By FSDH Research
There are now investment products in the Nigerian financial market for all Nigerians, irrespective of their income level. Opening an investment account is now easier than ever, after meeting the basic regulatory Know Your Customer (KYC) requirements.
In fact, in some cases, it could be as simple as A, B, C. Technology has made the process of transferring money into an investment account easy, simple and convenient. Since direct cash payments into investment accounts are not allowed in all cases, investors can now transfer money into their investment accounts through their phones and other convenient online platforms.
A mutual fund is an instrument that creates investment opportunities for retail investors in Nigeria. So instead of stacking your hard-earned money in a place where it does not increase in value, why not commit to a mutual fund and let your money start working for you, even when you are sleeping.
Mutual funds provide retail investors with an opportunity not only to preserve their wealth, but to grow their money. They are similar to the ‘esusu’, ‘ajo’ or ‘adashe’ systems prevalent in Nigeria where a group of people contribute monies on a regular basis to a common purse, usually managed by the leader.
After a specified period, say a week or a month, each person gets back his or her money after paying some sort of commission to the manager. Mutual funds are also similar to piggy banks, which are used to encourage savings amongst both children and adults.
However, mutual funds are better than these forms of savings because the managers of these funds invest the money paid into mutual funds accounts to generate additional income. The fund managers pool funds from various individuals and invest them in financial securities such as Nigerian Treasury Bills, Government Bonds, Commercial Papers, Real Estate and Stocks and Commodities.
In addition, mutual funds offer other benefits to the retail investor. Investors benefit from lower transaction costs. Since knowledgeable and experienced fund managers manage the fund, retail investors can sleep with both eyes closed. The fund managers make the ‘what’, ‘when’ and ‘why’ investment decisions on behalf of the investors in a bid to protect investment and earn the maximum return possible. Fund managers decide what security to invest in, when to do so and why.
From a national perspective, the monies from mutual funds could help to increase savings level in Nigeria, which is currently low compared to other countries. Investment in mutual funds is also a way to provide both short-term and long-term capital for companies and government to expand operations and improve infrastructure. This would help increase production, employment and consumption, and stimulate the economy.
Government would also be able to generate greater revenue through taxes on businesses.
In Nigeria, the Securities and Exchange Commission (SEC) regulates mutual funds operations and the professionals that are involved in them.
Most mutual funds are open-ended investment schemes: new investors can buy additional units at any time. The fund managers are also able to provide active liquidity by buying units from existing investors who want to sell units for cash.
Mutual funds offer investors an opportunity to diversify their investment portfolio. The existence of a Trustee and Custodian to a mutual fund ensures the safety of investments, as the Trustee ensures that the fund is managed in line with approved investment guidelines, while the Custodian holds the fund assets in safe custody.
The mutual fund assets in Nigeria have grown significantly in the last five years, an indication of the growing interest in this class of investment.
Data from the SEC on the Net Asset Value (NAV) of all registered mutual funds in Nigeria shows that the collective NAV grew by 328% between 18 April 2014 and 18 April 2019. This translates to a Compound Annual Growth Rate (CAGR) of 34% between this period.
Despite the impressive growth rate, FSDH Research notes that there is significant room for growth in mutual fund assets as we estimate the ratio of mutual funds to the country’s Gross Domestic Product (GDP) to be 0.57%.
FSDH Research notes, however, that mutual funds need more support than is currently available to enable potential investors to fulfil their wealth creation and developmental goals. Government, regulators and the operators in investment management need to provide mutual funds additional support. Government should intensify its efforts at improving the business environment. This will lead to job creation in the country, consequently reducing unemployment, increase savings and investable funds. Regulators could promote innovative legislation to increase investment in mutual funds and expand investment channels to increase returns on the funds invested.
The Fund Managers Association of Nigeria (FMAN) should continue to create public awareness on the benefits of mutual funds in order to generate interest from the investing public.
Absa Lauds Regulatory Framework for Trading Digital Assets in Nigeria
By Modupe Gbadeyanka
The decision of the Securities and Exchange Commission (SEC) to provide a regulatory framework for investing and trading digital assets, including cryptocurrencies, in Nigeria has been applauded by Absa Nigeria.
The chief executive of the leading pan-African bank, Mr Sadiq Abu, while appearing on CNBC Africa’s Power Lunch Show recently, expressed optimism that this development will boost the confidence of investors in the digital assets landscape.
He particularly commended the apex regulatory agency in the country’s capital market for recognising digital assets as securities and making efforts to regulate investments in the sector.
He said, “SEC decided to be proactive around cryptocurrency and digital assets. The SEC has realised that these are rightly called securities and further created a framework to bring them within the broader securities regulatory framework in Nigeria.
According to him, the SEC has also created a framework for protecting investors by requiring investments to be held by digital assets custodians and acknowledged that exchanges or platforms for trading digital assets needed to be regulated.
“There is also an overarching framework for regulating all participants that play in the digital assets space through a specialised license called Virtual Assets Services provider,” Mr Abu stated.
He pointed out that a new rule stipulating tenure and other qualifications of the Chief Executive Officer and Principal Officers of Digital Assets Offering Platforms was similar to the regulations of the Central Bank of Nigeria (CBN).
According to him, this is a clear indication that the SEC and CBN worked together to develop the new framework for the operation of digital assets.
He stated, “There is clear evidence that the SEC is working hands in glove with the CBN to create a regulatory framework for the operation of digital assets and the regulation of CEOs and Principal Officers fall under the broader approved person regime of the SEC.”
SEC had recently published a new guideline on Issuance, Offering Platforms and Custody of Digital Assets, fulfilling the promise it made last year to examine the digital currency to gain a better understanding and develop regulations to protect investors.
Absa, which has a strong footprint across the African continent, offers investment banking and market products through its various Nigerian registered subsidiaries, namely Absa Representative Office Nigeria Limited, Absa Capital Markets Nigeria Limited, and Absa Securities Nigeria Limited.
FG Moves to Improve Midstream, Downstream Operations
By Adedapo Adesanya
The federal government, through the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), has disclosed plans to unveil six regulations on midstream and downstream operations.
The regulations are being put in place to bring clarity to the sector as well as improve business processes and ease of doing business in the sector.
According to the Authority Chief Executive (ACE) of NMDPRA, Mr Farouk Ahmed, in a statement after a meeting with the Independent Petroleum Producers Group (IPPG), said the regulations are gas pricing, environmental management plan, environmental remediation fund, decommissioning and abandonment, gas infrastructure fund, and natural gas pipeline tariff.
The ACE also informed that a Working Team chaired by Mr Ogbugo K. Ukoha, Executive Director, Distribution Systems, Storage & Retailing Infrastructure (DSSRI) was set up to review the draft regulations, engage and consult stakeholders for smooth implementation when released.
Mr Ahmed further stated that the Authority was working hard on reducing the sector’s import dependency with more active efforts placed on local options.
“One of our key concerns is boosting local refining. Dangote and BUA refineries are coming on board; however, we want to see more companies investing in refineries so we can stop the importation of refined petroleum products, save our foreign earnings, create jobs and add value to the economy,” he explained.
The NMDPRA boss noted and commended the gradual growth of indigenous players in local exploration and production of petroleum products. He assured of the organisation’s commitment to making the business climate in the midstream and downstream conducive for local and foreign investment to thrive.
On his part, the IPPG Chairman, Mr Abdulrazaq Isa had said that the IPPG was an association of 25 indigenous Exploration and Production (E&P) companies with the vision to promote the continued development of the Nigerian Petroleum Industry for the benefit of industry stakeholders and the nation.
Mr Isa noted that timely communication with industry players was important at this time when the agency was going through a transition period, calling on NMDPRA to, as a matter of urgency, enact regulations on tariffs, domestic gas and clear license issuance modalities amongst others.
NNPC, Sahara Group Invest $300m to ‘Circulate’ Clean Energy in Africa
By Adedapo Adesanya
The Nigerian National Petroleum Company Limited (NNPC) and leading energy and infrastructure conglomerate, Sahara Group, have taken delivery of two 23,000 CBM Liquefied Petroleum Gas (LPG) vessels.
The delivery happened on Monday at the Hyundai MIPO Shipyard in Ulsan, South Korea, with plans to add 10 vessels in 10 years to enhance Africa’s transition to cleaner fuels.
The new vessels, MT BARUMK and MT SAPET have increased NNPC and Sahara Group’s joint venture investment to over $300 million, approaching the JV’s $1 billion gas infrastructure commitment by 2026.
The fleet previously comprised MT Sahara Gas and MT Africa Gas. All four vessels were built by Hyundai MIPO Dockyard, a foremost global manufacturer of mid-sized carriers.
WAGL Energy Limited, the JV company between NNPC and Oceanbed (a Sahara Group Company) is driving NNPC’s five-year $1 billion investment plan announced in 2021 to accelerate the decade of Gas and Energy transition agenda over the period.
Speaking on this, NNPC’s GMD, Mr Mele Kyari disclosed that the order of three additional new vessels was being finalised, adding that “we have a target of delivering 10 vessels over the next 10 years. The NNPC and our partners stand out with integrity in our energy transition quest and our commitment to environmental sustainability is unwavering.”
MT BARUMK and MT SAPET are WAGL and Sahara Group’s injections into the JV. WAGL is shoring up its gas fleet and terminal infrastructure, while Sahara Group continues to make remarkable progress in the construction of over 120,000 metric tonnes of storage facilities in 11 African countries, including Nigeria, Senegal, Ghana, Cote d’Ivoire, Tanzania, and Zambia, among others.
Mr Kyari also said the vessels were critical to driving the Federal Government’s commitment to the domestication of gas in Nigeria through several initiatives and increasing seamless supply in compliance with the mandate of President Muhammad Buhari.
The initiatives – the LPG Penetration Framework and LPG Expansion Plan are geared towards encouraging the use of gas in households, power Generation, auto-gas and industrial applications in order to attain 5 Million Metric tonnes of LPG consumption by 2025.
“This is another epoch-making achievement for the NNPC and Sahara Group, and we remain firmly committed to delivering more formidable gas projects for the benefit of Nigeria and the entire sub-region,” Mr Kyari said.
On his part, Mr Temitope Shonubi, Executive Director, Sahara Group, said: “WAGL has successfully operated two mid-sized LPG Carriers MT Africa Gas and MT Sahara Gas in the region in keeping with global standards, delivering over 6 million CBM of LPG across West Africa. With the new vessels, we are set to promote and lead Africa’s march towards energy transition.”
Mr Ali Magashi, Nigeria’s Ambassador to South Korea who represented the Federal Government, noted that President Muhammad Buhari deserved commendation for the Petroleum Industry Act (PIA) which he said would reposition the NNPC to explore more projects with partners like Sahara Group.
BARUMK was derived from the combination of the name and initials of the late NNPC GMD, Dr Maikanti K. Baru, in fond memory of his immense support for the Gas development in Nigeria. “SAPET” is named after the Sahara – Petroci (the Ivorian National Oil Company) JV LPG Company (SAPET Energy SA.), currently constructing phase one of a 12,000MT LPG storage facility in Abidjan, with expansion plans to achieve 30,000MT in phase two. The JV emerged from WAGL’s trading relationship with PETROCI, dating back to 2014.
LPG is the fastest-growing petroleum product in sub-Sahara Africa over the last decade, with forecasts indicating that LPG will grow at a 7 per cent Compound Annual Growth Rate (CAGR) over the next 15 years.
Increased uptake of LPG will reduce net Green House Gas (GHG) emissions and pressure on forest reserves, thereby increasing environmental sustainability.
Latest News on Business Post
- Davido, D’Banj, Others for YouTube Africa Day Concert 2022 May 23, 2022
- Absa Lauds Regulatory Framework for Trading Digital Assets in Nigeria May 23, 2022
- Sterling Bank Offers Optometrists Loans at Competitive Interest Rates May 23, 2022
- LG Financial Autonomy: FG, NFIU Floor Governors in Court May 23, 2022
- Buhari Meets Kano Explosion Victims, Expresses Sorrow May 23, 2022
- Why Nigeria Rejected OECD Minimum Corporate Tax Agreement—FIRS May 23, 2022
- FG Moves to Improve Midstream, Downstream Operations May 23, 2022
- NNPC, Sahara Group Invest $300m to ‘Circulate’ Clean Energy in Africa May 23, 2022
- Okowa’s Financial Aid to Mission Schools May 23, 2022
- Nigeria’s GDP Grows 3.11% in Q1 2022 Amid Lower Economic Activity May 23, 2022