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How to invest in the Nigerian Stock Exchange

The Nigerian Stock Exchange, sometimes known as the NSE, is one of the most important stock exchanges in Africa. The Nigerian Stock Exchange (NSE) is home to many traders who execute the actual transactions that allow investors to buy and sell shares of stock. The NSE is home to top companies from every conceivable industry in Nigeria.

Every year, the Nigerian Stock Exchange (NSE) handles billions of naira in transactions, and anyone with a brokerage account and a basic understanding of the market can make money by investing in the exchange.

A step-by-step guide on how to invest in the Nigerian Stock Exchange is provided in this article. We will also discuss a number of variables that are unique to the Nigerian stock exchange that we believe you should be aware of before making an investment.

Who is the target audience for this article?

  • If this is your first time investing in stocks, this is also a good opportunity for you.
  • If you have recently finished reading a book about investing in stocks and believe that now is the greatest time for you to get your feet wet, then this is the opportunity for you.
  • The following information is for you if you have been inspired by some of the things you have read online about stocks and wish to make an investment in Nigeria’s stock market.
  • In addition, if you are interested in investing in the Nigerian stock exchange and would like to gain a fair and balanced understanding of what to expect, then this article is for you as well.

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What is a Stock Exchange?

A stock exchange is an organized and regulated financial market in which securities (bonds, notes, and shares) are bought and sold at prices determined by the forces of demand and supply. A stock exchange is also known as a stock market or a stock market exchange.

Markets for stocks and bonds primarily serve two functions: as primary markets through which corporations, governments, municipalities, and other incorporated bodies can raise capital by channeling savings of investors into productive ventures; and as secondary markets through which shareholders can sell their securities to other shareholders for cash, thereby reducing the risk associated with investment and maintaining liquidity in the system.

In addition to imposing severe rules and listing requirements, stock exchanges also have the responsibility of enforcing applicable laws and regulations that are binding on all listed companies and trading partners.

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The Nigerian Stock Exchange (NSE)

The Nigerian Stock Exchange (NSE), formerly known as the Lagos Stock Exchange and established in 1960, serves the largest economy in Africa, Nigeria. It facilitates access to money for Nigerian and foreign businesses who seek to leverage the capital market to fund their strategic business expansion efforts.

The Nigerian Stock Exchange (NSE) is a registered company limited by guarantee that is controlled by the Securities and Exchange Commission of Nigeria and licensed under the Investments and Securities Act of the country in which it operates. All of the NSE’s listings are included in the NSE All-Share Index, which was established in January 1984 with a base value of 100 and has remained unchanged since then. Ordinary shares are the only ones that are included in the computation of this index.

The Nigerian Stock Exchange (NSE) is a founding member of the African Securities Exchanges Association, as well as a founding member of the World Economic Forum. The Nigerian Stock Exchange currently has around 160 listed businesses in its portfolio, with names such as Zenith Bank, Unilever, UAC Foods, Oando, and Julius Berger among those that are traded on the exchange.

What is the official market for trading stocks in Nigeria?

The Nigerian Stock Exchange, which is situated in Lagos, is the only place where you may purchase and sell shares of publicly traded companies in Nigeria. On the contrary, if you are looking for an exchange where you may trade stocks in private companies, the National Association of Security Dealers Over-The-Counter (NASD OTC) market is the place to go.

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What to know before I begin trading

Before you may begin trading stocks in Nigeria, you must first open a brokerage account with one of the country’s authorized stock brokerage firms. When you submit your application, you will be needed to supply identity, bank account information (including the BVN), passport photographs, signatures of account holders, next of kin information (if it is a personal account), and other supporting documentation. If you already have a bank account, it will take less than 48 hours to open a brokerage account. Some stockbroking firms also provide online trading systems, which eliminates the need to physically visit the stockbroking firm. Simply go to their respective portals and upload all of the information that they require.

Steps to take before investing in the Nigeria stock exchange?

We strongly advise you to open a Central Securities Clearing System (CSCS) account to facilitate the clearing of securities transactions. CSCS is a market aggregator that stores all of the accounts that have been created and maintained by all of Nigeria’s stockbrokers. If you have a CSCs account, you may also see your portfolio without having to go via a stockbroker and see which stocks you have in your portfolio. This is critical since it assists you in preventing fraudulent actions. It cost between N2k and N5k per annum to run it properly.

What is the best way to get started trading?

It is expected that you have opened a stockbroking account before you can begin dealing in shares. You will be assigned a Clearing House Number (CHN), which will be exclusive to your portfolio and will be unique to you. When you want to trade, all you have to do is deposit money with your stockbroker and direct them to acquire shares on your behalf. The most common method of communication is through your registered email address. However, using their online trading platform, which allows you to purchase and sell stocks at your leisure, is more convenient. Bids and offers can be placed through online trading portals, and they are typically accepted and executed within seconds of being received. You should also receive emails from your broker once you have placed bids and offers, as well as when the transaction has been successfully completed.

When are Transaction fees paid?

A transaction fee is payable each time a bid or offer is accepted by the other party. There are mandatory costs that you must pay to regulators, as well as broker fees that must be paid to your broker. Statutory costs are set, whereas broker fees vary between 1.5 percent and 1.8 percent for every transaction, depending on the size of the transaction.

Are Taxes levied on profits?

In Nigeria, there are no capital gains taxes levied on profits made from the purchase and sale of stocks.

How long does Clearing of funds take?

Stock transactions typically take 4 days to complete, depending on how many shares are purchased or sold. T+3 is the clearing and settlement time in the NSE.

How to Withdrawal my funds?

After you sell stocks, your money is held in the broker’s account until you request a withdrawal, which is usually accomplished within 24 hours of your request. Using an online brokerage account, you can withdraw funds by visiting the portal and selecting “withdrawal.” Some brokers additionally ask you to provide an email in order for your withdrawals to be credited to your account. Keep in mind that the bank account into which your cash will be deposited is the one that you supplied when you registered for the contest.

What is the Trading time?

The Nigerian Stock Exchange (NSE) begins for pre-market trading at 9.30 a.m., with regular trading beginning at 10 a.m. It is possible to post bids or offers during pre-market hours, giving you a preview of how the prices of stocks and the market as a whole can change when the market opens officially. The pre-markets close at 10 a.m., and trading begins soon after that. After then, the market will formally close at 2.30 p.m. You can find out more about what happens at 14.29 here.

What determines the Markets segments?

A number of market segments on the Nigerian Stock Exchange indicate varying levels of liquidity, which are further divided into sub-markets. The Premium Board, the Main Board, and the Alternative Stock Exchange Market are the three stock exchange markets ( ASEM). Zenith Bank, FBNH, and Dangote Cement are among the stocks on the Premium Board that are the most well-capitalized on the exchange. The regular board consists of approximately 190 equities and is just as liquid as the Premium Board in terms of the trading volume. The ASEM is a market for smaller companies with a high level of illiquidity. This means that you may not be able to view the stocks to buy, and even if you do see them, there may only be a limited number of buyers accessible.

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When are Indexes available?

Indexes are available on the Nigerian Stock Exchange, just as they are on the majority of other stock exchanges throughout the world. For starters, there’s the All-Share Index, which is a more comprehensive depiction of all stocks. Incorporates all equities traded on the market and tracks their performance on a daily basis. We also provide sub-indices for several industries, like banking, insurance, consumer products, oil and gas, and so on. We also have the Nigerian Stock Exchange 30 (NSE 30), which is the country’s own version of the Dow Jones Industrial Average. It keeps track of the performance of the 30 equities with the highest market capitalization on the exchange.

What Data or information is needed to continue trading?

In order to have a strong stock, you will also need data that you can put to use. The Nigerian Stock Exchange is not the most reliable source of data; nonetheless, there are a few that you may use to get a head start. Companies are required to post their financial results and other company information on the NSE’s website. Companies are required to publish results on a quarterly basis, and those who fail to do so are subject to fines. You can also look at each company’s website’s investor relations section for more information.

You can also obtain closing day prices from the NSE’s website or from the websites of your brokerage firms. It is actually preferable to sign up for newsletters from your broker if you want more in-depth information about the markets.

What Are Dividends?

Investment in companies listed on the Nigerian Stock Exchange, in addition to generating capital gains, also allows you to generate income through dividends paid by the company. In the United States, dividends can be paid in cash, stocks (script dividends), or a combination of cash and stocks. Dividends are now paid electronically into your bank account rather than in cash. As part of your responsibility to ensure that you receive your dividends, you are obligated to visit the registrars of the stocks in which you invest and supply them with your banking information. They will also require you to provide proof of identification as well as any supporting documents. Once you have completed the process, you will receive your dividends as soon as the corporation pays them. The registrars will also credit your CSCS accounts with any script dividends that have been earned.

Conclusions

So far, so good We have been able to give a detailed explanation on you can invest in the Nigeria Stock Exchange. Acquiring and owning stock may be a thrilling experience, especially when the stock price rises and you can see that your investment is producing money. However, sometimes the stock’s value drops, and this isn’t nearly as entertaining to witness.

It is critical to understand that investing in the stock market can result in financial loss. As a result, it is recommended that you diversify your investment portfolio. Rather than putting all of your eggs in one basket, diversify your portfolio by purchasing stock in a variety of firms and industries. It’s also crucial to do extensive research on a stock before investing in it.

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