SFS Capital Nigeria Limited CEO Patrick Ilodianya in this interview with TEMITAYO JAIYEOLAexamines how technology has been impacting investment in Nigeria

What What is the state of the investment landscape in Nigeria?

The investment landscape in Nigeria is very interesting and has a lot of potential. However, the upcoming elections are a very large event that would significantly affect the potential of all expected investment returns. However, most investment experts would agree that as long as we have a smooth handover, things are looking very good for the investment landscape. Real estate prices are expected to improve; the naira is expected to appreciate due to the inflow of foreign exchange; and the investment climate is expected to be much more favorable for business. Conversely, developed countries are expected to start facing a recession and this can be a double-edged sword for Nigeria. However, with the possible recession, foreign direct investment in Nigeria is expected to increase provided there is a smooth transition of power to any of the three main candidates.

Investing in Nigeria is generally associated with get-rich-quick schemes. Why do you think this is so? And why do Nigerians always fall for these schemes?

Actually, get-rich-quick schemes are not unique to Nigeria. However, it’s amazing how people always fall for them. Education is a very big challenge in Nigeria, and this is even worse when it comes to investment education. Most people have not received any training on how to identify, evaluate, and execute investments to optimize return and minimize risk. This is extremely important. In the same way you need a doctor for health related treatment; everyone should consult registered investment experts before making any investment decisions. It is important that any investment expert you consult is registered with the Securities and Exchange Commission (SEC) for two reasons. First, the registration procedure with the SEC is extensive and complete. Only technically sound entities would register. Second, if something goes wrong with the investment recommended by the registered expert, you can always report the investment expert to the SEC.

Nigerians need to read a lot about investing and consult registered experts. It is a process similar to your health. Do a lot of reading on the subject and consult a qualified investment expert.

How is the devaluation of the naira affecting investments?

Naira devaluation and inflation are very bad for naira denominated investments. Both evils effectively reduce the return on your investment. However, doing nothing is much worse. As an earning and spending Nigerian naira, it’s better to earn a 20 percent return on investment than have the naira devalue and have it eroded by inflation to earn a 0 percent return and still experience erosion.

Naira devaluation is sometimes positive for some investments like real estate. As the Naira devalues, real estate in Nigeria looks cheaper for foreign investors using currencies. This, in turn, drives up prices in the long run. However, this mainly applies to diaspora Nigerians who do not need to repatriate funds abroad.

The biggest disadvantage of devaluation is that it prevents international investors from investing because devaluation aggressively erodes any gains made when they try to repatriate it. In general, a gain in naira usually results in a loss when converted back to dollars or foreign currency. International investments are normally the largest available source of foreign exchange and investment in infrastructure.

With the naira continuing to fall, how can people profitably invest in the market?

For a Nigerian who earns and spends in naira, it is easier to achieve profitability despite the devaluation of the naira. However, most people prefer dollar-denominated investments like Eurobonds. Otherwise, high-yield naira investments are your best bet to mitigate losses from devaluation.

Crypto investments have gained ground in Nigeria. Many Nigerians are investing in cryptocurrency. Why do you think this is happening?

Cryptocurrency is an exciting innovation supported by blockchain technology. In general, Nigerians are very adventurous and some people believe that it provides a hedge against devaluation. Unfortunately, cryptocurrencies are not regulated. And this is a major problem. Due to the lack of regulation, many people would lose most of their investments in the next few years.

In my opinion, putting money in cryptocurrencies now is not investing; it’s more than gambling. Many things can go wrong. Crypto exchanges basically act like banks, fund managers, and trading exchanges all rolled into one without any regulatory oversight. There will be many problems in the future. I think the enthusiasm would deepen massively. But I also believe that when regulation catches up and regulators are actively involved, the abuses will decrease and the attractiveness will increase.

Technology has transformed the payments landscape, but the investment scene seems to be lagging behind. How can technology boost the investment landscape?

Regulators find it a bit difficult to keep up with Tech. Technology is a double-edged sword. It makes investment easier, but it also makes fraud easier. Most rules and regulations become outdated as technology changes. It is very important that industry players lead regulators forward. Fortunately, the Securities and Exchange Commission has done a great job so far of trying to keep up. For example, the entire stock quoting and trading system has become completely obsolete with technology. However, the system must move slowly to protect all investors.

Technology also makes investing easier. Industry players are encouraged to invest in understanding the advantages and disadvantages of technology. There is really no shortcut. The rise in smartphone usage, mobile app integration and the huge population of young tech-savvy people provide an opportunity to boost the investment landscape in Nigeria.

Your company recently released an app. Can you explain to us what you intend to achieve with it?

The SFS Fund mobile app was a response to technology and how it can make things easier. In 2019, the firm has launched a digitization agenda with the aim of bringing investment closer to our clients. So, we launched the web app and it was well received by new and existing customers. With the new clients, we saw a gap that needed to be closed with Gen-Zs, who are very interested in getting rich but may not be exposed to easy and legitimate products like SFS Fund. Seeing that they are a mobile first generation, it was very important for the company to launch the SFS Fund mobile app. With this, we can provide a financial product that is inclusive for young people and transversal to the needs of different generations. Our hope is that the mobile application will become the reference application for investing. We remain committed to including relevant updates by taking the pulse of our investors in addition to our experience as investment experts. SFS Fund is here to make investing easy and this is more than a slogan to us. It is built into our mission statement as an organization.

The CBN has set a financial inclusion target of 95% by 2024. Do you think this is achievable?

95 percent of financial inclusion can be achieved using technology. The CBN is moving in the right direction with the registration of telecom companies and mobile money agents. Without financial inclusion, investment would be restricted only to the wealthy or those within the financial system. At SFS Capital, we are doing our bit to contribute to this goal of financial inclusion, especially with SFS Fund. In March we launched the Business Shower for women entrepreneurs, an event to celebrate the contribution of women entrepreneurs to our economy. And we intend to further develop the program in 2023. In the second quarter of 2022, we began looking for a campus unit. We intend to visit schools and educate students on personal finance.