‘How improved savings can stimulate stock market investment’
Capital market experts have urged government to promote national savings culture through the provision of appropriate incentives for more patronage by retail investors’ and increased stock market investment.
The stakeholders, who spoke in a chat with The Guardian, attributed part of the current depression in the market to sell down by foreign investors, who account for about 51.57 per cent of market transactions as at January 2016, up from 13 per cent figure witnessed in 2007.
Indeed, they stressed the need to generate more savings within the country through forced or incentivised voluntary measure to substitute foreign capacity
Already, they linked the market growth to improved long term saving, noting that increased savings would accelerate development and bolster the economy.
For instance, the President, Fund Managers Association of Nigeria (FMAN), Ore Sofekun, explained that the level of savings in an economy has a multiplier effect on its investment, adding that long-term savings will spur activities in the primary market segment and accelerate economic growth.
To mobilise long- term savings, Sofekun submitted that government must introduce the right incentives to encourage more people to save on a long-term basis.
According to her, it is desirable for government to seek how to moderate the destabilising influence of foreign portfolio investors in the Nigerian capital market by boosting increased domestic participation in the market.
Furthermore, she explained that the association is working with the Securities and Exchange Commission (SEC) on electronic transfer of funds to boost financial inclusion, as well as boost investors’ confidence and encourage more investment in the market.
The Chief Relationship Officer of Foresight securities and Investment Limited, Charles Fakrogha, explained that if there were no savings, there would be no investment. According to him, Nigerian workers needed to embrace the culture of savings in order to provide more viable exit plans in the face of voluntary or compulsory disengagement.
He added that these savings would be channeled to stock market where the individual can monitor the movement and performance of the stocks and take appropriate investment decision.
“In basic economics, if there is no savings, there will be no investment. So people are encouraged to develop savings habit. Saving should be a habit. If you pay me one million, if I cannot save, if am paid 10 million, I cannot save also.
“ It is a culture that needs to be developed and once it is developed in Nigeria, we will have enough savings and can now channel these savings to investment in the capital market and other areas of the economy.
“We advice professionals and other workers to invest in the stock market where they do not need any body to monitor their investment. They can monitor their investment by themselves.
“If you have a monthly salary of N10,000 and straight for 12 months which is N120,000, you can now invest part of it in blue chip companies in the capital market and it will be beneficial to the economy, to you, as an individual worker and the capital market in general.”
An independent investor, Amaechi Egbo, argued that there was also need for market participant to explore various mechanisms and mobilise savings in order to boost liquidity in the market.
“The market is in a free fall now because there is no liquidity. There is no support for the market again because of illiquidity. There is a need for a proper national savings plan that would enable people put money aside for investment and be sure they will get some kind of incentive that would make them take up that policy. We don’t have good savings culture and we need to develop one.”