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Investors pull back from Mutual Funds



Volume of transactions in mutual funds, otherwise known as Collective Investment Scheme (CIS), dropped by 12.2 percent in 2021.

Specifically, investors’ commitment in the asset class fell to N1.3 trillion from N1.49 trillion in the previous year, 2020.

On a Year-to-Date (YtD) basis, the investment in the asset class also fell by 12.8 per cent from N1.49 trillion in January, 2021, reflecting increased investors’ apathy towards mutual funds.

Breakdown of performance in the different classes of the CIS showed that Bonds Funds outperformed the Equity-based Funds and the Money Market Funds. The Bonds Funds recorded the highest patronage with 12.6 percent Year-on-Year (Y/Y) growth in asset value to N534.14 billion from N474.30 billion a year ago.

Money Market Funds fell 25.1 percent to N536.39 billion from N743 billion, while Equity-based Funds declined by 7.2 percent to N28.34 billion from N30.54 billion in the previous year.

Financial experts attributed the development to low rate of returns recorded in some of the Funds as well as lack of understanding of the benefits by retail investors.

Consequently, sector operators have called for more awareness campaign on the part of the regulators and the fund managers in order to acquaint investors with the benefits while assuring them of safety and better regulatory environment.

They further emphasised the need for a downward review of the minimum entry fund in order to give opportunity for more retail investors to subscribe to the funds.

According to them, the introduction of fee structure where the SEC announced annual supervisory fees of 0.2 per cent on the Net Asset Value (NAV) of the CIS would further weigh badly on the performance of the funds.

Dealers’ comments

Commenting, Ola Oladele, Senior Vice President, Global Market, Parthian Partners, said that two major reasons are responsible for the lack-luster performance of the mutual funds.

She attributed the decline to lack of awareness/understanding of the benefits of funds and how they work as well as the low returns on the funds. “So, even investors that know of them are not interested given the high inflationary environment,” she further explained.

To improve attractiveness, Oladele said that investor education on the advantages of the Funds over individual retail assets needs to increase.

She stated: “Asset managers also need to improve on their skill in asset selection so that fund performance can improve. The moment people feel they can do better by investing themselves than investing in a Fund, it is less likely that they’ll opt for Funds.”

Also speaking, David Adonri, Vice Chairman, Highcap Securities, said: “Low patronage of CIS by investors may be due to low investors’ confidence in them because of past events that left sour taste in their mouths. Several CIS failed in the past before recent introduction of strict rules by the Securities and Exchange Commission (SEC). Stanbic IBTC Asset Management led the new wave of CIS and many banking institutions have also keyed in.

‘‘However, it will take more time to restore investors’ confidence once more in the scheme.

“Secondly, the number of retail investors in the capital market has generally dwindled after the calamity of the global meltdown. Consequently, the target market for the scheme has declined considerably.”

Continuing, he said: “To reawaken the interest of investors in CIS will require showing them that CIS are more capable of meeting the differentiated goals of investors. There must be a value proposition that is stimulating.

“Further enlightenment of retail investors is necessary to sell the benefits to them and also assure them that the space is now better regulated leaving no room for schemes to fail.”

In his own views, Patrick Ajudua, National Chairman, New Dimension Shareholders, said: “The low appetite for CIS by investors is because of its aggregate low yield when compared to returns on other high yield investment classes. As a result, most investors prefer to make their individual investment decisions with their market advisers rather than subscribe to CIS.”

He called for a downward review of the minimum entry amount in order to give opportunity for more retail investors to embrace the scheme.

Moses Ayodele Ogundeji, a member of Independent Shareholders Association of Nigeria (ISAN), also attributed the decline to lack of confidence on the part of the would-be investors, saying that many investors are a bit cautious not to be caught in the election aftermath.

He said: “Government policy somersault is another factor. For investors, the safety of their investment is paramount. More sensitisation needs to be done; there should be confidence building campaign and investors should be assured that their investment is safe under the scheme.”


Going forward, analysts at Afrinvest Securities said that the introduction of new fee structure in collective investment scheme by the SEC late last year would likely impact negatively on the performance of funds.

They said: “The SEC had on December 27, 2021, introduced annual supervisory fees of 0.2 per cent of the Net Asset Value (NAV) of Collective Investment Schemes (CIS) to be computed and accrued daily for each CIS. For Fund/Portfolio managers, SEC mandated an annual regulatory fee of 0.25 per cent of the NAV of all discretionary and nondiscretionary funds/portfolios (other than CIS) under the management for retail investors and 0.01 per cent for qualified investors.

“The new fee structures would somewhat weigh on the volume of secondary market transactions, and the additional cost would likely trigger market participants to demand higher yields to keep transactions attractive.”

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US stocks suffer biggest daily drop in almost two years



US stocks posted the biggest daily drop in almost two years as investors assess the impact of higher prices on earnings and prospects for monetary policy tightening on economic growth. The dollar and Treasuries gained amid a pickup in haven bids.

The selloff sent the S&P 500 down 4%, with the plunge in consumer shares surpassing 6%. Target Corp. tumbled more than 20% in its worst rout since 1987, after trimming its profit forecast due to a surge in costs. Shares of retailers from Walmart Inc. to Macy’s Inc. were caught in the downdraft. The Nasdaq 100 fell the most among major benchmarks, dropping more than 5% as growth-related tech stocks sank. Megacaps Apple Inc. and Inc. slid at least 5%.

Treasuries rose across the board, sending the 10- and 30-year Treasury yields down as much as 11 basis points. The dollar rose against all of its Group-of-10 counterparts, except the yen and Swiss franc. Gold caught bids in the move into havens.

The benchmark S&P 500 is emerging from the longest weekly slump since 2011, but any rebounds in risk sentiment are proving fragile amid tightening monetary settings, Russia’s war in Ukraine and China’s Covid lockdowns.

In some of his most hawkish remarks to date, Federal Reserve Chair Jerome Powell said Tuesday that the US central bank will raise interest rates until there is “clear and convincing” evidence that inflation is in retreat. Chicago Fed President Charles Evans said Wednesday he sees a half-point rate increase at next month’s meeting and “probably thereafter.”

In Europe, new-vehicle sales shrank for a 10th month in a row as the industry remains mired in supply-chain crises, while euro-area inflation plateaued at a record high. Meanwhile, UK inflation rose to its highest level since Margaret Thatcher was prime minister 40 years ago, adding to pressure for action from the government and central bank.

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Netflix lays off 150 employees due to slow revenue growth and business needs



Netflix is reportedly laying off nearly 150 employees in the coming days due to disappointing earnings and slow revenue growth.

According to a Variety report, the Amazon Prime Video rival might also terminate its contract with contractual contributors.

The layoffs are about 2 per cent of Netflix’s US workforce. “As we explained [in reporting Q1] earnings, our slowing revenue growth means we are also having to slow our cost growth as a company. So sadly, we are letting around 150 employees go today, mostly U.S.-based,” a Netflix spokesperson said.

The statement further revealed that the decision was primarily driven by business needs rather than individual performance. Netflix reported $7.87 billion in Q1, which was short of Wall Street’s estimates of $7.93 billion.

The report further reveals that nearly 70 part-time employees in Netflix’s animation studio will have to pack up and leave. A report by The Verge stated that about 26 contractors working on Netflix’s fan-focused Tudum website might see a termination.

“A number of agency contractors have also been impacted by the news announced this morning. We are grateful for their contributions to Netflix,” the company said.

Netflix, in its recent earnings call, revealed that it lost thousands of subscribers, which is a first for the company in over a decade.

The company expects to lose an additional 2 million in the next quarter due to the ongoing war between Russia and Ukraine. Netflix has shut shop in Russia following the country’s invasion of Ukraine.

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Dollar breaks N600/$ ceiling ahead of party’s presidential primaries



Less than two weeks to the presidential primaries of the political parties ahead of the 2023 elections, the US dollar has broken the N600/$ mark at the parallel market and set the tone for a possible uptick in the coming days.

The black market rate had traded between N570/$ and N590/$ since the beginning of the year while the Central bank of Nigeria (CBN)’s intervention at the Nigerian Autonomous Foreign Exchange (NAFEX) has kept its rate under N420/$.

With the latest slump of the naira, the arbitrage between the parallel and NAFEX, which is regarded as the official window, is now inching close to N200/$. The spread measures the deviation of the controlled official rate from the real rate of exchange, with experts calling for liberalisation of the market to enable naira to find its true value.

The World Bank and the International Monetary Fund (IMF) have also warned of the repercussions of sustaining an artificially high naira while calling on the CBN to embark on market reform.

But the CBN has maintained that Nigeria, with the current high level of importation and underperformance of the industrial sector, cannot afford to float the naira completely as the exchange rate could spill out of control.

At the Lagos street market, yesterday, naira traded between N595/$ and N600/$ band. With the presidential primaries of the two leading political parties scheduled for Abuja next weekend, there is an expectation the demand pressure has not peaked, suggesting that naira is in for a protracted pressure.

At peer-to-peer (P2P) trading platforms, the dollar has been trading above N600 in the past three weeks, which had signaled that the black market rate could break through the psychological ceiling.

With that eventually happening, naira could be on a renewed free fall.

But there is also hope that it is a season to offload warehoused hard currencies for political campaigns to possibly shore up supply.

Experts are not sure where rising demand and supply of foreign exchange would lead the naira to, but the interplay between the movements of the two variables is a key factor in predicting the value of the naira in the tense political season. Godwin Owoh, a professor of applied economics, advised Nigerians to prepare for a steeper fall of the local currency, saying partisan politics and intra-party meetings, which are highly dollarised would bring much pressure to bear.

The CBN has promised to continue to protect the naira but its ability could be constrained by the equally falling reserve. For the first time in eight months, the gross reserves dropped below N39 billion on Monday, when CBN data put the figures at N38.92 billion. Effectively, the country’s reserves have depleted by $160 billion year-to-date.

Bismarck Rewane, an economist, had projected the reserve to collapse to $32 billion in the year as he expected the CBN to spend $8 to $10 billion defending the naira, which is taking much pressure from excessive importation.

The value of Nigeria’s imports increased by 64 per cent last year to N20.84 trillion. Sadly, the value of exports increased at a slower rate – 51 per cent – to N18. 91 trillion in the same period. The falling reserves and rising imports have put the apex bank in dire straits in its efforts to continue to defend the naira.

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