Market operators said that the increasing use of stock trading apps in Nigeria is causing investors to be in an ‘activate panic mood’.
The market operators stated this while speaking to Nairametrics, noting that most retail investors using the apps are generally uninformed about how the capital market operates.
The market operators’ concern is despite the important role that the apps play in pooling together investments from local and foreign investors, thus boosting participation in the Nigerian capital market.
The trading apps: A stock trading app is a mobile software application that investors can use on their phones or tablets to connect to their brokers and stock exchanges like the Nigerian Exchange Group. The investing apps allow you to accomplish the same things you would accomplish on a desktop or laptop computer.
- Stock trading apps offer investors access to their trading accounts and the financial markets from the palm of their hand. This is an excellent option for those who prefer to be involved in maintaining their portfolios and making regular investments.
- The exciting news is that fintech startups are bringing investing solutions and apps that encourage micro-investments.
- The apps are great for beginners, and they make it easy for those just starting to invest.
- The apps have made wealth management accessible to anyone with a smartphone, one can kick-start an investment portfolio with as little amount as possible.
- Some of the top fintech apps causing disruption in the Nigerian financial industry and the capital market include Bamboo, Trove, Chaka, and Rise, among others.
What the experts said: The Chief Executive Officer of Wyoming Capital and Partners, Mr Tajudeen Olayinka, told Nairametrics that the apps are meant to lighten the burden of operators and investors to access the market, adding that they have existed for several years in the market.
He, however, noted that the use of the apps by naïve investors has predisposed them to activate panic mood.
- “The use of these apps has made some investors activate their panic mood, sometimes they see that prices of stocks are not doing well, they sell off when there was no need to sell and this will dampen the spirit of the market, just because they don’t have the knowledge of how the market works and they don’t seek brokers advice.
- “Both the downside and upside of using it are almost the same. We keep telling them to get in touch with their brokers if they want to sell rather than activating their panic mood and selling off their shares unnecessarily which they later get discouraged when the market recovers and they lost money. When too many investors activate panic mood it dampens the market and this is seen as a result of uninformed investors”.
Apps bring herd mentality: Also speaking to Nairametrics, the Executive Vice Chairman of Hicap Securities Limited, Mr David Adonri, said the trading apps bring about herd mentality in the capital market. He added that by using the apps, investors can decide when to buy or sell any financial instruments without their brokers’ advice, thereby taking their fate into their own hands. This could come with consequences, he warned.
- “They should be prepared to face the consequences of their decisions,” he said.
But there are benefits: On the benefits of using the apps, Olayinka said it makes the investors buy stocks immediately rather than being delayed by the third party.
- ‘’It just lightens the burden of both parties and makes trading seamless,” he said.
Adonri said the new apps increase the activities of the capital market since investors can take a decision immediately without the involvement of any third party. He noted that the apps have increased the automation of the capital market and reduced human involvement, thereby increasing the efficiency of the capital market in terms of trade execution.
- “They are partners in progress with stockbrokers, they are now even accepted as capital market operators,” he said.
What you should know: Some of Nigeria’s popular FinTech top trading apps include the likes of Trove, Bamboo, Chaka and Rise all of which are very familiar to young Nigerians new to investing. Bamboo is perhaps the most popular with over 1 million downloads on Google Playstore. Trove and Chaka have about 100k followers respectively.
- Traditional stock brokerage firms such as Meritrade, Afrinvest, Lead Trader, Investment One etc also have their apps. But between then, they have barely 110k downloads (MeriTtrade alone has 100k downloads).
- While some of the FinTech apps have achieved widespread adoption among younger Nigerians, the more traditional stockbroking firms appear to prefer traditional forms of facilitating trades to apps. Rather than target retail investor order flow they prefer wholesale orders from institutional investors.
- The current state of the Nigerian equities market appears to favour traditional stock brokerage firms over fintech-based apps. However, the widespread adoption of smartphones means the fintech apps will be the major route into investing for millions of young Nigerians, despite the risks identified by the experts.
