Investing in the Nigerian Stock Market Explained
A Guide for Beginners
“Though tempting, trying to time the market is a loser’s game…” - Christopher Davis
Sometime in 2019, I became interested in the stock market. This was due to several reasons. First, I had started earning well as a full-time employee of a Nigerian bank. Secondly, I was curious about investments seeing that I needed to make good returns on my idle money. I had no tangible investments to my name in the first 6 months of my baby-boy lifestyle in Port-Harcourt.
I have this aunt of mine, who had invested in the stock market and would from time to time, tell me about her investment journey. Out of curiosity one day, I asked her to share the contact of her broker with me ( a broker is someone who arranges, negotiates, buys and sells assets on behalf of others). Then, I made a call and within 2 weeks, I invested my first 100k in the Nigerian stock market. The rest they say is history. Here are the 5 guides to purchasing your first stocks;
Research: It’s important you research the company before a purchase. Look at the financial performance ( revenue, revenue growth, operating profit (EBIT), Profit for the year). Understand the company’s present and future growth strategies. Know the market share, strengths, weaknesses, opportunities and threats. Be aware of the management and their track records. Look at the industry, economic indicators (budget, inflation, interest rates, exchange rates) and global markets.
Get a broker: When you are done with your research and you are ready to invest, get a broker. The brokers are only personnel licensed to buy and sell stocks. You have to create a brokerage account called a CSCS account with a broker (United Capital, Meristem, Cordros, Afrinvest, Stanbic, Vetiva) etc. Your National ID preferably NIN, proof of address, photograph and BVN are major requirements. It takes less than 48 hours, in my case, to create an account. Your broker will furnish you with a prospectus of the companies you want to invest in. You will get to know how to place an order for a trade and how long takes it to execute. My trades were usually executed within 24 hours of market activity.
Place an Order: Once you have opened the CSCS account, place an order through your brokerage account website or app. Your order can only executed during the official trading hours (10:00 to 2:30 pm). You can choose between a market order (buy at the current price) or a limit order (buy at a specific price).
Orders placed at the current price are usually executed faster since they match supply.
Monitor Your Investment: After purchasing the shares, you will get a notification to alert you when the order has been fully executed with your reference number. You have to stay informed and updated about your company’s performance. There are usually quarterly, and annual reports published on the company’s and NGX's website (https://ngxgroup.com). There are earnings calls during the period too where you can get to watch and hear top management speak about the company’s performance. Be abreast of any regulatory changes, management changes and economic policies that can tangle the share prices.
Speak to your broker if you want to divest or invest more money. Of course, every trade has a stamp duty and brokerage fee attached to it.
Enrol for E-dividends: I made a big mistake when I bought my shares. I did not know I had to enrol for e-dividends so the dividends in my first year were not paid to my bank account. It was kept as a reserve with my registrar. Inform your broker that you would like to enrol on e-dividends. If the companies you invested in have different registrars, you would have to enrol with each registrar. This form can be completed and executed on the same day.
Viola, you’re good to go! Once you complete these few steps, you’ve earned the right to call yourself a shareholder. This was how I became a shareholder at two Nigerian companies.
By the way, do you know my Q&A session holds tomorrow, Sunday, the 17th of August 2024? There, I would be answering, should I own a slice of these bank shares? Is it a good time to invest? How does this bank recapitalisation affect the stock market? How do I know when to liquidate or invest more? How do I calculate my weighted average cost? This and many more.
Date: Sunday, the 11th of August 2024 || Time: 7pm || Venue: Google meet
Link: https://calendar.app.google/1dZNZmEBKTRJ9U4U6
Cheers to a Profitable lifestyle,
TL.