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This was the status quo until recently. The rise of ‘InvestTech’ startups is transforming the investment landscape. These ventures are leveraging technology to provide regular Nigerians with the chance to grow their money with the little they have. The technologies they deploy are helping to bridge the gulf between people and the wealth-generating vehicles. From real estate to agriculture, the money market and Eurobonds, more planes are opening up for the working class. And they’re starting to take advantage of them.
The Joys Of Investing Digitally
There’s no scarcity of digital platforms offering investment products to the general public. Some of them have become household names; several others are growing in this direction. Take PiggyVest for instance. It’s primarily a savings app, but it also serves up low and medium-risk investments to over 2 million users. There’s also Cowrywise, which provides its customers with a diverse selection of mutual funds. We’ve discussed some of the top investment apps in our article, 10 Best Investment Apps In Nigeria Right Now. These apps have proven attractive for at least two reasons. First, they have relatively low entry requirements. Cowrywise has a minimum starting balance of ₦100. Risevest, a platform that provides dollar-denominated investments, requires prospective users to begin with at least $10. There’s also the ease with which people can invest with these startups. Registration processes are typically uncomplicated. And while the quality of user experience may differ across apps, they’re almost always simpler than what you’ll get with traditional investment institutions. “I have had a great experience,” said Oluwatelemi, a Lagos-based lawyer who uses Risevest. “I mean, investing with Rise is pretty straightforward. For example, my withdrawals don’t take time, and they give a nudge when the exchange rate is about to get high.” Another selling point for ventures in this niche is the high returns they promise. It’s not uncommon to see projections of double-digit ROI—something that many financial institutions are unable to guarantee.Find our comprehensive listings of businesses in Nigeria here https://businesses.connectnigeria.com/
It’s Not All Plain Sailing
However, there’s often a lingering question about how these platforms actually work. Uche, a content creator who invested with a crowdfunding company, expressed his doubts about their transparency. “It was for a real estate project,” he explained. “There’s almost no way to verify. As an investor, you basically just put your money in for a length of time and then get paid after it. It felt like it was a gamble. But it’s not something I’ll do again.” Uche’s misgivings hint at a growing problem in the InvestTech space—the rise of dodgy ‘companies’ who pose as investment platforms and scam unsuspecting customers of significant amounts of money. This problem seems particularly rife in the AgriTech investment niche. In the past couple of years, several firms in that arena have failed to pay their investors. While some of these instances may have been caused by the COVID-19 pandemic, a good number of them appear to have been dubious schemes winded down by their orchestrators. It’s partly due to these incidents that regulators have stepped up their interventions in InvestTech. They have been especially active in 2021, clarifying existing laws and introducing new ones. But these interventions may have negatively impacted genuine investment startups as well.Are Regulators Enabling Or Hindering InvestTech?
Back in January, the Securities and Exchange Commission (SEC) ordered companies offering crowdfunding services to register with it. Many firms had to restructure and pivot away from crowdfunding to meet up with the SEC’s rules. In April, the SEC announced that startups delivering investments in foreign stocks not listed in Nigeria were contravening the law. On the surface, this declaration seemed to have struck a fatal blow to startups that provide Nigerians with the opportunity to invest in the US stock market. However, clarifications from the SEC a few days later let these companies off the hook. Investors with these startups were again thrown into a frenzy when, in August, a federal high court granted the CBN’s request to freeze bank accounts belonging to Chaka, Trove, Bamboo, and Risevest. The CBN alleges that they had sourced FOREX for the purchase of foreign stocks and bonds, in contravention of its rules. These events have caused analysts to wonder what the Nigerian authorities’ stance on InvestTech is. Their actions could well be inspired by good intentions (i.e. the need for local companies to remain in line with the country’s laws). But those actions have lit the flame of uncertainty in a space that’s only just beginning to help Nigerians to build wealth.Final Words: What The Future Holds
Despite the hitches and regulatory concerns encountered by investment technology startups, they still have the potential to revolutionize wealth creation. There’s a huge market for what they offer, a market teeming with young people who have high aspirations for themselves. Digital investment vehicles could help them achieve their financial goals. There’s no telling what the future holds for InvestTech in Nigeria. But its founders seem to be upbeat about it. Perhaps they will surmount the hurdles that lie before them, to enable a wealthier Nigeria. We’ll know with time. Featured Image Source: KobolineGot a suggestion? Contact us: editor@connectnigeria.com