A report by the Nigeria Stock Exchange for the month of June, 2017 revealed that retail investors’ participation surpassed that of institutional investors for the first time in the last five months.
According to the report which highlights the domestic composition of transactions on the Exchange between January and June 2017, the institutional composition of the domestic market decreased by 17.09% from N67.95 billion recorded in May to N56.34 billion in June 2017.
Retail Investors are back
More notably, the retail composition increased by 46.92% from N42.47 billion to N62.40 billion within the same period.
This indicates greater participation by retail investors over their institutional counterparts for the first time this year.
This could be considered a laudable development could perhaps be attributed to innovation in the Nigeria Stock Exchange (NSE) in recent times which promotes an increased retail investors’ participation.
Source: NSE June 2017 report
SEC Intervention
However, this renewed retail investors’ confidence in the market could also be linked to the strategies by the Security and Exchange Commission (SEC) to deepen the market by implementing key confidence-building initiatives to encourage the retail investors to invest in Nigerian market.
One of such is the introduction of the e-dividend platform which is a means of posting shareholders dividend directly into his or her bank account.
The SEC launched this platform in May as part of measures to curb the growth of unclaimed dividend in the Nigerian capital market. According to the statement by the Director-General of SEC, Mr. Mounir Gwarzo, about 2.2 million investors registered on the platform as of April which signals the participation of the retail investors in the market.
Effect of Online trading
In addition, there has been series of sensitization about the market in recent times as well as the creation of various online trading platform where retail investor can monitor their portfolio themselves.
The upside to this is that, if this trend continues, that is, increased participation of Nigerian retail investors on the NSE, it would reduce the vulnerability of NSE to foreign capital flights which in most cases affects the economy negatively as witnessed in 2016.
Foreign investors still key
NSE report for June revealed that although, domestic transactions marginally outperformed foreign transactions in 2016, accounting for 55% of the total transaction volume in 2016, foreign transactions have consistently outperformed domestic transactions.
Also, foreign transactions declined by 66.34% from N1, 539b in 2014 to N518b in 2016, representing about 45% of total transactions in 2016.
It showed that over the nine (9) year period, domestic transactions have significantly decreased by 85.43% from N3, 556 billion in 2007 to N634 billion in 2016.
In summary, for the market to witness relative stability and get more depth, regulators and all other stakeholders must work to increase the domestic participation. But then, investors need to be well armed with necessary information that would guide their participation in the market.