How To Buy Shares in Nigeria

How to Invest in Shares in Nigeria: The Nigerian Stock Market Complete Guide to Operators

Operators of the Nigerian stock market include the Nigerian Exchange Limited (NGX). It offers entrepreneurs and citizens an opportunity to develop alongside the country’s economy. Shares in state-owned enterprises would be the best method of making money and dividends. Yet the market is intricate. It is a planning, research, and implicit operation process. This handbook will have you with an overall understanding of share buying in Nigeria, beginning from the very basics to practical step-by-step practice.

1. Familiarization of the Nigerian Stock Market (NGX):

– Organizational and Regulatory Framework Chart:

The NGX is Nigeria’s premier stock exchange. It’s regulated by the Securities and Exchange Commission (SEC). The SEC is the lead regulator of the Nigerian capital market and monitors it closely in a bid to safeguard investors and ensure fair play. The sum of buying and selling transaction is effective and transparent by an electronic system (X-GEN) of the NGX. The NGX comprises different segments such as the Main Board, Growth Board, and Alternative Securities Market (ASeM) where a firm is assigned to each segment by age and activity.

The Players:

-Stockbrokers: Senior staff members with experience who purchase and sell the stock on the behalf of the investors on their behalf.

-Issuing Houses: Banks entrusted with the responsibility of issuing new stock and bonds.

-Registrars: Corporates with a record of shareholder identity against different securities.

-Central Securities Clearing System (CSCS): Where the settlement of trade is done along with custody of security.

-Investors: Institutional or individual investors who purchase stocks.

Indices:

All-Share Index (ASI) by NGX reveals overall performance of entire Nigerian stock market. Sector indices on different performance of different sectors like banks, consumer goods, petroleum and gas, etc.

2. Why You Should Invest in Nigeria Stock:

– Gain Opportunity: Shares gain value over time and can be sold in for a profit.

-Cash Dividends: Some companies distribute a portion of the profit to the stockholders.

-Beating inflation: Share markets have a good success record, better than inflation in the long run.

-Sharing a part of a Company: If you invest in shares, you co-own that company.

-Risk Diversification: Investment in stocks reduces the general risk of an investor.

-Investment in Economic Growth: Stock investment provides an opportunity to be aligned with the economic growth of Nigeria.

3. Most Important Steps Before Investment

-Planning finance: Choose your investment objective, the level of risk you are willing to bear, and the time horizon in which you would like to invest. Create your budget and invest some portion of your savings. Create a cash cushion before you invest in shares. Never invest money that will need to be withdrawn prematurely.

Learn the general guidelines of stock investment: gaining understanding on reading business moves and stocks. Reading diverse companies and sectors in lookout to invest. Pacing with tendencies of economic surge and latest tendencies within stock marketplaces. Looking through sites like NGX reviews, money sites, and investment books of stock.

-Risks Considering

Be cautious of investment risks in share investing: market risk and certain company risk, and economic risk. Think about how much risk you can tolerate, and then select your investments accordingly. Diversify your investments so that your risk is reduced.

-Choosing a Stockbroker

Choose a registered stockbroker who is well known and has NGX and SEC registration. Consider their fees, trading platform, research provided, and customer treatment. Ask your friends, family, or investment advisors for referrals. Make sure the broker is an SEC registered agent.

-Opening a Stockbroking Account

Complete all paper work documents needed by stockbroker like KYC documents. Upload documents for residence proof and identification. Stock fund broking account. Obtain your CSCS account number.

4. This is How to Purchase Shares: 

Inquiry into Stocks:

-Basic Company Check: See how healthy a company’s money is how well it’s run, and how its industry looks. Examine moolah reports, what they own and owe, what they earn, and how cash moves.

-Look at those important money ideologues like : stock price versus earnings; how much they owe compared to what they own; how much they earn compared to what they’re worth. Consider what the company does differently and how it could potentially expand.

-Chart Study: A study of past prices and how many stocks bought and sold is needed to determine trends. Use analytics as well as distinctive analysis tools to determine things like the stock’s strength with respect to its average price over time. Determine price levels that equate to ceilings and floors if the price has found buying resistance or selling support. Look for some distinct patterns (head and shoulders, double tops).

News and Opinion makes the market, so keep up with the market in terms of economic prospects and what the investor sentiment is.

-Telling the Broker to Buy:

You will call your broker and tell him the name of the company or its ticker symbol, number of shares you want to buy, the type of order to be executed (market order, limit order, or stop order). Market Orders are executed at the prevailing market price; Limit Orders are executed at a predetermined price or better; Stop Orders are put into effect once the price hits a predetermined level.

-Execution of Trade:

The stockbroker executes the order through the NGX trading platform. You will receive a trade confirmation from your stockbroker.

-Settlement:

The CSCS, in conjunction with the brokers, settles trade in three working days (T+3). The shares are credited to the account of CSCS.

-The Option of Receiving Share Certificate If You So Desire:

Most shares are presently under existence with the Central Securities Clearing System, but you can opt to request physical shares from the Registrar of that Company. This often takes a long time and is now not done so much.

-Monitoring Your Investment:

Look at how your portfolio has been performing. Stay updated with company happenings as well as events in the market. Readjust your portfolio if the need arises.

5. Order Types:

-Market Order: Order to buy or sell shares at price prevailing at the moment. This order goes through instantaneously but price may vary.

-Limit Order: Is an order to buy or sell shares at a predetermined price or better. Buyers execute buy limit orders at the limit price or below price. Sellers execute sell limit orders at the limit price or above price. This order type allows price control, but the order will not execute if the market price does not reach the limit price.

-A stop order is an order to buy or sell when the market hits a given price. Buyers put buy stop orders above current market price. Sellers put sell stop orders below current market price. This type of order is used to limit the loss or protect profit.

-Stop-Limit Order: A compromise between a stop and limit order, this is the kind of order that, while not being activated itself, sets off a limit order each time the price reaches the stop price. It is therefore a combination by giving better price control and protecting from losses.

6. Investment Strategies:

-Value Investing: A technique of discovering firms currently carrying a lower price than what their fundamentals would show, but which have a strong basic profile.

-Growth Investing: Sharing funds with companies for which one has reason to believe they could grow a lot in the future.

-Dividend Investing: This involves buying shares from companies that have a history of regular dividend payments.

-Index Investing: Investing in either index funds or ETFs that track a specific market index.

-Sector Investing: Specific industries or sectors expected to beat the market.

-Dollar-Cost Averaging: Investing fixed amounts at regular intervals, regardless of market prices.

-Long-Term Investing: Holding investments for extended periods to benefit from compounding growth across many years.

-Short-Term Trading: Trading often, buying and selling stocks to take advantage of little price fluctuations. This requires a lot of observation in the market and possesses larger risks.

-Emotional Investing: If emotions guide all your investment decisions instead of facts, you just will have bad results.

7. Key Considerations and Risks:

-Market Volatility: Stocks prices can be volatile over a very short period.

-Economic Risks: Changes in economic factors such as inflation, interest rates, and GDP growth may lead to movement in the market.

-Company-Specific Risks: Some factors, such as poor management, financial difficulties, and high competition, can harm the performance of a business.

-Liquidity Risk: This is the danger of failing to sell a stock position very quickly when a lump sum of investment is required.

-Information Asymmetry: Some investors have information that others do not, thus creating an unfair advantage.

-Regulatory Risks: New government rules could cause some disruptions in the stock market and among certain industries.

8. Tax Implications:

-Capital Gains Tax: Selling shares and making a profit means that one has to pay taxes on those capital gains.

-Dividend Tax: Companies paid dividends, but from that amount, the government taxes before it lands into your pocket.

To know how taxes affect you, it’s wise to consult a tax advisor.