Monday, November 22, 2021/4:15 PM / OpED By Sola Oni / Header Image Credit: Fool.com
The concept of the audacity of hope emanated from the keynote address of Barrack Obama at the 2004 Democratic National Congress (DNC) when he was an Illinois Senator and Presidential aspirant. The speech which he delivered in just 20 minutes contains his family background and vision for America. This address shot him to fame when he embarked on his presidential campaign in America. Some of the issues raised in the address formed the fulcrum of his presidential campaign. The ideas became published as his memoir when he emerged as the United States of America president.
IOSCO and World Investors Week (WIW), the Power of Knowledge
This week, investors worldwide are in the mood of World Investors Week (WIW), an annual event initiated by the International Organization of Securities Commissions (IOSCO), a leading global policy forum for securities regulators, to promote Investor Education and protection. Our Securities and Exchange Commission (SEC) is on the governing Council. Therefore, it has directed all the securities markets in Nigeria to celebrate investors this week and symbolically 'Ring the Bell or Beat the Gong,' a euphemism for opening or closing the market. For instance, Pan Atlantic University and Kings College students are scheduled to visit the Lagos Commodities and Futures Exchange (LCFE) to ring the bell today. This is all about exposing students to financial literacy.
The initiative of IOSCO is not new to securities exchanges as they all know the essence of investor education. It is as old as the history of The Nigerian Stock Exchange, which has metamorphosed into NGX after demutualization. The same applies to investor protection. However, it is to the credit of the international body that World Investors Week (WIW) is a wake-up call for the regulators of securities markets to defend market integrity.
Investor Education as the key
As the Spokesman for The Exchange, in 2005, a senior colleague and I were sponsored to the Stockholm Stock Exchange in Europe to participate at the intercontinental Investor Education Forum. Stockholm Exchange was primarily chosen to give us insight into how it was demutualized in 1993, got listed in 2000 and made history as the first securities Exchange to demutualize and list itself globally. Without investors, there is no securities market, and without their trust, the securities market is on the way to extinction. At the core of market regulators' duties is investor protection, while the operators should be preoccupied with creating innovative securities products and services to attract investors. It is settled in financial management that money has no colour, race or creed. It gravitates to wherever it is needed.
The securities market deals in intangible assets and therefore requires the integrity of regulators and operators to build and sustain investor confidence. The market exists to provide a platform that mobilizes funds from surplus economic units and channels to deficit ones. The market is guided by rules and regulations, while the market operators as intermediators. Investor education has widened because of the rapid development in information and communications technology (ICT). It is ironic that worldwide, while many investors have made fortunes through the securities market, others had watched helplessly as their live savings vanished when the market moved against them.
Echoes from the Past, the 2008 Meltdown
The NGX is still contending with the flame of the global meltdown of 2008 as many investors in Nigeria have developed apathy to the market, the consequence of earlier large losses. Some have died in the process, while some stockbrokers have either died or remained at correctional centers to date. Before the meltdown, drivers, mechanics, and other artisans became investment advisers in Nigeria. Many banks coerced their staff to obtain loans to take a position in the securities market. Swindlers who paraded themselves as stockbrokers made a fortune through over-ambitious investors who wanted to become instant millionaires. The market became predominantly short-term, and securities were overpriced. It was a case of vicarious liability for the regulators, operators, and investors. Everyone is guilty. The rest is history.
Learning the Lessons of Investor Week
The substance and essence of this year's World Investors Week are beyond bell ringing or gong beating, but a critical appraisal of how investor education and protection could be more effective. Unarguably, the inclement operating environment in Nigeria, characterized by misalignment of fiscal and monetary policies, sub-optimal utilization of the capital market by all tiers of government, forex scarcity, exchange rate volatility, unfriendly market policies and insecurity which has heightened the country risk, has discouraged many portfolio investors from participating in our market.
But as we celebrate investors, both the regulators and operators should intensify efforts on investor education and protection. The emergence of Millennials and Generation Z demands more creative means of growing retail investors in Nigeria. Market operators at various groups are also investing in investor education. The Exchange's renewed approach towards capacity building for retail investors is commendable. In a population of over 200 million, less than six million retail investors are not comforting.
Protecting Investors on the NGX
The NGX Investor Protection Fund (IPF), its multiple windows for disseminating information to investors, SEC's Complaints Management Framework, the Commission's resolves to sanction market infraction with dispatch, Direct Cash Settlement of transactions, Policy on multiple subscriptions, and efforts at addressing unclaimed dividends challenge amongst others are strategic means of connecting with investors to build trust in the market.
Showing Risk Resilience
An average investor is expected to understand risk and return tradeoff, personal risk profile, fundamentals of asset allocation, portfolio construction and re-balancing, analysis of financial ratios in an annual report, and market timing to deploy technical or fundamental analysis for buy and sell orders. But at the positive level, few investors have the technical knowledge. As part of the key messages of this year's Investor Week, investors should partner with securities dealers for investment advice.
The regulators and operators should harmonize the relationship toward market development. High transaction cost on our market is still a bitter pill for investors to swallow. All efforts towards investor education speak to the future that there is an audacity of hope for investors through the Nigerian financial market. Despite the challenges, the premier securities market, NGX, has been judged topmost in return on investment worldwide in the recent past. The resilient market beacons alpha returns on investment.
Happy World Investors Week to all categories of investors!
Oni, an Integrated Communications Strategist, Chartered Stockbroker and Commodities Broker, wrote in from Gbagada, Lagos