Digitally accessed mutual funds drive economic inclusion and domestic investment

Accessing Nigeria’s capital markets has never been easier or simpler. Today, Nigeria’s investment industry offers a broader range of products, enabling an ever younger and less affluent segment to invest affordable sums online, via solutions that, today, can be accessed from a hand-held phone. 

In the past, those Nigerians with sufficient capital to invest simply opened basic deposit accounts which reflected the performance of high-yielding treasury bills underwritten by the Nigeria Deposit Insurance Corporation (NDIC). Then, 18 years ago, mandatory employer-provided pension fund schemes, managed by professional pension fund administrators, began attracting a larger share of domestic investment as employees began allocating funds to retirement savings accounts. Today, Nigeria’s retirement savings industry is worth N13.4 trillion, in an economy with an annual government budget in the region of N17.3 trillion. 

The massive growth of the pension fund industry in recent years points to the volume of savings available in the Nigerian economy. This also highlights an even greater potential for growth should more Nigerians gain access to a broader range of tools with which to access the country’s capital markets.

Certainly, the country’s experience with pension funds, has developed a much more favourable attitude to investing in general, and towards investment funds. Today, many more Nigerians, witnessing the growth of their retirement savings, believe it makes sense to allocate additional discretionary cash to mutual funds. 

With mutual funds now more likely to outperform basic deposits, the independent fund industry in Nigeria has grown by 30% in the last five years alone, currently accounting for N1.5 trillion in investments. While this is still relatively small compared to the retirement fund industry, these numbers demonstrate the potential for growth. 

All that is lacking to drive even greater participation by ordinary Nigerians in the country’s capital markets are more products and solutions – and ever-more easy online ways of accessing them. 

To this end, Coronation Asset Management has already brought four exciting funds to market:

• Coronation Money Market Fund
• Coronation Balanced Fund
• Coronation Fixed Income Fund
• Coronation Fixed Income Dollar Fund

These existing funds will very soon be augmented by its new Multi-Asset US Dollar, High Net Worth Fixed Income, and Infrastructure funds.  

Unlike the equity-focused NGX Exchange which has traditionally attracted an older more affluent set of investors, steeped in a history and deep knowledge of equity investment, Coronation Asset Management’s mix of accessible, easily understood and transparently managed funds, provides a much younger, less affluent, segment of Nigerians with access to Global Investment Performance Standards (GIPS)-approved funds.

It is important to emphasise that receiving GIPS approval in Nigeria is no small achievement. GIPS approval means that funds are managed in accordance with global best practice. This is particularly assuring for first-time investors who may not understand the complexities of investing but need to be certain that their investments will be managed in a professional and accountable manner, in accordance with global best practice and full client oversight.  

One of the great things about Nigeria’s capital market today is the proliferation of web-based mutual funds. Platforms are opening the Country’s capital market to younger and more digitally literate customers. 

The proliferation of these platforms and the funds that they offer, while not all created equally nor managed to the same global standards of professionalism or transparency, are nonetheless opening Nigeria’s capital markets to a broader segment of investors than ever before. 

In short, leveraging digital technology and global best practices in fund management to make far more funds available for greater investment in a much broader range of industries and sectors is increasing the opportunity and capital growth potential for all.