In the past, those Nigerians with sufficient capital to invest simply opened basic deposit accounts which reflected the performance of high-yielding treasury bills underwritten by the Nigeria Deposit Insurance Corporation (NDIC).
Some invested in the capital market, buying shares with a portion of their capital, buying properties and putting the larger chunk in fixed deposit in the banks. However, the collapse of the banking industry had taught many not to put most of their eggs in one basket.
Then, 18 years ago, mandatory employer-provided pension fund schemes, managed by professional pension fund administrators, began attracting a larger share of domestic investment as employees began allocating funds to retirement savings accounts. Today, Nigeria’s retirement savings industry is worth N13.4 trillion, in an economy with an annual government budget in the region of N17.3 trillion.
The massive growth of the pension fund industry in recent years points to the volume of savings available in the Nigerian economy. This also highlights an even greater potential for growth should more Nigerians gain access to a broader range of tools with which to access the country’s capital markets.
Certainly, the country’s experience with pension funds, has developed a much more favourable attitude to investing in general, and towards investment funds in particular. Today, there are several instruments available for Nigerians to invest in such that they can spread their risks beyond properties, banking halls and stock market.
Witnessing the growth of their retirement savings, many more Nigerians believe it makes sense to allocate additional discretionary cash to mutual funds. With mutual funds now more likely to outperform basic deposits, the independent fund industry in Nigeria has grown by 30 per cent in the last five years alone, currently accounting for N1.5 trillion in investments. While this is still relatively small compared to the retirement fund industry, these numbers demonstrate the potential for growth.
According to Investopedia, a mutual fund is a financial vehicle that pools assets from shareholders to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund’s assets and attempt to produce capital gains or income for the fund’s investors.
With mutual fund managers taking to technology, they have been able to draw in younger investors with a mix of accessible, easily-understood and transparently managed funds. These platforms are opening the Nigeria’s capital market to younger and more digitally literate customers.
The proliferation of these platforms and the funds that they offer, while not all created equally nor managed to the same global standards of professionalism or transparency, are nonetheless opening Nigeria’s capital markets to a broader segment of investors than ever before.
Investors are also opened up to dollar denominated mutual funds as a means of storing value with some offering up to nine per cent interest rate for investors annually. Asides investment in mutual funds, Federal Government Bonds have proved to be a safer store of value. Whilst the rates are still below inflation rate, analysts argue that it is still a safer place to invest.
The FGN Bond which is meant for institutional investors where minimum investment is N50 million is issued at a range of 13 to 14 per cent interest rate while the Savings Bond which is meant for retail investors with a minimum investment of N5,000 was raised at 11.041 and 12.041 per cents for the two- and three-year papers.
In short, leveraging digital technology and global best practices in fund management to make far more funds available for greater investment in a much broader range of industries and sectors is increasing the opportunity and capital growth potential for all.
Banking Stocks Good To Invest
The stock market can help investors make a lot of money, if they invest knowing the nitty-gritty of the market.
Entering into the fourth quarter (Q4), is a good time for investors to return into the market as most companies on the Nigerian stock market have December as their yearend.
Apart from dividend to the paid to investors, they will also benefit from the capital gain. Right now, the market is volatile with most stocks trading below their price value.
Investors can look at investing in stock stocks like United Bank for Africa (UBA), Guaranty Trust Holding Company (GTCO), Access Holdings, Zenith Bank, Fidelity Bank and Sterling Bank. Despite pressures across most business fronts, the earnings performance of the banking sector remained resilient.
Performance Of Bank Stocks In H1 2022
Wema Bank
Wema Bank ended H1 2022 as the best performing equity, after its share blew through the roof, appreciating by 343.05 per cent, following its share ending June at N3.19 kobo, in contrast to the 72 kobo it started the year with. The demand for Wema Bank shares in the capital market saw the firm’s share hit a 52-week high of N3.85kobo. During the same period, it had traded at 52-week low of 56 kobo.
The interest in Wema Bank’s share resulted into a dramatic growth in the lender’s market capitalisation, which closed H1 at N41.91 billion, far from the N9.25 billion it started January with. This is a gain of N32.65 billion, which helped Wema Bank maintain its spot as the 12th most valuable banking entity in Nigeria, leaving the class of under N10 billion, which it shared with Unity Bank.
Fidelity Bank
After six months of trading, Fidelity Bank outperformed tier-1 lenders in the capital market in H1, as its share rose to N3.42. This is a 34.11 per cent rise when compared to this year’s opening of N2.55. The bullish run cemented Fidelity Bank’s 9th position on the most capitalised banks in the Nigerian bourse, after ending the period at N95.61 billion. Fidelity Bank market capitalisation had gained N21.73 billion within six months, rising from the N73.88 billion it started the first half of the year with.
Ecobank Transnational Incorporated (ETI)
Ecobank shareholders saw their investment in the firm appreciate by 21.83 per cent between January and June 2022, after demands in the stock market triggered an upward trajectory of the share, hitting N10.60, from N8.70. Rising investors’ confidence in Ecobank added N34.86 billion to the financial institution’s market capitalisation, which settled at N194.50 billion, in contrast to the N159.64 billion the lender was valued earlier in the year.
FCMB Group
FCMB was also one of the best performing Bank stocks in the first half of 2022, creating an investment growth of 15.71 per cent for its shareholders, thanks to the share value appreciating to N3.46 after six months. It had begun trading for the year at N2.99, but the cost of FCMB share rose 47 kobo between January to June this year. Following the strong gains in share value, FCMB market capitalisation grew by N9.30 billion to N68.51 billion from N59.21 billion.
Union Bank of Nigeria (UBN)
Union Bank also perform well. Its share had appreciated by 4.23 per cent to sell at N6.15, having traded at N5.90 at the start of this year’s first month. The hike drove the market capitalisation of Union Bank to N179.09 billion, gaining N7.28 billion during the six months period. The market cap was previously N171.81 billion at the start of January.
Nigerian bank’s financial performance on stock returns has been impressive over the years. Increase in earnings per share will attract the investors to the sector. Based on this, the banks’ half year results showed improvement in their profitability which will increase both the net profit margin and return on asset for a better stock return.
