Economy

Investment Opportunities for Retail Investors

Published

6 years ago

07/05/2019

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.

Economy

FAAC Disburses 1.727trn to FG, States Local Councils in December 2024

Published

4 hours ago

14/12/2024

Modupe Gbadeyanka

By Modupe Gbadeyanka

The federal government, the 36 states of the federation and the 774 local government areas have received N1.727 trillion from the Federal Accounts Allocation Committee (FAAC) for December 2024.

The funds were disbursed to the three tiers of government from the revenue generated by the nation in November 2024.

At the December meeting of FAAC held in Abuja, it was stated that the amount distributed comprised distributable statutory revenue of N455.354 billion, distributable Value Added Tax (VAT) revenue of N585.700 billion, Electronic Money Transfer Levy (EMTL) revenue of N15.046 billion and Exchange Difference revenue of N671.392 billion.

According to a statement signed on Friday by the Director of Press and Public Relations for FAAC, Mr Bawa Mokwa, the money generated last month was about N3.143 trillion, with N103.307 billion used for cost of collection and N1.312 trillion for transfers, interventions and refunds.

It was disclosed that gross statutory revenue of N1.827 trillion was received compared with the N1.336 trillion recorded a month earlier.

The statement said gross revenue of N628.972 billion was available from VAT versus N668.291 billion in the preceding month.

The organisation stated that last month, oil and gas royalty and CET levies recorded significant increases, while excise duty, VAT, import duty, Petroleum Profit Tax (PPT), Companies Income Tax (CIT) and EMTL decreased considerably.

As for the sharing, FAAC disclosed that from the N1.727 trillion, the central government got N581.856 billion, the states received N549.792 billion, the councils took N402.553 billion, while the benefiting states got N193.291 billion as 13 per cent derivation revenue.

From the N585.700 billion VAT earnings, the national government got N87.855 billion, the states received N292.850 billion and the local councils were given N204.995 billion.

Also, from the N455.354 billion distributable statutory revenue, the federal government was given N175.690 billion, the states got N89.113 billion, the local governments had N68.702 billion, and the benefiting states received N121.849 billion as 13 per cent derivation revenue.

In addition, from the N15.046 billion EMTL revenue, FAAC shared N2.257 billion to the federal government, disbursed N7.523 billion to the states and transferred N5.266 billion to the local councils.

Further, from the N671.392 billion Exchange Difference earnings, it gave central government N316.054 billion, the states N160.306 billion, the local government areas N123.590 billion, and the oil-producing states N71.442 billion as 13 per cent derivation revenue.

Economy

Okitipupa Plc, Two Others Lift Unlisted Securities Market by 0.65%

Published

9 hours ago

14/12/2024

Adedapo Adesanya

By Adedapo Adesanya

The NASD Over-the-Counter (OTC) Securities Exchange recorded a 0.65 per cent gain on Friday, December 13, boosted by three equities admitted on the trading platform.

On the last trading session of the week, Okitipupa Plc appreciated by N2.70 to settle at N29.74 per share versus Thursday’s closing price of N27.04 per share, FrieslandCampina Wamco Nigeria Plc added N2.49 to end the session at N42.85 per unit compared with the previous day’s N40.36 per unit, and Afriland Properties Plc gained 50 Kobo to close at N16.30 per share, in contrast to the preceding session’s N15.80 per share.

Consequently, the market capitalisation added N6.89 billion to settle at N1.062 trillion compared with the preceding day’s N1.055 trillion and the NASD Unlisted Security Index (NSI) gained 19.66 points to wrap the session at 3,032.16 points compared with 3,012.50 points recorded in the previous session.

Yesterday, the volume of securities traded by investors increased by 171.6 per cent to 1.2 million units from the 447,905 units recorded a day earlier, but the value of shares traded by the market participants declined by 19.3 per cent to N2.4 million from the N3.02 million achieved a day earlier, and the number of deals went down by 14.3 per cent to 18 deals from 21 deals.

At the close of business, Geo-Fluids Plc was the most active stock by volume on a year-to-date basis with a turnover of 1.7 billion units worth N3.9 billion, followed by Okitipupa Plc with the sale of 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.3 million units sold for N5.3 million.

In the same vein, Aradel Holdings Plc remained the most active stock by value on a year-to-date basis with the sale of 108.7 million units for N89.2 billion, trailed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with a turnover of 297.3 million units worth N5.3 billion.

Economy

Naira Trades N1,533/$1 at Official Market, N1,650/$1 at Parallel Market

Published

10 hours ago

14/12/2024

Adedapo Adesanya

By Adedapo Adesanya

The Naira appreciated further against the United States Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) by N1.50 or 0.09 per cent to close at N1,533.00/$1 on Friday, December 13 versus the N1,534.50/$1 it was transacted on Thursday.

The local currency has continued to benefit from the Electronic Foreign Exchange Matching System (EFEMS) introduced by the Central Bank of Nigeria (CBN) this month.

The implementation of the forex system comes with diverse implications for all segments of the financial markets that deal with FX, including the rebound in the value of the Naira across markets.

The system instantly reflects data on all FX transactions conducted in the interbank market and approved by the CBN.

Market analysts say the publication of real-time prices and buy-sell orders data from this system has lent support to the Naira in the official market and tackled speculation.

In the official market yesterday, the domestic currency improved its value against the Pound Sterling by N12.58 to wrap the session at N1,942.19/£1 compared with the previous day’s N1,954.77/£1 and against the Euro, it gained N2.44 to close at N1,612.85/€1 versus Thursday’s closing price of N1,610.41/€1.

At the black market, the Nigerian Naira appreciated against the greenback on Friday by N30 to sell for N1,650/$1 compared with the preceding session’s value of N1,680/$1.

Meanwhile, the cryptocurrency market was largely positive as investors banked on recent signals, including fresh support from US President-elect, Mr Donald Trump, as well as interest rate cuts by the European Central Bank (ECB).

Ripple (XRP) added 7.3 per cent to sell at $2.49, Binance Coin (BNB) rose by 3.5 per cent to $728.28, Cardano (ADA) expanded by 2.4 per cent to trade at $1.11, Litecoin (LTC) increased by 2.3 per cent to $122.56, Bitcoin (BTC) gained 1.9 per cent to settle at $101,766.17, Dogecoin (DOGE) jumped by 1.2 per cent to $0.4064, Solana (SOL) soared by 0.7 per cent to $226.15 and Ethereum (ETH) advanced by 0.6 per cent to $3,925.35, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.