Okay, so you’ve heard from someone or read somewhere that there’s FREE money investing in the stock market. And that all you have to do is buy a collection of company shares.
If things go right, you make money without working for money!
Sounds sweet, right?
But just like a coin has two sides, so does this investment.
You can watch your money go down the drain, unable to do anything about it.
It’s a win-lose game. However, if you have up-to-date information about stock market investment and the Nigerian stock exchange (NSE), you can minimise risk and maximise profits.
The first challenge now is that you have little to no knowledge of how to buy company shares/stock, let alone how the market works.
Keep calm, and stay with me. For you’ll get detailed information about the subject matter and learn the steps needed to ultimately achieve your goals –make money buying company shares in the Nigerian stock exchanges.
Luckily, the process of buying shares in Nigeria (and pretty much everywhere else) is not yours to do.
This is getting interesting, right?
It is the job of a registered stockbroker to do so. What you may only have to focus on is finding the right type of shares to buy and then selecting a stockbroker whose duty is to carry out all stock transactions for you.
Without further ado, let’s go into the steps on how to buy shares and invest in the Nigeria stock exchange.
Before you begin to buy shares in Nigeria, you must know about the stock exchange and the different types of market available.
What is a Stock Exchange?
A stock exchange is an institution where shares, stock, bonds, note and other financial securities are bought and sold by traders and stockbrokers. The stock exchange is also known as the securities exchange.
If a share, stock or bond isn’t listed on the stock market, it cannot be traded.
The stock exchange is the platform for primary markets where capital can be raised by corporations and governments. In other words, securities are created in the primary market and investors buy shares directly from corporations.
The stock market also serves as secondary markets wherein investors trade among themselves. In other words, investors sell their shares and other securities to other investors for money.
How to Buy Shares of Nigerian Companies
Hire a Stockbroker
To start investing in the stock market, the first step you’ll take is to hire a registered stockbroker.
Your stockbroker is the middle man between you and the stock market. His duty is to help you open an account and buy securities from the market.
In furtherance, your stockbroker will be responsible for trading your money and managing the sophisticated aspect of your investment.
Before this can be done, he’ll request for certain documents and information to know more about you. These will include your ID card/ driver’s license/ international passport, your bank account details, passport photograph, address, email address etc.
Open a CSCS account
After you have provided the required information and document, he’ll then proceeds to open your CSCS (Central Securities Clearing System) account. Without your CSCS account, you cannot buy shares or trade on the Nigerian stock exchange. Your CSCS account stores the record of your holdings and transactions.
Transfer Funds to Your Brokerage Account
Once it is opened, you’ll receive the account details from your broker. You can then transfer your investment capital to it. That is, send funds to your stock brokerage account to buy shares.
If you are in Nigeria, you can easily fund your stock brokerage account via bank transfer. If you reside abroad, there are several ways to do so but the easiest way is through international wire transfer. Terms and bank charges will, however, be included during this process.
Submit Your Trading Offer
The next thing is to start trading. But before you start buying shares, do diligent research to know which one you prefer.
After this, inform your stockbroker about the shares you want and the number of shares he should buy. Some brokers prefer you send them an email about your trading instruction while some will ask for a signed trade mandate form.
Your broker will then process your trade which usually takes a minimum of 4 days to get a confirmation after placing the trade order on the Nigerian stock market. The duration is determined by the type of shares, the liquidity of the stock market and whether or not the market is open.
After trade execution, your broker will send a contract note that indicates the trading price, charged fees and commissions.
The interesting thing about buying shares in Nigeria is that you can purchase it for as low as ₦10,000.
In actuality, this minimum starting amount depends on the amount set by the stockbroker or brokerage firm you hire.
The Nigerian Stock Exchange operates from Mondays to Fridays. During these days, the opening hour is 10:00 AM – 2:20 PM
However, pre-market trading time in the NSE is 9:30 to 10:00 AM. And there is now extended trading time after closing hour as a result of the electronic trading platforms available today.
If you have made the right purchase and the company you invested makes a profit over time, as a shareholder, you’ll receive your share of the profit in form of dividend.
There are several types of dividend:
- Cash dividend: Your dividend will be paid in form of money on an assigned date of payment.
- Stock dividend: Instead of paying you in cash, you get additional shares of the company. You, therefore, have more numbers of shares.
- Hybrid dividend: A combination of both cash and stock dividend.
If you’ve been following diligently, you’ll notice the use of the words ‘shares’ and ‘stock’. Let’s look at how these words relate.
Meaning of Share and Stock
A Share is a minimum unit a company’s capital is divided. It represents the percentage you own or invest in a company.
On the other hand, a Stock is a collection of wholly paid shares. So you become a stockholder when your shares are converted into stock.