Steps to invest in Nigeria stock market. Investment is the way to go, it has never been a bad idea and so long man exists meaningful financial advancement cannot be attained without detailed and careful investment of funds as proceeds of other businesses.
Nigeria stock market has been a dominant area where new investors taken advantage of securities to get even richer. For the benefit of all and especially the newbies, I will take my time in this article to explain vital terms which will in turn enable a speedy and adequate understanding of the topic under review.
NIGERIA STOCK MARKET: WHAT IS STOCK?
For the purpose of investment, a stock is the capital raised by a company or corporation through the issue and subscription of shares.
The term stock is not a difficult one to understand, this simply means that companies seek to borrow money from the public, thereby giving you the investor opportunity to buy its stock which in turn gives you a right or part ownership to that company as a shareholder.
You may also like to read: All you need to know: How to invest in FGN Bonds – Financengr
NIGERIA STOCK MARKET: WHAT IS SHARES?
Shares are units of ownership interest in a corporation or financial asset that provide for an equal distribution in any profits, these interests or profits are normally declared in form of dividends.
Companies or corporations will normally offer their stocks in form of shares which are aggregated in units to map what is due to individual holders.
After the global economic recession of 2006, the Nigeria stock market received a huge blow which categorically puts so many investors off and into debts. So many investments have been abandoned, that notwithstanding does not rule out the fact that people are still making money from the buying and selling stocks.
As a beginner, I will take you through some parameters you need to know if you are interested or wants to invest your money in the Nigeria stock market.
NIGERIA STOCK MARKET: WHAT IS STOCK MARKET?
A stock market is a market where securities, shares or equities are being traded. This may include shares listed on the public stock exchange as well as those only traded privately. In Nigeria, stocks are being traded on the floors of the Nigeria Stock Exchange (NSE).
NIGERIA STOCK MARKET: TYPES OF SHARES: There are basically two types of shares namely:
1. Preference shares- This type of shares usually get priority or significant over the other in terms of payment of dividends or on winding up of the company. There are varying degrees of preference shares having different rights and characteristics. Holders of this shares are entitled to having a fixed periodic income and have restricted voting rights liable to particular circumstances or resolutions, this is however dependent on the terms of the shares.
2. Ordinary shares- Ordinary shares has no exceptional or preferred rights. Ordinary shareholders are entitled to share in the earnings of the company. They can vote at the company’s general meetings. They are also eligible to participate in any dividends or any distribution of assets on winding up of the company.
How to invest in Nigeria stock market: You will really need to understand how to invest your money in the Nigeria stock exchange market. First and foremost you have to start by opening a Nigerian brokerage account.
1. You will complete the CSCS account opening form, it’s is referred to as the Central Security Clearing System (CSCS), this records the ownership of Nigerian securities via electronic accounts. Your broker will send you the CSCS form when you are read. You will be assigned account number. This number will link every Nigerian stock trade you execute, allowing the CSCS to keep record of all your holdings in the country.
2. Complete the broker’s account opening form, after your first mail to the broker requesting how to open an account, you will receive an account opening form from them to fill which normally require you provide your passport number, ID number, your address and banking details.
3. Collect two color passport sized photos of yourself
4. Get a recent utility bill not older than 90 days, this is normally used to verify your place of residence.
5. Credit your brokerage account.
How do I buy a stock?
You have done your research and found a stock you’ll like to buy, give an order to your broker to execute same.
Trading cost: Commissions and fees are assessed on sliding scale that is a standard across all brokers. For transaction amounts less than N1,000,000 you will pay 1.86% when purchasing a stock and 2.19% when selling any. For larger transactions, commissions and fees total 1.49% of the total transaction value to buy and 1.82% of the total transaction value to sell.
You may also like to read: How to invest in treasury bills in Nigeria
NIGERIA STOCK MARKET: WHO IS A STOCKBROKER?
A stockbroker is a regulated professional individual, usually associated with a brokerage firm or broker-dealer, who buys and sells stocks and other securities for both retail and institutional clients through a stock exchange or over the counter in return for a fee or commission as mentioned above.
From the above explanation you now understand that you cannot buy a stock yourself rather you go true your stockbroker who is being licensed to do same. It is however your duty to determine the particular stock price you’d like to invest in, stock market price differs with varying situations and indices.
WHERE TO GET THE NIGERIA STOCK MARKET NEWS AND ANALYSIS:
You can follow daily business news trend, stock analysis on television and some financial blogs and magazines. Channels Television, AIT, NTA etc. Also check https://www.nairametrics.com
Common term used in stock Market
. Share trading– This is buying and selling of shares
. Open– The price at which the stock opens in the morning when the market opens at 9:00 AM
. High– The highest price level the stock attained throughout the trading day
. Low– The lowest trading level the stock attained throughout the trading day
. Close– The final price of the stock when the market closes for a day or the stock price which it remains at the time of closing the market at 3:30 PM.
. Volume– This is the quantity of the shares.
. Bid– This is the buying price.
. Offer– The selling price.
. Bid Quantity– The total number of shares available for buying
. Offer quantity– The total number of shares available for selling.
. Short selling– First selling and then buying.
. Transaction– One complete cycle of buying and selling of shares.
. Limit order– In limit order, the buying and selling price has to be mentioned and when the share price comes to that price then the order will get executed with the price.
. Online share trading– This is buying and selling of shares through internet during market hours.
. Offline share trading– Buying and selling of shares through broker and phone calls.
. Right issues– This is issuing right to a company’s existing shareholders to buy a proportional number of additional shares at a given price, usually at a discount.
. Dividend– This is share of profit the company gives to its’ shareholders.
. Bonus shares– Free share of stock given to current shareholders, based on the number of shares the buyer holds.
Example to take away!!!
Say a company ABC Sales its’ share for N2.50 per ordinary shares which could be its’ initial public offer. While as an investor you decided to buy 30000 units of this shares. It therefore stands that you will be investing
N2.50 X 30000 units = N75,000 in whole.
Say may be after two months the shares appreciates from N2.50 to N4.20, it simply means for each unit of shares you’ve made N4.20 – 2.50 = N1.70. You’ve made N1.70.
30,000 units x N1.70 = N51,000. Your latest profit as at this time is N51,000 from an investment of N75,000. You can build your portfolio this way and climb the ladder of wealth.
There could as well be possible loses, however your ability read the market take profit and stop lose will ensure you maintain a good profit margin.
If ABC peradventure gives bonus shares say 2 is to four, you will gain more units and grow rapidly. It means that for each 4 units of shares you own you’ll get extra 2 units for free.
Which is 30,000 units/2 = 15000 units extra + 30,000 units = 45,000 units. This is how your money will keep on growing.
You may also like to read: Top smart ways to lure real investors to your business
Opportunities abound in theNigeria stock market, learn the trade or get your stock broker to trade on your behalf. It’s a good and veritable avenue to make passive income, put your money to walk and not your strength to work, think smart and join a league of future millionaires’ todays. Subsequently I will bring you penny stock trading to even open more doors of financial stability only if you are ready to take advantage. Get further details on https://www.investinginafrica.com
Raphael is a seasoned and dynamic writer, with interest in Banking, personal finance, entrepreneurship development. A councillor and motivational speaker.