1. Setting Financial Goals
   - Learn how to define and prioritize your financial goals, from short-term dreams to long-term aspirations.

2. Mindset vs. Knowledge: The Wealth Equation
   - Explore the age-old question: Is wealth primarily a result of mindset or knowledge? Find out the balance between the two for financial success.

3. Achieving Financial Independence
   - Uncover the strategies and principles that can help you achieve financial independence, freeing you from the constraints of financial worries.

4. When to Start Saving for Retirement
   - Understand the importance of early retirement planning and the magic of compound interest.

5. Categories of Savers and Investors
   - Identify where you fit in and how different types of savers and investors approach wealth-building.

6. Risk and Return
   - Navigate the delicate balance between risk and return in various investment options.


Personal Finance

Are you ready to unlock the secrets to financial success and start a journey towards financial independence? Join us in this comprehensive and engaging video course, "Mastering Personal Finance," where we will dive deep into the world of money management, investments, and wealth-building strategies

Personal Finance Masterclass

The movers and shakers of the global economy

Countries are classified into different buckets based on the similarities of their economies. While these classifications are often imperfect, it provides useful information and narrows the countries that investors should pay attention to. 

These classifications usually differentiate country groups across indicators such as development level (using HDI), financial markets depth, level of industrialisation and the nature of economic growth. 

The main groups to focus on include advanced economies (US, UK, Germany, Japan, France etc), emerging economies (Brazil, Russia, India, South Africa, China) and frontier economies (Mexico, Indonesia, Turkey, Nigeria).  

The advanced economies have a high level of development, high and mature industrialisation, strong financial markets and slow, stable and predictable economic growth rates. 

The emerging economies have a moderate level of developing, growing industrialisation driven by labour, strong domestic financial markets and fast but uneven economic growth. 

The frontier economies have low levels of development, emerging industrialisation, weak domestic financial markets and moderate economic growth characterised by regular instability. 

The advanced and emerging markets are the movers and shakers of the world. Given their size and interconnectedness with the world due to their high share of global trade and investment, investors must pay attention to what happens in these economies as they typically have strong impacts on other countries. If the US and China are struggling to grow, it is likely to hurt other economies through their imports. If interest rates are high in Europe and the US, investors are likely to pull out funds from emerging and frontier economies. 

As an investor, while watching markets or companies of interest, also consider their value chain and what is happening in economies that they have strong ties with. 


Drivers of the global economy and markets

The level of development (measured by the
Human Development Index - HDI), depth of banking and financial
markets, capital controls, the rule of law, to mention a few.
If the banking system and financial markets are without depth, then
investing opportunities and sophisticated products will be lacking.
In fact, liquidity and efficiency which is key for investors will be lacking.
A situation where there are capital controls means that it might be
hard to exit your investments outside the country, while a lack of rule
of law means that the interests of investors will not be properly
safeguarded.

Economic resilience, development and freedom

The exchange rate, especially for cross-border transactions, is
extremely important.
The exchange rate is the price of one currency expressed in another
currency. For instance, $1 is sold for N930 in Nigeria in September
2023 - in this case the price of dollar is expressed in Naira and the
inverse can also be done.

When you invest in economies with volatile exchange, rates you must
be prepared to deal with disruptions. You must know what to expect
over time, how to hedge and whether investment opportunities remain
compelling
Even in countries with stable exchange rates, you must know what to
watch out for or what drives the exchange rate

Why the exchange rate matters

Economic growth is important because it captures the
productivity of a country. Economic growth is captured by
the Gross Domestic Product (GDP), which measures
the actual value of final goods and services produced
within a period. GDP is measured in terms of output,
expenditure and income, which must all be equal.

When economic growth is positive, it means that the country is
producing more goods and services compared to an earlier
period. Countries that are growing faster than average or peers,
are good investment destinations. It means businesses are more
likely to be doing well since the economy is healthy.

Economic growth, inflation and interest rates

The external balance, measured in terms of trade or current account
balance, considers the net transactions between a country and other
countries.

The external transactions typically include the import and exports of
goods and services, inflow and outflow of investments, loans and
remittances.

Typically, countries who run a trade surplus, a situation whereby
exports exceed imports, tend to have more stability. A country that
runs a trade deficit but can comfortably attract investments might have
a stable external balance too.

When the external balance is in terrible shape and policymakers are
not taking appropriate steps to stabilise it, you can expect a long
period of instability and potentially poor returns on your investments.

External balance and the economy

Interest rates and asset prices

The valuation of assets, especially assets with cash flows, is essentially about discounting future cash flows to the present.

This borrows from the concept of time value of money, which says that a sum of money today is worth more than the same sum in the future. $1 is better received today than in the future.

When discounting cash flows to the present, the rate of return expected by the investor is the most important. And this return is highly dependent on the level of interest rates.

For investors in the stock market, the Capital Asset Pricing Model (CAPM) provides a framework to think about the returns investors expect. 

The formula is: expected return = risk free rate + beta (equity market premium). What this means is that the returns investors expect is first dependent on the risk-free rate, which is the rate at which the Federal Government borrows. The market premium is the return investors want for investing in equities rather than government bonds, adjusted by the beta which is the risk of the specific company relative to its industry. What this means is that the market premium expected for risky companies will be higher than less risky companies. 

The risk free rate is influenced by the rates determined by the Central Bank of Nigeria. 
How interest rate affects valuation


If you win a promo from Nestle that promises to pay you N1.0m
every year for the next five years, what would you do?

Option A: wait to receive all the promised cash flow in the future as and when due

Option B: cash-out all that money now. But will you get the entire N5m? No!

So, what will you get?

Let’s say because you need to cash-out all that money you are
meant to collect in the future today, you approach a bank for a
deal. How will it work?

The bank has to value the cash flows you are to receive in the future. They do this valuation by doing a present value calculation, derived by discounting the future cash flows by the expected return or interest rate. Recall that the time value of money concept says that $1 or N1 today is worth more $1 or N1 in the future. The present value formula is: future cash flow/(1+interest rate)^no of years in the future

The bank might tell you their interest rate is 20% or even 30%. So how much will the bank give you today for N1m you want to collect every year up till 2027? 

The table below shows the value of the promo if you want to receive all the money today. At 20% interest rate, you get paid N2.99m only for N5m. While at 30% interest rate, you will receive only N2.44m. 



What this tells you as an investor is that the value of any asset you are invested in is related to interest rates. The lower the interest rate, the higher the valuation and vice versa. Hence, always monitor what the Central Banks do, know how it would affect your portfolio and ensure you hedge your investments. 


Interest rates and asset prices

Investment strategy based on macroeconomic indicator

Investment strategy based on macroeconomic indicators

Macroeconomics, the study of the overall economy by
considering the household, businesses and government
sectors. For investing, there are some macroeconomic
indicators that are important.
These include economic growth, inflation, interest rates,
exchange rates, external balance and the overall structure of the
economy.

Why is macroeconomics important for investing?

Macroeconomic indicators and asset allocation
A clear understanding of what drives the asset or economy or company you are invested in matters. Even better is understanding how assets or companies invested in react to macroeconomic data. 

Macroeconomic data enables you to feel the pulse of the economy. In this respect, growth and inflation are two fundamental indicators. We consider these two because other macroeconomic data have a relationship with growth and inflation. For instance, interest rates and unemployment have strong relationships with growth and inflation. When growth is strong, businesses hire more and unemployment is low, while there is no reason to reduce interest rates because inflation risks getting out of control. Meanwhile, when inflation is high, policymakers raise interest rates to bring it down. The relationship between inflation and unemployment is less clear these days because you can have both high and low incidences of both data at the same time. There are useful leading indicators that tell you how inflation and growth is likely to behave, for instance PMI surveys, Sales surveys and consumer expectation surveys. 

When inflation is low and growth is low, bonds tend to do well. Bonds do well in this situation because the expectation for low inflation raises demand for bonds and leads to higher prices. Lower inflation also means potentially lower interest rates, which raises bond prices. Stocks struggle because the economy is weak and companies are unlikely to be doing well in growing earnings. The kind of stocks to thrive in this environment are defensive stocks that have high growth potential - stocks that are resilient enough to maintain high earnings growth but also highly sensitive to interest rate movements.

When inflation is high and growth is low, cash tends to do well. 
This was the global economic environment in 2022, which is a situation called ‘stagflation’. Bonds, real estate and stocks all took a beating as Central Banks raised interest rates to bring down inflation. In this market, cash did well relative to other risky assets. The kind of stocks to hold in this situation are value stocks that are resilient - stocks that are priced fairly (less sensitive to high interest rates) and can maintain earnings momentum in a harsh operating environment. Short-term bonds are ideal in this environment because long-term bonds will suffer significant losses. 

When inflation is high and growth is high, commodities tend to do well.
In fact, high commodity prices tend to be leading indicators for inflation. Also, strong growth means that companies will raise demand for commodities required in their operations, thus implying rising commodity prices. Value stocks that move in line with economic cycles are a fit for this kind of macroeconomic environment - the investor takes advantage of resilient earnings and reduced sensitivity to price changes due to high interest rates.  

When inflation is low and growth is high, stocks tend to do well.
This is the perfect environment for stocks. High growth supports strong earnings and low inflation means low interest rates, which support higher valuation and prices for stocks. The US market between 2010 and early 2021 fits. Growth stocks that tend to be highly sensitive to the economy’s performance are the best investments in this environment. However, typically, almost all stocks with good fundamentals do well in this kind of environment. Real estate also does considerably well as low inflation means low interest rates and high growth means high income, both of which are strong drivers for real estate demand.


Macroeconomic indicators and asset allocation

In this course, you will learn how to analyse economies for the purpose of investing.

We cover the global economy as well as domestic economies, using Nigeria as a case study

We focus on core macroeconomic indicators (such as growth, exchange rate, interest rates, inflation rate etc) and qualitative factors in the economy that are important to investing and how to use them to create an investment strategy under different business cycle scenarios. 

Macroeconomics for Investing

Why prepare for retirement?


We cannot work forever, and at some point, we must take a
break from working. We don’t want to be a burden to society or
family when we retire, hence we prepare ahead.
Our productive years typically fall within the 15-65 age range.
We are typically at the peak of our earning powers in this
interval, which also means it is the best time to prepare for
retirement.

The age range is not strictly defined as people work longer than
65, but it is often not ideal or at least it is better for it not to be
a necessity.

Why prepare for retirement?

Understanding The Nigerian Pension System

Governments all over the world take retirement planning seriously. After all, retirees without assets to live on would eventually become a burden to society. 

To achieve the goal of ensuring that retirees are self-sufficient, governments create policies to guide saving and investing towards retirement. 

The flagship regulation in Nigeria is the Pension Reform Act (PRA, 2004) which was later revised in 2014. The regulator is the National Pension Commission (PENCOM). Prior to 2004, there was no proper regulation, pension planning was dysfunctional and both private and public sector employers did not do right by their employees. 

The PRA requires employers who have more than 5 employees to enroll their staff into the pension system. Employers are to deduct 8% from the employee’s basic, housing and transport salaries and self-contribute 10% of the same base for a total of 18% that must be remitted to the Pension Fund Administrators (PFA) of the employee’s choosing. 

The PFAs manage investments - by deciding on the assets to invest in to generate the best returns - on behalf of employees contributing through the pension scheme. 

To ensure that the PFAs use contributions for what is intended, Pension Fund Custodians (PFC) receive the contributions of employees on behalf of PFAs and act on the instruction of PFAs to settle transactions for investment and other allowed purposes. 

The pension scheme has worked remarkably well over the past 19 years. Contributors have increased to over 10 million and retirement assets are at around N17tn. It is nowhere where it should be given that about 60 million adults are employed, but there is a great structure. 

Retirees also receive their benefits as and when due, unlike what existed prior to 2004 when retirees were at the mercy of their employers. Under the current system, PFAs manage benefit disbursements. 

Recent initiatives in the pension system
The multi-fund structure was introduced in July 2018 to ensure that PFAs take risk commensurate with the age or risk tolerance of the worker.  Prior to that, a 30 year old and 50 year old’s pension assets would have been invested the same way. 

The micro-pension scheme with flexible withdrawal was introduced in March 2019 to serve informal sector workers who wanted to enroll in the pension system if they desired. The legislation guiding the pension system prioritised organisations and staff in the formal sector. 

The transfer window which allows you to switch among PFAs was introduced in 2020. 

A non-interest fund for ethical investors who wanted shariah compliant investing of their pension fund has been introduced. 

Equity for residential mortgages has also been introduced in 2022. This allows a worker to use a maximum of 25% of their pension assets as equity contribution towards residential mortgage. 

How have pension funds been performing?

The downside of the current pension system is that returns are not growing fast enough given that PFAs are only allowed to invest in naira-denominated assets which tend to underperform when we factor in inflation and foreign opportunities for wealth building. 

For workers who are making contributions to their retirement savings account, the main challenge is that the returns earned do not compensate for inflation and exchange rate risks. What this means is that retirement savings is not creating wealth for the worker, since the purchasing power of the investments is weak. 
 
Historically, the returns earned are below the inflation rate, and this has worsened of late. This is unlike the situation in other countries such as South Africa, where workers earn returns above inflation rate. 

The main reason for poor returns in Nigeria is the poor policy environment that has not made investing in Nigeria attractive, and this affects the financial markets. Similarly, PFAs are not allowed to invest contributions outside Nigeria and in markets that offer better returns.


Understanding the Nigerian pension system

Processing benefits under the pension system

https://pencom.gov.ng/wp-content/uploads/2020/09/CPS-Pack-2020.pdf

Processing benefits under the pension system

Pension coverage and performance

We need to estimate how much we need to retire comfortably and how
much to invest on a periodic basis to achieve that goal.
We have created a calculator to help you with that. All you need is to fill
in the inputs that guide the estimation process.
These inputs include your
• current age,
• planned retirement age,
• existing wealth portfolio,
• life expectancy and
• monthly income after tax.

Estimating your retirement needs

Investment risk profiling 

To determine how much risk you can take, you need to first determine the purpose for which you need a strategy. Are you targeting a specific goal (kid’s education, retirement etc) or is it a general investment fund?

Once you decide, you need to consider how much risk you need to take, your ability to take risk and how you react to losses. These three factors were adopted from the investment risk profiling of the CFA institute, which we find to be compelling.

Let’s say you plan to retire in the next five years without any existing investment to support you. Clearly, to create enough wealth to retire in the next five years, you will need to take on a lot of risk. It becomes even more urgent if you are not expecting any support post retirement. 


Investment risk profiling and strategy

This course will prepare you for retirement. We explain the Nigerian pension system and why it is important to plan for retirement. 

We go further to explain how you can estimate your retirement needs, profile your risk and invest for retirement on your own

The Pension system and investing for retirement

The time value of money is a concept in finance that states that a sum
of money is worth more today than in the future.
For simplicity, it means $1 or N1 today, is worth more than $1 or N1 in
the future. Opportunity costs, inflation and uncertainty are reasons why
This is the most powerful concept when it comes to pricing and
valuation in finance, and it has wide applicability to all assets with
cashflows.

It helps businesses and investors make sound financial decisions

Calculating the price and yield to maturity of bonds

Types of fixed income instruments?
In the world of finance, we tend to group fixed-income instruments on the basis of maturity, the issuer, currency denomination, coupon type and credit rating.

The issuers are the institution raising capital. Issuers can be sovereigns (Federal Government), Sub-nationals (States & Local Governments), supranationals (development finance institutions) and corporations

In terms of maturity, you could have short, medium and long-term fixed income instruments. The market for short-term capital raising is the money market while the capital market is for long-term capital raising. 

The fixed income instruments that are short-term include treasury bills, commercial papers and bank placement or fixed deposit. Treasury bills have a maximum maturity of 364 days and are issued by the Federal Government. Commercial papers have a maximum maturity of 270 days and are issued by large, credit-worthy corporations. Bank placements have a maturity of 12 months. 

The long-term fixed income products are called bonds, which are then further named after the issuer. When bonds are issued by the federal government, it is called a sovereign bond. When it is issued by companies, it is called corporate bonds. When it is issued by development financial institutions it is called a supranational bond. 

Some bonds are also different on the basis of the currency of the issue and the goal it is intended to achieve. A eurobond is a bond that is issued in a foreign currency. A climate or green bond is meant to invest in projects protecting the environment. A sukuk bond appeals to islamic and other ethical investors and is created to invest directly in projects and earn rental payments rather than interest. Any of the issuers above can use these bonds to raise money.

You can even classify fixed income instruments according to the quality or credit worthiness of the issuer such as investment grade (good quality) and junk (bad quality). 

Fixed income instruments can be further classified according to the security backing it, the seniority when it comes to who gets paid first, the repayment format, the type of coupons, whether options are included etc. 


The types of fixed income instruments

Understanding the Risk Free Rate

The risk-free rate is the interest rate at which a sovereign issues local debt securities. It is considered risk-free due to the very low chance of default since sovereigns have money printing powers. Federal government securities such as treasury bills and bonds are considered risk-free.

The risk-free rate serves as the benchmark for all other issuers of
securities. Corporate, sub-national, supranational etc. debt securities are priced at a premium to the risk-free rate.

For investors, the risk-free rate serves as the opportunity cost for all
other investments. If you can get 10% on government bonds, it makes no sense to get a lower return on other riskier investments. Investors expect a premium that matches the risk they are taking.

For retail investors, the risk free rate also lets you know how to assess investment opportunities to preserve capital. Ponzi schemes offer ridiculous returns when compared to the risk free rate, implying that you are taking on enormous risk. 


Fixed income risks and the risk-free rate

The mathematics of discounted securities

Short-term fixed income
investments


Investments with tenors or maturity dates that are less
than 1 year at the point of issuance

• Treasury bills
• Commercial papers
• Fixed Deposit

Treasury bills and commercial papers are discounted
securities, meaning you pay less than the face value of the
instrument. Fixed deposit is not.

Short-term fixed income instruments and discounted securities

Investing in fixed income instruments involves a variety
of risks that you should watch out for and should guide
your investing decision.

There is the credit risk, which is the risk that the borrower
might have a lower capacity to meet the obligations. This
affects the prices of bonds and there could eventually be a
default.

Inflation risk means that the interest or coupon the investor
is earning might not compensate for a rise in the inflation
rate. In this case, the purchasing power of your earnings

The risks and how to invest in fixed income instruments

What are bonds?


Bonds are debt securities issued (borrowed) by corporations or
sovereigns to raise long-term capital for investments. The maturity is
more than a year and can have no limit.
A bond investor is a creditor or lender to the issuer. The issuer has an
obligation to the investor to meet the terms of the debt.
The terms of the investment are pre-determined – maturity, coupon
rate, convertibility, among other provisions
Bondholders have priority over shareholders as they will be paid before
them during a bankruptcy and after other secured creditors

Understanding bonds, bond pricing and valuation

Fixed Income Investments


When you make an investment in a debt instrument - providing
capital to a borrower that must repay - that provides fixed and
predetermined income, you are investing in fixed income
instruments.

The income could be interest payment, coupon or preferred
dividend

Examples include bonds, treasury bills, commercial papers and
fixed deposit placements. They are often called debt securities.
In simple terms, it means that even at the point of investing you
already know what you are going to earn for the duration of
that investment and when the earnings will happen.

Fixed income instruments and its role in your portfolio

From fixed deposit to treasury bills and bonds, this course will deepen your understanding of fixed income instruments. 

We cover the relevance of fixed income instruments in your portfolio, the risks involved and how to invest in them. 

The course also takes you through calculations to determine price and return for discounted securities and bonds. 

Investing in Fixed Income Instruments

Determining your asset allocation strategy

Investment risks and readiness

Investing requires preparation. Before you start investing,
you must know that investing, unlike saving, is risky.
There is a chance that you will suffer losses from time to
time, and if you are not in it for the long-term, these losses
will often be realized.

To be a good investor, you must have financial resilience in
the short-term

Investment risks and readiness

Investment risk profiling


You need to first determine the purpose for which you
need a strategy - are you targeting a specific goal (kid’s
education, retirement etc.) or is it a general investment
fund?

Once you decide your goal, you need to consider how
much risk you need to take, your ability to take risk
and how you react to losses to create your investment
strategy.
These three factors were adopted from the investment
risk profiling of the CFA institute, which we find to be
compelling.

Investment risk profiling

Creating your investment
strategy 1.0


If you are not investment ready and you cannot take risk, then
you prioritise safety in your investments. This means having a
lower portfolio allocation to risky assets such as stocks and
cryptocurrencies and more to short-term investments.
If the outcome suggests that you are investment ready and you
can take moderate risk, then you can increase the share of your
portfolio in stocks, real estate and cryptocurrencies.
If you are investment ready and can take risk, then you can be
aggressive with your portfolio allocation as growth is to be

prioritized. This means a lower portfolio allocation to short-
term investments, and a significant allocation to risky assets

such as stocks and real estate.

Creating your investment
strategy 2.0


• Determine your goals

• Ascertain the level of risk you can take to achieve them
• Invest at an appropriate level of risk – asset allocation
• Track performance and rebalance when needed

Creating an investment strategy

Why do we need an investment
strategy?


• As retail investors, one of the biggest concerns we have
about investing is not knowing how to start
• This is a separate challenge from even saving enough to
invest in the first place
• The decisions you make on how to invest within the
context of your personal circumstances is your
investment strategy.
• Your investment strategy will help you achieve your
goals

Why do we need an investment strategy

Understanding the characteristics of assets

It is important to realise that your investment strategy can change,
just as your financial situation changes and you learn from investing.
Constantly reassess your financial position as we have done in the
prior sections to know if you must take more risk or scale down
the risk in your portfolio.

Manage volatility through diversification

For those who are interested in investing but don't know how to start and be successful at it, this course is the perfect choice. 

In this course, you will learn how investment risks and readiness, and how to assess your risk profile. 

We take you through how to create your own investment strategy and what you must prioritise in doing so. 

Alternative investments tend to offer effective diversification means to investors. It is not enough to buy different kinds of assets, but what is necessary is to buy assets with low correlation to the rest of your portfolio to diversify. For instance, arts and collectibles have a lower correlation to stocks compared to real estate and bonds. This was the traditional role of alternative investments in investors’ portfolios.

Diversification benefits of alternative investments

The downsides of investing in alternative investments

For beginner investors, alternative investments are equal parts full of opportunities and pitfalls. Some of the biggest issues investors should be on the lookout for can be demonstrated using Agritech investment platforms earlier discussed.

The average investment platform offered high returns but the investments were not accessible before maturity. This means there was a lack of liquidity - it does not allow investors to exit if they have liquidity needs or have new knowledge that could hurt their investments.

They were also not regulated by the SEC to protect investors and they exposed investors to risky agriculture investments without communicating these risks clearly and without sharing a history of performance that investors could analyse or investigate. The last point further shows that alternative investments are often complex and not easily understood by retail investors. We generally advise investors against investing in assets they do not understand. 

Some of the other issues facing alternative investments include the high minimum investment and stringent requirements required (in PE, VC, hedge funds etc). This makes it inaccessible to retail investors and in favour of HNIs and institutional investors, although it is meant to protect them given the enormous risk involved. 

So many funds also charge high fees and some alternative investments are often hard to value, which makes investing decisions difficult.


The downsides of alternative investments


Alternative investments refer to the non-conventional asset
classes other than cash, bonds and stocks. Conventional assets
have a long history and credibility in the financial markets
Their popularity has increased because investors are looking for
superior returns on their investments. They were extremely
popular in the period of low interest rates when cash and bonds
became less attractive

They include real estate, commodities, currencies, cryptocurrencies,
private equity and venture capital, arts and collectibles, private debt,
infrastructure funds among others

What are alternative investments?

Investing in alternative investments

If you are ready to start investing in alternative assets, we have six recommendations for you. 

Search for the alternative investment opportunities
Understand the characteristics – risk, liquidity and return profiles
Do your due diligence (track record) about the opportunity and the promoters
Determine how it fits into your portfolio and the position to be taken
Invest when you find the right mix considering your risk and return expectations
Hedge your risk or make your allocation limited to manageable losses

If you find yourself uneasy about the opportunity at any of the six steps, exercise caution by not investing in that opportunity. 

Where can you find these opportunities

You can get access to some alternative investments on stock trading platforms through vehicles such as Exchange Traded Funds (ETFs). They have real estate, commodities etc. 

Some investment platforms offer investments in assets other than savings, bonds and equities. 

Asset managers also provide some of these opportunities through managed funds. 

Sometimes, they are all around us, introduced to us or marketed to us


How and where to invest in alternative investments

Drivers of alternative investments


In this course, you will learn about alternative investments, which are investments other than the traditional bonds and stocks. 

You will learn the reasons for their growing popularity, the risks involved, their role in your portfolio and how to invest in them.

Understanding Alternative Investments

The organisation of financial
markets

7

Over the counter
exchange (OTC)

Securities
exchange

The financial market in two different ways, both latest developments facilitated by
technology means that the distinctions are not so clear

1.Over the counter exchange (OTC)
2.Securities exchange

• The securities exchange is more transparent, under robust regulation and well-defined
rules, allows for level playing field (dealers, brokers, other participants etc)
• Communication is centralised and bid and ask prices are public, so also transaction details
• OTC markets are less formal (less rules, more flexibility) and depends on a network of
dealers, who can withdraw from the market easily
• Exchanges are more liquid because orders and prices are visible, and there are dedicated
market makers
• Clearing and settlement is better managed in exchanges and guaranteed
• Risk management is easier in the OTC markets due to less standardisation

The organisation of financial markets

Movers and shakers of global markets

The financial market

2

The financial market is like any other market: a place
of exchange between buyers and sellers.

However, the market is not for the buying and selling
of goods but for capital/money - capital is required
to build businesses, fund operations and embark on
projects.

The market connects owners of capital to users of
capital and allows for risk transfer/management

Introduction to financial markets

Capital raising means securing
money to fund a business

Companies need capital to fund projects and run their
operations. The process of getting capital is capital raising.

This can either be debt, which is when a company borrows
money that must be repaid, or equity, which is when a
company seeks shareholders that will invest and share in the
risks of the business.

In either cases, founders of companies first approach family
& friends for to raise money before going to banks and the
financial market

 
 	
Capital raising in financial markets and banking

Developing capital markets – what is necessary?
The Nigerian capital markets are stuck in the early phase, as institutional capacity, access,
sophistication, huge domestic savings and a robust domestic investor base are still lacking

Early Stage
• Legal and operational
infrastructure
• Policy coherence and
continuity
• Standardizing the issuance
of sovereign debt
• Inclusion in an index
• Proper tax and regulatory
framework

Mature Phase
• Macroeconomic stability – low
and stable risk-free rate
• High domestic savings and a
large pool of domestic
investors
• Efficient market functioning and
liquidity
• Hedging instruments and
derivatives
• Ratings agencies
• Transparency and governance

The development of financial markets: Nigeria as case study

The size of global financial markets

Institutional players in the
financial market

10
We have both direct and indirect players in the financial market. These are the
intermediaries through which the financial market impacts the real economy

1.Pension funds
2.Asset management institutions
3.Development Finance Institutions
4.Deposit corporations
5.Insurance

Regulators:
SEC/CBN/Ministry of Finance

Institutional players, the role and depth of financial markets


This is an introductory course to the world of financial markets. We explain the importance and the workings of financial markets from the perspective of retail investors and institutional players. 

We consider capital raising through the financial market and the banking system.

We look at the markets of importance and assess the size and level of financial market development across the world. 

We take you through the development of financial markets using Nigeria as a case study.

Understanding Financial Markets

Financial independence means
sustenance with little work

With financial independence, you should aim to get to a
position where you generate enough passive income to fund
your lifestyle.

Have a clean credit and sustainable debt profile. Do not have
outstanding payments that could affect your credit worthiness
and have enough income to cover payments on existing debt.

What financial independence means

How you can achieve financial freedom

Financial freedom is a moving target for most people, especially when we are young or when our ambitions change. It is a goal we have to work towards, much like receiving great education, getting a great job and building a sustainable business. Unless, we are fortunate to happen on good fortune or inheritance, attaining financial freedom requires doing the right things consistently for a long time. 

At Money Africa, we have developed a framework that clearly outlines what is required to achieve financial freedom. Living in Africa means we are victims of some peculiarities that could hold us back. But we are not stuck, we can make decisions that empower us and ensure that we achieve financial freedom.

The key essentials that are critical to achieving financial freedom for us fall into three major buckets: financial security, financial independence and economic freedom. 

When it comes to financial security, you should prioritise having an emergency fund and insurance that protects you against everyday risks and a retirement plan that ensures that you do not become a burden to society and people who care about you in the future. 

With financial independence, you should aim to get to a position where you generate enough passive income to fund your lifestyle. 

When it comes to your investments, you do not want to be limited to Nigeria and Africa given poor long-term returns in dollar terms. It is extremely hard to build wealth in such environments. Hence, it is essential that you build wealth in a strong currency like the dollar.

You also want to ensure you have clean credit and sustainable debt profiles. This means that you do not have outstanding payments that could affect your credit worthiness, and you have enough income to cover payments on existing debt. 

Finally, you also need to aspire towards economic freedom, which expands the opportunities available to you and allows you to take advantage of them. Economic freedom allows us to overcome the barriers of geography. It means being borderless and exploiting opportunities wherever they are. This could be either or all of having a foreign education, a strong international passport and ensuring that a part of your wealth is domiciled offshore.

Our financial freedom equation is the sum of the factors of financial security, financial independence and economic freedom. 

Finally, the discipline and consistency to adhere to this plan is necessary to be financially free. We are rooting for you. 


How can we achieve financial freedom

Overcome the barriers of
geography with economic freedom

• Economic freedom expands the opportunities available to
you and allows you to take advantage of them.

• This could be having a foreign education or a skill in demand
globally, a great international passport and ensuring that a
part of your wealth is domiciled offshore.

• With economic freedom, it does not matter where you are
born. It means being borderless and exploiting opportunities
wherever they are without limitations

Overcoming barriers with economic freedom

Achieving Financial Freedom

What is financial freedom?

First, you might wonder how financial freedom differs from financial security and financial independence. We think of financial freedom as the most important goal. Financial security offers you protection against life’s risks in the short-term and financial independence is when you have passive income that covers your living expenses. 

Financial freedom means that we have the resources to meet not only our needs but to achieve our dreams. Financial freedom is a goal we aspire and work towards as individuals because it unburdens us from money worries.

While financial freedom would have different meaning to different people, depending on their age, social class and aspirations, what is certain is that financial freedom unlocks flexibility in our lives. 

What does it mean for us?

It means we have the power to choose what we want to do, where and how we choose to. It means pursuing passions or doing things which would previously not be economically viable or possible. Attaining financial freedom does not mean you need to become a dollar billionaire or ultra wealthy.


What is financial freedom?

In this course, we will teach you why you need to aspire for financial freedom and how to achieve it. We explain the differences between financial independence and financial freedom

We also consider what financial freedom means from the perspective of people living in developing economies. 

We developed a financial freedom equation for people in developing economies. 