April 14 (Lagos) - Last week the CBN directed Banks to stop providing BVN verification to some financial apps in Nigeria who had started offering purchase of foreign shares from Nigeria via registered brokers in USA and other countries.
While desperate Nigerian investors flocked to such websites and apps to quickly invest in the fastest growing companies of the world, they forgot to check whether such services are actually legal in Nigeria. Few years ago it was MMM investing that caught the imagination of Nigerian investors and that ended in sorrow, pain and tears.
While CBN received a lot of flak from investors and stakeholders of such apps, their efforts should be commended to finally put to end to illegal stock trading bordering on stock marketing and money laundering.
Apps like Bamboo, Chaka and others become popular very quickly but it was short lived fame because their basic service is against the laws of the country. Such laws exist in all countries, you cannot just by-pass the legal system to start offering share trading of securities not registered in the domicile country.
In their defense, such apps say they go through a registered broker in USA but how does that prevent outflow of forex from the Nigerian economy. For example when you buy shares of TESLA from Nigeria using Naira, the Naira has to be converted to USD before trade can happen. Who supplies those Dollars ? This is actually a form of money laundering and its shocking that such thoughts they would get away with it.
It is shocking that such apps managed to get so popular and it shows just how desperate the CBN has made Nigerian investors who cannot earn a decent return in Treasury bills, fixed deposits or in the local stock market.
While CBN has clamped down rightly on such apps, this should be a wake up call (one of them) for the CBN leadership to understand the frustration of Nigerian investors who are ready to go to any lengths to get some return on their investment, even if its illegal while most may not be aware that it is illegal.
Easykobo too received proposals to turn into a US stock trading platform, a suggestion that was shot down as soon as it was received, knowing it would be illegal. Those who have known easykobo over the years know that we are here for long term and will never do something against the law. We continue to suffer and smile just like Nigerian investors.
Maybe the CBN will create a separate license for such firms, but will that be fair to the registered stock broking companies of Nigeria who have gone through the pains to be registered and followed due process?
CBN showed that it is serious about upholding laws of Nigeria but it needs to revive the attractiveness in Nigerian asset classes like treasury bills, fixed income and stabilize the Naira and prevent it from falling more and more.
People would never look for illegal apps if they could get a decent return on treasury bills, fixed deposits or savings. CBN needs to fix the underlying problem as well.
reporting for easykobo.com on Tuesday, April 14 2021 from Lagos, Nigeria