Last Updated on August 8, 2020 by Henry Ibeleme
Investing in the Nigerian Stock Exchange market is one of the investments you can make, and you won’t regret it. Nevertheless, it comes with its risks and tricks which you must learn.
Thanks to technology and the internet, investing in the stock market here in Nigeria is pretty simple. That is because this market has evolved over the years, making it possible for virtually anyone to invest.
If you’re an ardent reader of this blog, you probably know that I’m an advocate of multiple income streams. The only way you can indeed be financially free is when money is no longer a problem.
That, however, can only happen when you’re determined to put your money to work. The thin line between the rich and the poor is that the rich always put money to work.
The poor, however, is a master saver – always putting his money in the bank.
According to our legendary investor, Warren Buffett,
“Investment is the process of laying out money now to receive more money in the future”.
Money is a tool, a slave that exists to serve you. Your slave shouldn’t be idle in the bank, when there are lots of investment opportunities here in Nigeria.
Just like Treasury Bills, investing in stock is one of the financial decisions you won’t regret. But before you begin, here is a detailed guide on how to invest in the Nigerian stock exchange.
Table of Contents
- How To Invest In The Nigerian Stock Exchange
- Trading in Nigerian Stock Exchange
- Making Money With The Nigerian Stock Exchange
- Frequently Asked Questions: Nigerian Stock Exchange
- Success Tips For Investing In The Nigerian Stock Exchange
- Final Words
How To Invest In The Nigerian Stock Exchange
1. Choose A Stockbroker
A stockbroker is an authorized agent who can execute, buy, or sell orders for stock and other securities on your behalf.
The first step to investing in this lucrative goldmine is to pick a stockbroker. By going for the right broker, you save yourself tons of headaches, stress, and, most importantly, protect you from losing your money.
When it comes to choosing the right stockbroker, it might get a little complicated. There are lots of stockbrokers parading themselves as the best. Sometimes, falling for the wrong person is inevitable.
To begin this hunt, you need to visit the Securities and Exchange Commission (SEC) official website, a regulatory body for stockbrokers.
Through this portal, you will have a list of licensed and certified stockbrokers in the country.
This website tends to feature the top ten brokers in Nigeria, a perfect way to choose your ideal stockbrokers.
Aside from this seemingly easy route, you can find reputable and reliable stockbrokers through recommendation.
Before you hire anyone, ensure you conduct your research and choose the best among the options.
If you’re going to be a passive trader, you can ask the broker firm to allocate an account officer to carry out trades. If you don’t have much knowledge regarding the Nigerian Stock Exchange market, it will be best to seek a discount broker’s services.
If you want to delve in fully, you can hire a full-service broker who does much more than just trading on your behalf.
A full-service broker can provide services ranging from research, tax tips, and trade execution.
2. Open An Account
If you have a bank account, opening an account with your stockbroker takes less than 48 hours. Also, you will need some materials for opening an investment account which includes:
- Your ID Card
- Bank Verification Number (BVN)
- A pair of passports
- Next of kin details
- Signatures of account holders
Since some brokers have an online platform, you can easily register using this information. In less than 48 hours, your account will be active and ready to trade in the Nigerian Stock Exchange.
Furthermore, I will recommend opening a Central Securities System(CSCS) account.
In case you don’t know, CSCS is a market aggregator that maintains or manages all your trading accounts created by all stockbrokers in Nigeria.
With this unique account, you can view your portfolio, even see stocks you own. Through this account, you help to mitigate fraudulent activities, which are a good thing.
The cost of this account ranges from #2000 to #7000.
3. Fund Your Account And Start Trading
After getting a stockbroker to invest in the stock exchange on your behalf, the next step is to fund your account.
Many financial institutions have a minimum requirement when it comes to depositing. So, shopping around and weighing your options will help you find one that suits your budget.
Your stockbroker will provide you with their bank details you can use to fund your account. When you make a transfer, and the transaction was confirmed, your broker will execute trades on your behalf.
When it comes to trading, it can happen in two ways. You either send trade instructions to your broker through emails or execute it yourself using your brokers’ online platform.
Trading in Nigerian Stock Exchange
Once your stockbroker opens an account for you, you will get a Clearing House Number (CHN), which is a number that is unique only to your portfolio. After successful registration, you can fund your account and send trading instructions to your broker.
If your broker has an online platform, you can trade by yourself without any assistance. Unless you’re pretty new in which you will have to allow your broker trade on your behalf.
Through your brokers’ online platform, you can place bids or offers, which automatically terminates seconds once received. For effective communication with your broker, you are to ensure you get your brokers’ email address.
One thing you need to know before investing in the Nigerian Stock Exchange is transaction fees. This fee varies among brokers, and you’re charged any time you bid. Statutory prices are fixed, while your broker’s fee can range between 1.5% and 1.8% per transaction.
Regarding taxes, there is a need to know that there are no capital gains when selling or buying equities in Nigeria. The only stockbroker will be able to enlighten you on everything you need to know about taxes.
After trading, it usually takes four (4) days for your transaction to conclude. In the Nigerian Sock Exchange, clearing and settlement are T+3.
When you sell your equities, your cash will stay in your brokers’ account until you request a withdrawal. This process often takes 24 hours to complete, making it ideal to seek before needing the money.
When it comes to NSE, trading typically opens at around 9:30 am for pre-markets. During this period, you can placer bids or offers. If you don’t want to do any of that, you can peek at the prices of stocks.
The pre-market ends by 10:00 am in which trading commences immediately. This trading goes on till 2:30 pm, when trading officially closes.
Making Money With The Nigerian Stock Exchange
To make money from this investment opportunity, one thing you must have is knowledge of how the market works. Through the assistance of your stockbroker, you will get to understand the basics of investing in a stock.
Unlike Treasury Bills, the stock market comes with risk. It is possible to buy some units for #200,000 and watch your money deplete in half in the coming week. The reverse could also be the case, which proves that the market is risky and not stable.
However, you can become a millionaire when you have the right knowledge. Let’s assume you bought Dangote Cement shares worth #300,000 at the price of 1.50 kobo per share.
If by next day, next week or perhaps next month and the price appreciates to 4 kobos per share, you’ve made four times your initial investment.
Let’s do the math: #300,000 x 4 = #1,200,000.
This is insane, right?
From this trade, your expenses won’t be more than #10,000 from which you can pocket the rest. How do you think rich people like Warren Buffett make money?
It is through stocks, and knowledge of this investment will literarily change your life. By investing in the Nigerian Stock Market, you open the millionaire doorway.
I see lots of Nigerians leaving millions of money in the bank all the name of saving. If you have a good knowledge of how stock works, you will be making money without sweating.
Aside from investments like Real Estate, stock can make you a lot of money, especially if you buy shares from a booming company.
Frequently Asked Questions: Nigerian Stock Exchange
NSE is a marketplace where people sell or buy shares. Investors who buy shares during an IPO or PO can decide to sell those shares to willing buyers.
When a company’s shares are listed for sale on the NSE, you can buy the shares can buy the stock with or without a PO.
Just like in every market, some factors influence demand and supply. A company can have over 50 million naira shares outstanding but offer only a small portion for sale.
In that case, a buyer can only buy what is offered.
Before you start buying shares, you will need to identify companies and the share price they are currently selling.
This aspect is technical, and it is where your stockbroker comes in.
Stockbrokers are there to advise you on which stock to buy or hold.
If you want to make gains, you’d better listen to your brokers and do as they say.
Aside from capital gains, you can make additional money in the form of dividends.
It can be paid either in cash, stock, or a combination of both.
When you earn some dividends, your earnings could be electronically sent to your account.
Success Tips For Investing In The Nigerian Stock Exchange
1. Get Some Investment Education
If you’re serious about making tons of money from stock, then there is a need to acquire investment education. Don’t get me wrong; anyone can invest without any foreknowledge about investment.
If you want to start holding individual stocks, you will need to learn about investing before starting such a journey. While playing it safe as a novice, use the time you have to read books, listen to CDs, and get a mentor.
You can also join investment forums, groups, or visit investment blogs for investment education, tips, and tricks.
2. Don’t Forget To Diversify
The goal of every investor should be to diversify his income streams. By adding individual stocks, you diversify your cash and fundholding. Even at that, nothing stops you from spreading out your capital in various equity sectors.
3. Hire A Financial Advisor
In life, you don’t need to know anything to succeed. All you need is to be in contact with smart and intelligent people.
Not everyone is a financial guru, which is why hiring a financial advisor will be pretty smart. Through your financial advisor, you will be able to determine your financial goals and then make decisions.
Hiring a financial advisor isn’t free, but they help ensure you don’t make any investment mistake. If you have the money and yet you know nothing about the stock market in Nigeria, then I will advise getting a financial advisor.
4. Set Long Term Goals
What is your purpose for investing in the Nigerian Stock Exchange? To some investors, the reason could be to save for retirement, to purchase a home or perhaps, to fund college expenses.
Before you start investing, you need to know your purpose and the time when you will need the funds. If you aim to get returns in a few years, perhaps you should consider real estate.
By knowing how much you need, and the future point in time when you need it, you will be able to make your calculations.
5. Control Your Emotions
The stock market is not for the feeble-minded, and the inability to control your emotions can lead to bad decisions.
When the majority of investors are worried about a company, its shares are most likely to decline. The reverse could also be the case when investors feel positive about a company’s future.
In the stock market, we have the bear and the bull. The bear refers to pessimistic fellows, while the bulls are optimistic investors. During trading hours, these two folks are always battling, and their speculations can influence your decision.
That is why you need to tame your emotions if you’re considering investing in the Nigerian Stock Market.
If you’re in Nigeria, with some funds lying idle in the bank, you’re losing money without even knowing it.
When you make it a habit always to put your money to work, you will discover the reason why the rich keep getting richer.
You cannot be rich through saving but through investments that create streams of income. To invest, you don’t need to be a guru or financial analyst.
With a broker and a financial advisor, you’re ready to become a millionaire. If you have any questions regarding the Nigerian Stock Exchange, drop a comment, and the best minds will guide you.
Also, do not forget to subscribe to this blog by using this signup form. In that light, I wish you success!