The concept of the audacity of hope emanated from the keynote address of Barack Obama at the 2004 Democratic National Congress when he was an Illinois Senator and presidential aspirant. The address which he delivered in just 20 minutes contains his family background and vision for America. This address shot him to fame when he embarked on his presidential campaign in America. Some of the issues raised in the address formed the fulcrum of his presidential campaign. The ideas became published as his memoir when he emerged as President of the United States of America.
This week, investors worldwide are in the mood for World Investors Week, an annual event, initiated by the International Organisation of Securities Commissions, a leading global policy forum for securities regulators, to promote investor education and protection. Our own Securities and Exchange Commission is on the governing council. It has, therefore, directed all the securities markets in Nigeria to celebrate investors this week and symbolically ‘Ring the Bell or Beat the Gong’, a euphemism for either opening or closing the market. For instance, students of Pan Atlantic University and King’s College are scheduled to visit the Lagos Commodities and Futures Exchange to ring the bell today. This is all about exposing students to financial literacy. The initiative of IOSCO is not new to securities exchanges as they all know the essence of investor education. It is as old as the history of the Nigerian Stock Exchange which has metamorphosed into NGX after demutualisation. The same applies to investor protection. However, it is to the credit of the international body that World Investors Week is a wake-up call for the regulators of securities markets to defend market integrity.
As the spokesman for The Exchange in 2005, a senior colleague and I were sponsored to the Stockholm Stock Exchange in Europe to participate in the Intercontinental Investor Education Forum. Stockholm Exchange was primarily chosen to enable us to have insight into how the Exchange demutualised in 1993, got listed in 2000 and made history as the first securities exchange to demutualise and list itself globally. Without investors, there is no securities market and without their trust, the securities market is on the way to extinction. At the core of market regulators’ duties is investor protection while operators should be preoccupied with the creation of securities and innovative products and services to attract investors. It is settled in financial management that money has no colour, race or creed. It gravitates to wherever it is needed. The securities market deals in intangible assets and therefore requires the integrity of regulators and operators to build and sustain investor confidence. The market exists to provide a platform that mobilises funds from surplus economic units and channels same to deficit ones. The market is guided by rules and regulations while the market operators as intermediates. Investor education has widened in scope because of the rapid development in information and communications technology. It is ironic that worldwide, while many investors have made fortunes through the securities market others have watched helplessly as their life savings vanished when the market moved against them.
The NGX is still contending with the flame of the global meltdown of 2008 as many investors in Nigeria have developed apathy to the market due to their massive loss. Some have died in the process while some stockbrokers have either died or remained in correctional centres to date. Prior to the meltdown, drivers, mechanics, and other artisans became investment advisers in Nigeria. Many banks coerced their staff to obtain loans to take positions in the securities market. Swindlers who paraded themselves as stockbrokers made fortunes through over-ambitious investors who wanted to become instant millionaires. The market became predominantly short-term, and securities prices were overvalued. It was a case of vicarious liability for the regulators, operators, and investors. Everyone is culpable. The rest is history.
The substance and essence of this year’s World Investors Week are beyond bell ringing or gong beating, but a critical appraisal of how investor education and protection could be more effective. Unarguably, the inclement operating environment in Nigeria, characterised by misalignment of fiscal and monetary policies, sub-optimal utilisation of the capital market by all tiers of government, forex scarcity, exchange rate volatility, unfriendly market policies and insecurity which has heightened the country risk have discouraged many portfolio investors from participating in our market. But as we celebrate investors, both regulators and operators should intensify efforts on investor education and protection. The emergence of millennials and generation Z demands more creative means of growing retail investors in Nigeria. Market operators at various groups are also investing in investor education. The Exchange’s renewed approach towards capacity building for retail investors is commendable. In a population of over 200 million, less than six million retail investors is not comforting.
The NGX Investor Protection Fund, its multiple windows for disseminating information to investors, the SEC’s Complaints Management Framework, the commission’s resolve to sanction market infractions with dispatch, direct cash settlement of transactions, policy on multiple subscriptions, and efforts at addressing unclaimed dividends challenge, among others are strategic means of connecting with investors to build trust in the market.
At the normative level, an average investor is expected to understand risk and return tradeoff, personal risk profile, fundamentals of asset allocation, portfolio construction and re-balancing, analysis of financial ratios in an annual report, and market timing to deploy technical or fundamental analysis for buy and sell orders. But at the positive level, few investors have the technical knowledge. As part of the key messages of this year’s Investor Week, investors should partner with securities dealers for investment advice. The regulators and operators should harmonise their relationship toward market development. High transaction costs on our market are still a bitter pill for investors to swallow. All efforts towards investor education speak to the future that there is an audacity of hope for investors through the Nigerian financial market. Despite the challenges, the premier securities market, NGX, has been adjudged topmost in return on investment worldwide in the recent past. The resilient market beacon alpha returns on investment. Happy World Investors Week to all categories of investors.
Sola Oni, a chartered stockbroker and analyst, wrote from Gbagada, Lagos
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