1. Stocks

How To Invest In Nigerian Stocks

Stocks are one of the most viable investment opportunities for the rich. To invest in Nigerian stocks, you need to understand this simple guide on stock investing. It also doesn’t matter where you are in the world. Anyone can trade Nigerian stocks from where they are.

Nigerians in diaspora can use this medium to understand and invest in Nigerian stocks. The value of the Nigerian stock market is growing everyday, irrespective of the economic situation of the country.

For those who have disposal funds they can allow to sit around for 10 to 20 years should explore the huge penny stocks potential of the Nigerian stock market. Investing a meager 1 million naira in Nigerian stocks today could be worth tens of millions in a few years to come.

 

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And don’t underestimate the come back opportunity for the Nigerian economy, which will trigger future stock appreciation.

Understanding Nigerian Stock Exchange

If you are new in stock investment, you may have a hard time understanding everything that goes on in the stock market. It’s the same for every stock market. You may not know everything about how stock market works. But make up your mind to start learning gradually.

I have also written another post on Steps To Make Money In The Stock Market. There’s so much to learn from that as a beginner.

Although, I have provided you with the basics that you need to know about how you can invest in the Nigerian stock market, you have to make conscious effort on your own to learn even more.

Choosing A Stockbroker

To start trading Nigerian stocks you need to choose a stockbroker or dealer. It’s only NSE accredited brokers you can use to buy or sell stock through the NSE central order book.

You are also to confirm brokers status with both the NSE and SEC (Securities And Exchange Commission) before selecting a suitable broker to represent your interest as an investor.

You should know who these stockbroking firms are. So, research and pick the best broker firm for your stock investment. Click Here to see List Of NSE Approved Stockbrokers.

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Cost Of Trading Nigerian Stocks

When buying or selling stocks in the Nigerian stock market, there are stipulated cost associated with each transaction. As an investor, you need to know the charges.

These costs of transacting Nigerian stocks includes the following:

  1. Commissions
  2. Fees

And the commissions and fees are standard across all brokers, usually assessed on a sliding scale. That is, for transaction amounts that are less than 1 million naira in value, you will pay the following costs percentage:

Buying = 1.86%
Selling = 2.19%

But if the transaction amounts exceeds 1 million, that’s a far larger transaction, the following commission and fees apply.

Buying = 1.49%
Selling = 1.82%

Trading Nigerian Stocks On NSE

Trading stocks on on the Nigerian Stock Exchange may not be exactly as that of certain world exchanges like the New Stock Exchange. The peculiarity of the Nigerian environment is also taking its toll on how Nigerian stocks trading works.

Every stock exchange in the world have their different procedures on trading their stocks. That’s the first thing you learn before investing in stocks in that exchange. That’s also why the Nigerian stock market has a process of trading stocks on it.

Invest first in learning about stock trading, especially about the exchange you want to trade on. You will be shock about how much you didn’t know from what you will discover.

Read books about stock market, especially about Nigerian stock market. You should also follow some popular Nigerian stock pages on social media. Follow this Facebook page: The Nigerian Stock Exchange (NSE) and Facebook group: Nigerian Stock Market Investors.

How To Become An Investor

There are 2 ways you can become an investor in the Nigerian stock market. According to The Nigerian Stock Exchange (NSE), they are the only ways you can start trading Nigerian Stocks.

  1. By Direct Account Opening Structure
  2. By Indirect or Custody Account Opening Structure

Direct Account Opening Structure:

  • Contact preferred domestic dealer (DD)
  • Complete account Opening KYC with dealer
  • Submit all the required KYC documents to dealer
  • Broker processes CSCS account Opening and gives Account details to investor
  • Investor can now trade (buy or sell) stocks on NSE
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Investor now chooses how he or she would want to trade Nigerian stocks. With a direct trading account, investors have two options to place stock orders, either to buy or to sell. It’s not like you are restricted to any of the options. You can choose to use the two options interchangeably.

The 2 options are:

  1. Remotely
  2. Through dealer

Trading Nigerian stocks remotely affords investors the privilege of sending order mandate through remote trading platform provided by dealer. This remote platform is directly linked to NSE central order book. While CSCS settles these trades into clients Account with dealer. And this process usually takes 3 to 4 trading days.

But when order is by dealer option, investors sends order mandate to the dealer to execute. While the dealer or broker sends clients orders through trading interface to NSE central order book. And it finally gets settled into clients account with dealer through CSCS. It takes the same duration, 3 to 4 Days.

Indirect or Custody Account Opening Structure:

  • Contact preferred domestic dealer (DD)
  • Complete account Opening KYC with dealer
  • Submit all the required KYC documents to dealer
  • Investor appoints a domestic custodian
  • Dealer is linked to a investor trading account
  • Investor buys or sells stocks on NSE through linked dealer

And when trading stocks, investor’s trading mandate is sent to both dealer and custodian. Dealer will always verify trade instructions with custodian to ensure access to account and availability of stocks or cash, depending on whether the trade is to buy or sell stocks.

So the dealer sends clients orders through trading interface to NSE central order book. And CSCS (Central Securities Clearing System) settles trade into clients Account with dealer. This whole process takes about 3 to 4 days settlement circle.

Tips On Indirect Account You Should Know:

  • Investors assets are with the custodian and not the dealer
  • Even though access is restricted, several brokers can still trade on the inventory
  • Access to securities are with custodian. Dealers can only get access from the custodian
  • And the stocks and cash settlements are settled with the custodian
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KYC Requirements And Documentation

To open your Nigerian stock trading account, you will need to provide some KYC documents. Apart from filling some forms, they are backed up with proof of documents. Know your customer (KYC) is an important stock trading account opening requirement.

  • Fill the CSCS Account Opening Form
  • Complete the Broker’s Account Opening Form
  • Submit 2 color passport-sized photos of yourself.
  • Submit a Photocopy of your passport or driver’s licence or any government recognized identity card
  • Submit a Photocopy of a recent utility bill as proof of your residential address

Some of the documents required are to prove the identity of the investor. The passport-sized photos and your approved identity card are to prove you are the actual person requesting to open a stock trading account. While the utility bill is a way to confirm the address you provided to be your current residential address.

Conclusion

The stock market is a place the rich create wealth over time. Some value stocks can be purchased as penny stocks, at a very low price point, and within time the value appreciates at an unprecedented rate.

Stocks are the type of investment that the value increases over time. And it gives you rights to earn profits from publicly listed companies, rather than starting your own business from the scratch.

The strategy of growing wealth in the stock market is by starting from where you are. Even with initial small stocks, you can gradually increase your stock portfolio by continuously trading for more stocks to multiply your investment.

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