By Dipo Olowookere
Investors in the Nigerian capital market have been advised to invest only in stocks with good fundamentals for capital gains.
This advice was given by the Chief Financial Officer of FBN Holdings Plc, Mr Oyewale Ariyibi, when he engaged reporters in the capital market.
At the event held to lecture members of the Capital Market Correspondents Association of Nigeria (CAMCAN) on Understanding Financial Statements for Business Reporting, he said it is dangerous to invest in equities without due diligence.
According to him, before such investment is made, a financial adviser should be consulted, who will give an analysis of the possible shares to buy.
He advised that any money to be invested in the stock market should be from what “you do not need immediately” and that the mindset should be for “the medium and long-term” and not for the short-term.
The financial expert noted that “investing in financial markets is not a gamble or bet, you need a financial adviser to assist in making investment decisions.”
As regards making the right investment decisions, Mr Ariyibi noted that investors should endeavour to have the basic knowledge of interpreting financial results of companies as it would be of great benefits to them.
He described the financial statement as a document that gives records of the “financial activities of an entity” as it “reflects the financial effects of business transactions and events on an entity” and prepared by “following certain logical and consistent accounting principles and usually audited to ensure accuracy for tax, financing or investing purposes.”
Mr Ariyibi said through the financial statements of an organisation, investors can identify the sound and weak stocks and then make an informed decision.
“For shareholders and investors, financial statements can be used to analyse the viability and profitability of their investments and to assess the ability of the business/organisation to pay dividends and determine any future course of action,” he said.
He submitted that understanding financial statements would be beneficial to investors, in the long run, noting that the adoption of the International Financial Reporting Standards (IFRS) has brought sanity and transparency into the system.
