Inflation, devaluation push millennials away from stock exchange trading

Despite years of stability of the Nigerian Stock Exchange, many Nigerian youths are diversifying and hedging their investment portfolios from the country’s high inflation and devaluation, through virtual currencies, online bets and international stocks.

The present inflationary trend and currency devaluation compound the woes of many investors in traded equities on the Nigerian stock market, as many shares are currently selling at the lowest possible value.

The exact definition of a millennial does not exist but vaguely, it refers to a person born between 1980 and 1990s. Yet, regardless of the precise definition, these are people who are now in their mid-lives.

Based on the foregoing, Vice President of Highcap Securities, Imafidon Adonri, said it has become imperative for traditional investment opportunities to be made more attractive for young investors. He pointed out that if the interests accruable to investments were increased, it would definitely encourage millennials to consider buying shares, treasury bills and other investment instruments in the nation’s capital market.

He, therefore, urged the authorities to work towards ensuring that investor confidence is guaranteed by addressing current macroeconomic concerns, promoting issues of national development, tackling prevailing stock market volatility and restoring the market to sustainable rebound.

According to him, young investors who have once seen their parents incur losses in the market may never invest their money in the same loss-making venture.

During the 2008-2009 global financial crisis, millennials were young but mature enough to experience what the stock market crash could mean for their future. Just over a decade ago, countless people lost their jobs, houses, savings and were left homeless.

Millennials remember the entire crisis, as well as its aftermath and the blame that stocks had in it. Erasing these from memory is not easy and millennials who are already struggling to find decent employment and competitive salaries cannot be asked to risk their savings. After the crash, millennials have become focused on their immediate needs.

Adonri said due to the high level of financial illiteracy in Nigeria and the penchant of youths for internet addiction, it was not difficult for cryptocurrency ventures to penetrate in Nigeria. He pointed out that Nigerians also have an unusually high appetite for taking risks with their ‘get rich quick attitude.’

He said Nigerians have repeatedly fallen victim to several fraudulent and pyramidal schemes in the past 30 years, including Forum, Umana Umana, Planwell Watershed, Nospecto and MMM with cryptocurrency as the reigning defrauding scheme.

He called for a conscious effort to attract the ‘displaced millennials’ to the capital market where their fortunes are better assured, secured and preserved, adding that strong and decisive regulatory actions from the government are necessary to prevent the exposure of youths to harmful financial schemes.

In the area of awareness, Adonri urged the Chartered Institute of Stockbrokers (CIS) to visit schools to ‘catch’ young investors. He said CIS should also engage the Federal Ministry of Education for the inclusion of capital market studies in school curricula.

Adonri noted that the exchange has a yearly essay programme, which is designed to stimulate students’ interest in capital market investment. “The stock exchange has many outreach programs to enlighten the public on investments. With the migration of capital market transactions to the internet, young people who are addicted to the Internet can easily switch to the capital market.”

However, he argued that these laudable efforts would be meaningless if fraudulent schemes are allowed to proliferate. He also expressed optimism that the youths will be attracted naturally to the capital market if their investment will be profitable, liquid and safe.

An independent investor, Amaechi Egbo, maintained that the market might fall out of relevance and become extinct if urgent steps are not taken to reverse the trend. He blamed youth apathy in stock market activities to various crisis bedeviling the nation’s capital market, ranging from the 2007/2008 global financial crisis, the over N700 billion trapped in private placement scams during the era of stock market boom and the sale of the three nationalised banks as some of the factors that have eroded investors’ confidence in the market.

Available figures showed that millennials prefer other assets such as microfinance banks, FinTech products, Ponzi schemes and cryptocurrencies to stocks. This is in spite of warnings by regulatory authorities that some of these assets do not meet minimum regulatory requirements to qualify as tradable financial assets.

For microfinance banks, they claim interest from this segment is as high as 18 per cent yearly if the deposits are significantly higher and have a long retention rate. The allure for FinTech is also of financial interest to young Nigerians.

In Nigeria, most FinTech-related products are sold to millennials as AgriTech funds or pure peer-to-peer lending. The more esoteric AgriTech funds involve playing in a market that allows one to lend money to farmers in parts of the country one may never visit. They promise significantly higher returns than traditional investment and offer low rates of investment loss.