The bearish trend that is being witnessed in the Nigerian Equity market is a reflection of Nigeria’s current economic woes, as weak growth has dragged the Federal Government’s economic plan into great uncertainty.
With the devaluation of the naira and a looming recession, many young Nigerians are following in the footsteps of Africa’s richest man, Aliko Dangote who announced earlier this year that he plans to diversify his wealth and invest more in advanced economies like America.
Dangote’s plan is aimed at hedging against naira’s volatility and inflation. The dangers of the effects of inflation strengthen the attraction of foreign-denominated assets as a better option for storing wealth and value. More so, investing in foreign stocks and other financial assets provides a viable choice for many Nigerians who are largely discouraged about investing in the Nigerian equities market due to several reasons.
There is also the perception that meaningful investment in value stocks on the NSE is exclusively reserved for the elite and super-rich. In other words, big money investors make up a large chunk of the Nigerian bourse.
Also, certain Nigerian stocks are not readily available for sale, based on the fact that they are not liquid, although listed on the Nigerian Stock Exchange.
On the other hand, most foreign stock markets have engaging success stories of young entrepreneurs like Google’s Larry Page, Tesla’s Elon Musk, and Facebook’s Mark Zuckerberg. There are also trusted and stable global blue-chip names like JP Morgan Chase, and Pepsi.
The Nigerian equities market has a market capitalization of less than $70 billion. Interestingly, Apple (which manufactures iPhone and is America’s most capitalised stock), is about 20 times more capitalised and more dynamic than the entire NSE. This shows that stocks in advanced economies are more liquid and transparently available.
The United States does not have any law prohibiting foreigners from investing in US markets. Therefore, that is not a concern. Also, most American companies do not produce paper stock certificates. Administration costs have reduced the number of companies providing stock certificates. Therefore, most stock ownerships are proven digitally as the related institutions (brokerage firms, transfer agents and so on) are required to keep records.
In view of the foregoing, a few Nigerian startups are now making it easier for many Nigerians to access foreign equity markets. Nigerians can now access top world brands like Coca-Cola, Pepsi, Twitter, Facebook, Amazon, General Electric, Exxon Mobil and so on, just by using their smartphones.
These Nigerian fintech startups offering such brokerage services include:
Bamboo: It is an investment platform that gives Africans real-time access to invest in or trade over 3,500 stocks listed on the American and Nigerian exchanges right from their smartphones or personal computer. In partnership with US-based Drive Wealth LLC, Bamboo provides seamless, secure access to US and Nigerian securities. The minimum balance for Bamboo accounts is $20 (N7, 600) which is charged on deposits based on payment method.
Chaka.ng: Led by Tosin Osinbodu, the company provides top-class access to stocks listed on the Nigerian and American stock exchange. The online trading platform offers access to investment in assets listed on Nigerian and American Stock Exchanges as well as global top brands from over 40 countries. Chaka partners with Citi investment capital. The minimum opening balance for Chaka.ng is about $10 (N3800). It offers zero transaction charges and wire transfer fees.
Trove: Founded in 2018, Trove allows young Nigerians to trade the Chinese, American and local securities through your mobile phone by downloading its app. Trove also has partnerships with Drive Wealth LLC and Sigma Securities, a Nigerian based company; this allows access to securities in local and international markets.
Trove users have the choice to buy fractional shares, rather than full shares, in firms which can cost thousands of dollars to buy like in the case of Google trading at a price of $1,206 (N458 280).
Rise: Eleanya Ekev, Bosun Olarenwaju, Mayowa Dami Lawal, and Anthony Odib are determined to help you get the best dollar-denominated returns from safe high-performing dollar investments. Rise holds its clients’ investments through its cooperative license. Foreign investments are held through third party partnerships with regulated entities in their perspective jurisdiction. Its minimum opening balance stands at about $10 (N3,800) it offers no transaction fees except for withdrawal charges.