Whether you are a major investor or a smaller-scale one, numerous investment options are accessible in Nigeria, with Nigerian stocks being one of the viable choices.
Stocks signify ownership in publicly traded companies. When you acquire stocks, you are essentially obtaining a stake in that company and becoming a shareholder.
Nigerian Stocks are traded on stock exchanges such as the Nigerian Exchange (NGX) and NASD OTC Securities Exchanges, where investors engage in buying and selling
The price of a stock is determined by various factors including the company’s performance, market conditions, supply and demand dynamics, economic trends, and investor sentiment.
Investing in stocks offers potential for capital appreciation as the value of the shares can increase over time. However, it also involves risks as stock prices can be volatile and influenced by numerous external factors beyond a company’s control.
The Nigerian Exchange in 2023 appreciated by 45.9%, as stocks provided some of the best investment returns in the country last year.
Some of the equities traded in the market appreciated by as much as over 1000%, 700%, 400%, and 200%, while some recorded no capital gain throughout the year.
Like other capital markets across the world, the NGX has a challenge. The market is more open to institutional investors, leaving out regular Nigerians who are more prone to choosing unsafe and riskier investment options.
In 2023, companies owned by billionaire businessman, Abdulsamad Rabiu (BUA) gained N2.3 trillion in market capitalization, even as BUA Foods appreciated by 197% during the year. Also, companies led by Tony Elumelu gained N1.6 trillion during the year.
These figures highlight the level of returns that accrued to some Nigerian individual investors who own stocks in the Nigerian Exchange.
Nairametrics has described simple steps for ordinary individuals on how to invest in Nigerian stocks in 2024.
1. Open a brokerage account
The first step in investing in the NGX is opening a brokerage account with one of the approved stock broking firms in the country. Currently, there are over 100 active stock broking firms, with the most popular being CardinalStone Securities, Meristem Stockbrokers, Afrinvest Securities, CSL Stockbrokers, Stanbic IBTC Stockbrokers, Calyx Securities, and FBNQUest, among others.
To do this, you’ll have to fill out an application and provide certain documents such as;
- Means of Identification (Drivers’ licence
- Bank account details (including your BVN)
- Passport photos, signatures (if it’s a personal account), and next of kin information. This process usually takes less than 48 hours, especially if you already have a bank account.
To make this step easy, you can use an online trading platform. Some of the registered stockbrokers in Nigeria have trading apps that allow for easy access to the stock market.
Some of these trading apps include FBN Edge by FBNQuest, MeriTrade by Meristem, and Stanbic IBTC Stockbroking, among others.
With these apps, you can open a brokerage account from your mobile devices, make trades in the NGX, get real-time information about stocks, and invest in mutual funds.
If you open your brokerage account with these apps, it will take between 24 and 48 hours to verify your KYC details, then you can start making trades in the NGX.
2. After opening an account
Once your account is set up, you’ll receive a unique Clearing House Number (CHN) for your investments. To start trading, you just need to deposit money with your stockbroker and ask them to buy shares for you.
They’ll usually communicate with you through your registered email. But using their online platform is easier – it lets you handle buying and selling stocks by yourself.
With these online portals, you can make bids or offers, and they’re usually sorted out within seconds. Your broker will also email you when you place bids or offers, and once the transactions are done.
3. Register with CSCS
The Central Securities Clearing System Plc (CSCS) serves as the authorized entity responsible for central depository services, clearing, and settlement of transactions within the Nigerian capital market.
For individual investors looking to engage in trading Nigerian stocks, it’s advisable to register with CSCS, however, it is not necessary.
Consider CSCS as a vast storage facility for all the accounts handled by stockbrokers in Nigeria. Having an account with CSCS provides you with a personalized window to monitor your investments.
It’s akin to having an individual perspective on the stocks you possess, distinct from the information presented by your stockbroker.
Access to CSCS is not without cost; individual investors are required to pay N3,055, corporate investors N6,110, and stockbrokers N61,103 for the privilege.
4. Withdrawals
To withdraw funds from your online brokerage app, visit the website and select the withdrawal option. Certain brokers may request your email to transfer the money to your bank account. It’s important to remember that the funds will be sent to the bank account provided during the signup process.
What you should know
There is no tax imposed on share trading in Nigeria unless the shares amount to N100 million or more. In such cases, a capital gains tax of 10% will apply.
Upon the success of your bid or offer, transaction fees will be incurred. These fees come in two categories: statutory fees directed towards regulators and fees designated for your broker. While statutory fees remain constant, broker fees can vary, ranging from 1.5% to 1.8% for each transaction.
In Nigeria, the NGX typically commences at 9:30 am with pre-markets.
This period allows for placing bids or offers and provides insights into how stock prices may open when the market officially starts. Pre-markets conclude by 10:00 am, marking the commencement of the full trading day. The market officially closes at 2:30 pm.
