, gave reasons for this. Excerpts:
By Nkiruka Nnorom
WHY do you think the domestic retail investors are raising their stake at this period of political uncertainty in the country?
I think it is a relative term; a comparison of what it used to be and what it is now. If the participation of foreign portfolio investors are dropping, it simply means that in percentage term, the domestic investors participation should be going up.
The foreign investors have no stake and lasting interest in the market. The local investors have a stake and better grasp of the economy than the foreign investors who come in, make profit and run away.
I know very well that there is nothing wrong with the economy. If you also look at the stocks that are losing price, there is nothing basically wrong with them.
If I am an average Nigerian with this mindset and I have investible income, I will put the money in the stock market. If I have a place to even borrow more, I will borrow and put in the market because as a local investor, I know that there is nothing fundamentally wrong with our economy, it is just the political uncertainty that is making people to hold back their cash. That is what I think is driving local investors’ participation.
Why are we not seeing commensurate response from domestic institutional investors, who are reducing their portfolio instead?
Institutional investors, ordinarily, have a portfolio size. If you take for instance the Pension Fund Administrators, PFAs, there is percentage allowable for them; they just have to operate within that percentage. The increment only needs to come with retail and individual investors. If they have investible income, it is limitless.
There is need for the level of interest being demonstrated by domestic retail investors to be sustained going forward. What do you think should be the contribution of the operators, the government and capital market regulators in ensuring that their interest is sustained?
The number of Nigerians that are outside the market is enormous. The more there is investors’ education, which the Securities and Exchange Commission, SEC, and the Nigerian Stock Exchange, NSE, are championing, the more likely we have more people participating. The more people know about the benefits of the market, the more likely you have increased participation. There are un-reached Nigerians that the capital market needs to reach. So, investor education and awareness is the number one thing that everybody that loves the market will do but the only people that have the clout to do that is the stock exchange and SEC. They are the people that will drive it farther, but, of course, every stockbroker is a marketer of products in the market.
There is the need for the government to create an enabling environment. There are instruments created by the government that are traded in the market.
Apart from creating enabling environment, government’s participation by creating those instruments is part of what deepens the market, not only in equity, but in debt instruments.
When you said that if you are an average investor, you will borrow and invest in the stock market, are you encouraging investors to buy more?
Yes, I encourage people to participate more; there is nothing wrong with the market. However, there has to be a change in mentality, a change of attitude. There was a time that investors were looking short-term investment.
If you are thinking short-term, you don’t need to come near the market. It is not a place for short-term. I meet people who say to me, ‘if I give you one million, how much are going to give me in six months or one year’? That is not the language of the market. We must begin to think long-term.