The saying that investment in knowledge pays the best interest is correct, depending on your view on investment and what knowledge is. Let us not be tempted to box knowledge to the four walls of a classroom. For this article, we shall take Merriam-Webster’s definition of knowledge as an acquaintance with or understanding of science, art, or technique. On the other hand, it defines investment as the outlay of money, usually for income or profit (interest).
People who invest money do so with the hope of having interest based on their knowledge of how the company is performing. So, a person can decide to pump in funds or play safe with money while investing in a business, depending on how many risks they can take. You may call it a gamble, but successful investing is about managing risks and not avoiding them. The higher the investment, the loftier the risk of losing everything or the chances of having huge returns.
One of the best places to invest is the stock market- where shares of publicly held companies in a country are traded daily on official market days. Such stocks are open to both local and foreign investors. In Nigeria, investors buy stocks in the capital market through a brokerage or an asset management company (AMC). An AMC (also referred to as a money manager) invests a pooled fund of capital on behalf of clients, usually to fund different investments in various asset classes through a brokerage account. They also help clients to invest in foreign stock markets.
When using a traditional AMC to invest locally or internationally, the process is usually tedious. It would require some paperwork and physical presence (sometimes). That has discouraged people from following through with investing in the stock markets. Therefore, the need to grow wealth has forced people who lack the patience for AMCs to set up businesses they could not run or invest in companies they could not track.
But technology is changing the narrative as fintech startups provide flexible investment solutions with a click. Some of the fintech startups are enabling more Nigerians to own dollar investments in US real estate, stocks, and Eurobonds via their smartphones. Their rise has cut the long tiring processes people once endured with asset management companies.
Although some of these traditional asset managers like Cardinalstone (CS Alpha app) and Meristem Capital Ltd (MeriTrade app) now have mobile apps. Some of these apps are still not as flexible as fintech investment apps. The last time I tried investing through one of the AMC apps, it felt stiff. Needless to say that I abandoned it after 30 minutes of wasted effort. But with the fintech apps, within 5 minutes, I was through signing up and still had time to take a tour.
These fintech startups now make it easy for people to invest in foreign companies, especially in the US stock market. It is quite simple for people to get started. Steps such as: creating an account, choosing the account type and completing verifications are all people need to do. These apps easily convert local currencies to US dollars through inbuilt wallets. People can also start investing for as low as $5. Best of all, people can see the performance of their investments in real time and can decide to withdraw an investment whenever they like. These offerings are luring people to start investing in the US stock markets.
Recently, Bamboo, a Nigerian-based fintech company which allows people to invest in US exchange, more than doubled its users from 200,000 to over 500,000 between 2021 and 2022. The fintech raised $15 million in January during a pre-seed round and expanded to Ghana in September. While people find it tasking to invest through traditional asset managers, more people now trust fintech with investments. That signifies that the adoption rate is gradually increasing.
Nigeria has over 200 active fintech startups and the largest fintech ecosystem in Africa. While some serve as payment gateways and loan and banking apps, some help with dollar investments. Those who use these investment apps to trade in the US stock market may have better returns since the naira keeps crashing against the dollar. While they make gains and contribute to the US economy, the Nigerian stock market would lose investors to foreign stock markets as the dwindling naira discourage participation.
