The Chief Executive Officer of SFS Capital Limited, a leading investment management firm in Nigeria, Mr. Patrick Ilodianya, in this exclusive interview with newsmen speaks about the investment climate in Nigeria and why many Nigerians are prone to investing in Ponzi schemes.
He also shares insights on why fixed income is one of the best investment options for Nigerians this time. Excerpts:
Having been serving high net worth investors for years, you recently opened your business to retail investors, what has been the response from the retail market?
Usually, when there’s a lot of uncertainty, it is the best time to reduce the risk to your portfolio. Because if your portfolio is exposed to the vagaries of the economic environment, monetary policy, and all that, and there’s so much uncertainty it is always better to move towards investments that have a limited reaction to uncertainty.
Nigerians Are Gamblers By Nature, That’s Why They Fall For Ponzi Schemes – Patrick Ilodianya, CEO SFS Capital
So, for instance, if you’re tracking what’s happening, equities globally have been dropping even cryptocurrencies have been losing value. And that’s because of the uncertainty globally.
And so far, so good, there’s nothing that says that the uncertainty, globally and locally is going to reduce. The Russia-Ukraine issue is still there. The China-Taiwan issue is coming up gradually. The Iran issue is still there and those are major headwinds. So, there is nothing that says that uncertainty is going to reduce.
In fact, on the other side, inflation is increasing aggressively. The UK recently released its inflation, which was over 10%. And usually, what happens when inflation increases is that people start increasing interest rates. I’m sure in the last three years, almost all central banks including Ghana, UK, US have increased their interest rates. So, interest rates is becoming a more secure play because they’re fighting inflation. If interest rates are now more attractive, then you’re probably better off allocating a larger portion of your portfolio to something less risky because we’re not sure of what will happen next.
For instance, in cryptocurrencies, Nigerians are probably the largest players in that industry. And there’s a lot of uncertainty in Nigeria also with regards to the elections and the insecurity.
So, right now, until Nigeria crosses over to 2023, and everything becomes clear, it is better to err on the side of caution and just make investments in more predictable areas, like fixed income for now.