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Sunday, 19 January 2020 06:36

Nigerians buying American assets, stocks - Report

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Financial technology, (fintech) start-ups are helping a generation of young Nigerians to invest in American stocks and assets easier than ever before.

These fintech platforms, according to a report by Quartz Africa Weekly Brief, are the rave across African technology ecosystems but the sector has become increasingly defined by payments specialists. This is somewhat unsurprising given how global payments giants have fueled interest by investing hundreds of millions of dollars.

But beyond payments and digital banks, there’s a growing crop of “wealthtech” or wealth management start-ups offering investment opportunities to willing users in Nigeria, the Quartz Africa Weekly Brief report revealed.

After starting Rise informally as an investment club among friends, Eleanya Eke chose to formalize operations as a fund management company given the scale of interest.  The club of Nigerian professionals had teamed together to buy and flip or rent residential property in the United States but as the group grew, demand rapidly evolved. “We first started with U.S real estate but a lot more people were interested in US stocks. All of that informed our move as there’s a really strong demand for it—especially among the internet-connected crowd.” Now in beta phase, Eke says Rise already has over 1,000 users.

Despite strong latent interest, the lack of know-how and on-boarding requirements for U.S brokerage firms represented barriers that restricted potential standalone middle-class investors. That was the driving factor for Richmond Bassey and Yanmo Omorogbe, co-founders of Bamboo, an investment app that now allows Nigerian users buy and trade US equities. Bamboo has garnered over 10,000 Nigerian users since launching in October.

Bassey says the company helps users scale the hurdles of on-boarding by partnering with trusted brokerage firms in the U.S and carrying out the data and identity verification requirements on the Nigerian end. Among other things, the platform requires users to register with a Bank Verification Number, a mandatory unique ID issued by Nigeria’s financial authorities to every customer with a bank account. Bamboo’s founders say while they have started with U.S equities due to most investor interest there are also plans to offer stock options from other countries in the future.

The growing use of wealthtech platforms also signal a wider shift in investment culture among younger Nigerians, who are increasingly looking beyond traditional models of saving. Locally, wealth management apps like PiggyBank and Cowrywise, which allow users automate savings in naira have also become popular by also offering savings and investment options with interest rates much higher than what traditional banks offer.

Eke admits younger users hold extra appeal for business: “Young Nigerians are a major opportunity,” he says. “Consider the fact that they’re starting their careers and they have the longest investment horizon because they are looking to build a significant nest egg overtime.”

The opportunity to invest in U.S stocks and assets provides a viable alternative for younger Nigerians, who are largely apathetic about investing in the Nigerian Stock Exchange due to a number of factors. This includes the perception that, with institutional investors dominant, the most valuable assets on the exchange remain out of reach or that the market is rigged in favour of insiders.

“Young people don’t have a lot of faith in the Nigerian Stock Exchange but still need to invest somewhere,” Eke says. “They know companies like Facebook, Twitter and Tesla because they use their products but they should be able to buy and invest in them as well.”

 

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