The Chairman, Association of Stockbroking Houses of Nigeria, ASHON, Chief Patrick Ezeagu, in this interview, spoke on the proposed establishment of Lagos Commodity and Futures Exchange (LCFE) in conjunction with the Lagos State Government, investors’ confidence in the stock market and other market activities.
By Peter Egwuatu
WHAT informed ASHON’s decision to float Lagos Commodity and Futures Exchange (LCFE) in conjunction with the Lagos State Government?
An emerging trend is that government is now expanding its scope of diversification in terms of earning foreign exchange from sources other than crude oil. If we are diversifying and they have to go into commodities which have to do with agricultural products as well as solid mineral and gas, it means that there must be a platform where our members can play their intermediation roles in terms of trading on warehouses’ receipts electronically.
The ultimate goal for our members is to be able to push for high turnover in this proposed market. The whole process is all about how we can play our role in the economy and ensure that the economy grows in the manner it is supposed to grow. We must be part of the diversified economy as Nigeria would no longer be dependent on crude oil any longer.
What is ASHON doing in respect of enlightening new investors on how to get access to the stock market?
ASHON is warming up to renew its enlightenment programme which places premium on both the youths and mature people in order to attract more investors into the capital market net. ASHON would soon commence the enlightenment programme tagged ASHON Investor Education in order to meet the yearning demand for market knowledge by the existing and potential investors nationwide.
Source of fund for investment
Every new investor must contact a stockbroking firm, where stockbrokers would conduct a Know Your Client (KYC) in order to ascertain basic information about the investor.
KYC must be extensively conducted in order to ascertain information such as the address of the new investor, form of identification, source of livelihood and source of fund for investment among others.
An investor who has some funds to invest must go through a stockbroking firm. He must approach a stockbroker who shall conduct the KYC which is very fundamental. The stockbroker must carry out investigation to ascertain that the potential investor is a fit and proper person. I must emphasize that because we are very mindful of people using the market for money laundry and all of sorts of illegality.
The next phase is for the person to complete the processes of account opening forms. We shall do the account opening with the clearing house of the Nigerian Stock Exchange, NSE, the Central Securities Clearing System (CSCS) Plc.
The CSCS shall provide an account number for the client and that is the basis upon which we can now buy and sell on behalf of the client. But our purchase or sale order must be based on instruction or agreement with the client.
After the rudiments of KYC and account opening, stockbrokers are interested in an investor’s investment objective in order to know the types of asset classes that would form his portfolio.
Where an investor could not clearly explain his objectives, there is a mechanism through which a stockbroker can design certain questions for the investor in order to ascertain his risk profile and other important investment variables.
What can you say about investor confidence in the stock market at the moment?
Investor confidence in our stock market has been restored as they (foreign investors) have seen a lot of transformation on the Exchange after the meltdown. Also both capital market regulators and operators had been working together to ensure adherence to global best practices in all areas of market operations.
It appears that the youths are not interested in stock market activities, what is ASHON doing to attract youths into the capital?
The youths would be factored into the reviewed programme in order to help them develop investment instinct at a tender age. ASHON’s members are always ready to exhibit highest level of integrity as there are sufficient rules and regulations to address any act of unethical practices by its members.
We want to assure investors to take advantage of relatively cheap prices of stocks on the Exchange to beef up their portfolio as the market fundamentals are very strong while return on investment on the Exchange would continue to be attractive.