An Examination of the Unit Trust Scheme/Mutual Fund as a Veritable Vehicle of Investment in the Nigerian Stock Market.

Abstract

The Nigerian economy is characterized by low income, low savings, low investment and low productivity. The capital market which on its own is a veritable vehicle for mobilizing investible funds from surplus units to units suffering from scarcity came alive with the financial restructuring of the 1990s and especially the bank consolidation scheme of 2004. At a time it was adjudged one of the highest yielding stock markets in the world. However with the global financial meltdown, there was a near complete collapse of the market and many of the investors who were playing more or less solo got their fingers bunt. As marginal investors, majority of them lacked the skill, knowledge, competence and capital to effectively diversify their investment risks to have a soft landing during the meltdown. Neither were they much aware of the availability of the unit trust scheme/ mutual fund as a veritable investment vehicle especially for novitiates and fringe investors as most of them were. The result was a poorly patronized segment of the Nigerian stock market and a monumental loss of wealth and confidence in the market. This paper examines the unit trust scheme /mutual fund as an investment option very suitable in mobilizing investible funds from small savers and not too sophisticated investors. It finds out that there is lack of awareness and poor patronage of the scheme in the Nigerian stock market and sufficient wide spread education is necessary in this regard. It posits that the Nigerian economy stands to gain substantially from the strengthening of institutional and systemic factors including legal and accounting architecture to enhance transparency and accountability around fiduciary relationships as unit trust and mutual fund schemes connote.