This article provides a step by step guide on how to invest in the Nigerian Stock Exchange. We will also highlight a number of factors peculiar with the Nigerian stock exchange that we think you should know before investing.
Who is this article for?
- If this is your first time of investing in stocks, then this is also for you
- If you just read a book about investing in equities and feel this is the best time for you to test the waters, then this is for you.
- If you have been inspired by some of the things you read online about stocks and wish to invest in Nigeria’s stock market, then this is for you.
- If you are interested in investing in the Nigerian stock exchange and wish to get a fair and balanced insight into what to expect, then this article is also for you.
What is the official market for trading stocks in Nigeria?
In Nigeria, you can only buy and sell shares of publicly quoted companies solely from the Nigerian Stock Exchange which is based in Lagos. However, if you want to trade in equities of private companies, then the National Association of Security Dealers Over- The-Counter (NASD OTC) is the market for you.
How do I start?
Before you start trading equities in Nigeria, you will need to open a brokerage account with any of the approved stock broking firms in Nigeria. Upon application, you will be required to provide a means of identification, bank account details including BVN, passport photographs, signatures of account holders, next of kin details (if it is a personal account) etc. It takes less than 48 hours to open an account provided you have a bank account. Some stockbroking firms also have online trading platforms, meaning you do not need to visit the stockbroking firm physically. Just visit their portals and upload all the information that they need.
What else do I need to have?
We recommend that you open a Central Securities Clearing System (CSCS) account. CSCS is a market aggregator that warehouses all the accounts created and maintained by all stockbrokers in Nigeria. By owning a CSCS account, you can also view your portfolio independent of your stockbrokers and see what stocks you own. This is important as it helps you mitigate fraudulent activities. It cost between N2k and N5k per annum.
How do I start trading?
To start trading in equities, you are expected to have opened a stockbroking account. You will be given a Clearing House Number (CHN), which is unique to your portfolio. To trade, simply deposit money with your stockbroker and instruct them to purchase shares for you on your behalf. The means of communications is typically with your registered email. However, it is easier using their online trading platform, which allows you to buy and sell stocks on your own. Through online trading portals, you can place bids or offers which usually terminates within seconds of being received. You should also get emails from your broker once you place bids and offers, and when the transaction goes through.
Transaction fees are charged any time your bid or offer goes through. There are statutory fees that you pay to regulators and those you pay to your broker. Statutory fees are fixed while broker fees vary between the range of 1.5% and 1.8% per transaction.
There are no capital gains taxes on buying and selling of equities in Nigeria.
Clearing of funds
When you buy or sell stocks, it usually takes about 4 days before the entire transaction is concluded. In the NSE, clearing and settlement is T+3.
After you sell equities, your cash remains in the account of the broker till you request for a withdrawal which takes within 24 hours to be completed. To withdraw using an online brokerage account, just visit the portal and click withdrawal. Some brokers also require emails for your withdrawals to be paid into your accounts. Remember, the account where your cash will be credited is the bank account you provided when you registered.
The Nigerian Stock Market usually opens for trading at 9.30am for pre-markets. During pre-markets, you can place bids or offers and catch a glimpse of how the prices of stocks and the market as a whole might open officially. Pre-markets close by 10.00am and trading commences immediately. The market then officially closes at 2.30pm. You can read about happens at 14.29 here.
The Nigerian Stock Exchange also has a number of market segments that represents different liquidity levels. They are the Premium Board, Main Board, and the Alernative Stock Exchange Market ( ASEM). The Premium Board includes the most capitalized stocks on the exchange: Zenith Bank, FBNH and Dangote Cement. The main board includes about 190 stocks and is as liquid as the Premium Board. The ASEM is a market for smaller stocks and is highly illiquid. This means you might not see the stocks to buy and even if you buy, there are very few buyers available.
Just like most stock exchanges in other parts of the world, the Nigerian Stock Exchange also has indexes. The first is the All Share Index, which is a broader representation of all stocks. It includes all the stocks on the exchange and tracks their performance daily. We also have sub-indexes for sectors such as banking, insurance, consumer goods, oil and gas etc. We also have the NSE 30, which is Nigeria’s own equivalent of the Dow. It tracks the performance of the 30 most capitalized stocks on the exchange.
Data and information
To have a robust stock, you will also need to have data you can use. The Nigerian Stock Exchange is not the best with data, however, there are a few you can get to start with. Companies publish their results and other corporate information on the website of the NSE. Results are published quarterly by companies and those who do not comply are fined accordingly. You can also check their investor relation section of each company’s website
You can also get closing day prices on the website of the NSE or from your broker websites. In fact, you are better off subscribing to newsletters from your broker for more detailed market information.
What about dividends?
Apart from capital gains, investing in companies quoted on the Nigerian Stock Exchange also allows you to earn some returns in the form of dividends. Dividends can either be paid in cash, stocks (script dividends) or a hybrid of cash and stocks. Cash dividends are now paid electronically into your bank account. To ensure that you receive your dividends, you are expected to visit the registrars for the stocks you own and provide them with your bank details. They will also ask you for means of identification as well as other documentation. Once you are done, you get your dividends as soon as it is paid by the company. Script dividends are also credited to your CSCS accounts by the registrars.
Pre market times were adjusted in 2018. Prior to that, pre market began at 9.30 and ended at 10am. Market makers then placed bids till 10.15am, when trading opened for the entire market.
CBN reveals framework for the N75 billion Youth Investment Fund
The Nigerian Youth Investment Fund will be funded through the NIRSAL MFB window of the CBN.
The Central Bank of Nigeria (CBN) has revealed the implementation framework for the Nigerian Youth Investment Fund.
This was disclosed in a publication by the Development Finance Department under the auspices of the Central Bank of Nigeria.
The CBN stated that the Nigerian Youth Investment Fund (N-YIF) would be funded through NIRSAL MFB window, with an initial take-off seed capital of N12.5 billion.
The N-YIF aims to financially empower Nigerian youths to generate at least 500,000 jobs between 2020 and 2023.
Objectives of the scheme:
Improve access to finance for youths and youth-owned enterprises for national development.
Generate much-needed employment opportunities to curb youth restiveness.
Boost the managerial capacity of the youths, and develop their potentials to become the future large corporate organizations.
Explore Data on the Nairametrics Research Website
The fund targets young people between the ages of 18 and 35 years.
Beneficiaries of NMFB, TCF and AgSMEIS loans, and other government loan schemes that remain unpaid are also not eligible to participate.
Individuals (unregistered businesses) shall be determined based on activity/nature of projects subject to the maximum of N250,000.
Registered businesses (Business name, Limited Liability, Cooperative, Commodity Association) shall be determined by activity/nature of projects subject to the maximum of N3.0 million (including working capital).
The tenor of the intervention is for a Maximum of 5 years, depending on the nature of the business and the assets acquired, of which interest rate of not more than 5% under the intervention shall be charged annually.
The Federal Ministry of Youth and Sports Development (FMYSD) will collaborate with relevant stakeholders to identify potential training for training/mentoring.
The youths that are duly screened (and undergo the mandatory training where applicable) shall be advised to login to the portal provided by the NMFB to apply for the facility.
Paystack partners Google to empower SMEs in Nigeria, Kenya, and South Africa
Paystack partners with Google to empower over 500,000 SMEs in Nigeria, Kenya, and South Africa.
Tech startup, Paystack has disclosed that it partnered with Google to aid over 500,000 Small and Medium-sized enterprises (SMEs) in Nigeria, Kenya and South Africa.
This was revealed via its Twitter handle.
Shola Akinlade, Founder of the company, stated that the partnership would enable the reliability of their work, “which would guarantee that all businesses paid via Paystack are thoroughly checked for legitimacy and credibility.
“In a low-trust environment like Nigeria, where many people are paying online for the first time, it’s important to deliver a safe, fraud-free experience, and this is a responsibility that Paystack takes extremely seriously.”
Explore Data on the Nairametrics Research Website
⚡️ Hi team, we partnered with our friends at @Google to help over 500,000 SMEs in Nigeria, Kenya, and South Africa restart, recover and digitise their businesses with new tools, financial support, and training.
Get started here 👇🏾 https://t.co/0fdVl4ZUBp
— Paystack (@paystack) October 28, 2020
(READ MORE:Paypal to offer Cryptos by early 2021)
Why it matters: Paystack’s partnership with Google is to help SMEs to grow and digitise their businesses with new tools, financial support, and training. This would also help business communities in Nigeria, Kenya, and South Africa to rapidly grow.
What you should know: Google is an American multinational technology company that specializes in internet-related services and products.
Nairametrics reported that the company had a partnership with Truecaller in 2018 to aid in the facilitation of online payments across Africa. The deal states that Paystack will use Truecaller’s database of verified phone numbers to authenticate payments for transactions executed on its platform.
Click here to apply.
Curfew: How to plan for a financial emergency
To ensure that you are prepared for a financial emergency, here are some basic decisions you have to take from the onset.
Life has its ways of generating unforeseen emergencies that leave us stranded. You cannot exactly prepare for some of these incidences despite your dedication. However, unlike other emergencies, a financial emergency is something you can actually plan for and work towards. Hence, the question of how to plan for a financial emergency is very vital.
The sudden declaration of curfew across several states in the country indicates that things could happen when you least expect. Traders who earn income from daily sales were the most affected; especially, the ones without laid down plans. Some white-collar workers too got a watered-down salary due to the situation, as the company made little or no profit.
However, to ensure that you are prepared for the next wave of sudden income blockage, some basic decisions you have to make from the onset are:
- Set up an emergency fund account: This is your most assured way of preparing for financial emergencies. It is non-negotiable. At every point, you should always have some money specially set aside for sorting bills in case of financial troubles. Although this seems like an obvious thing to do, in reality, most individuals do not have one. Financial experts recommend that the set-aside sum should be able to cater for at least 3 to 6 months of your basic expenses.
- Ensure you stay debt-free as much as possible: When financial difficulties kick in, what becomes a burden is the regular payment obligation you have to make. Remember, there are already basic non-negotiable expenses that you have to meet, and adding debts makes it much worse. If you are currently in debt, channel your resources to pay back in time. Also, focus on paying debts with the highest interest rate first.
- Slash down your expenses: As soon as the crisis kicks in, the first thing for you to do is to reevaluate. Run through your standard expenses and remove the wants. In a time like this, only the needs should stand. Keeping your expenses as low as possible would help you thrive better.
Having understood how to prepare for financial emergencies, it is also critical that you understand how to deal with them. Preparation and dealing with the situation itself are two different things.
Here are some tips on how you can deal with the current financial situation:
- Be critical about every financial decision: Financial debacles are mentally stressful and could cause you to make poor decisions. This is why, at every moment, you should think properly before making any money decisions. Practicing this would greatly help you steady the ship. Ask yourself what long-term consequences would this have on my credit and finance? If disastrous, you know what to do.
- Explore other potential streams of income: One of the fastest and easiest ways to navigate financial emergencies is to explore other streams of income. What else can you do to make extra income that would help deal with the present situation? In real-time, looking for a side hustle while going through financial difficulties is not easy, but if you can pull it off, it would help a great deal.
- Talk to a financial advisor: Lastly, you can always visit a financial advisor for a professional view on your current crisis. However, this may be a little tricky because you would have to pay for their services. But the right person can help you get your finances in check from the very first day, as opposed to you trying to put things together by yourself.
Emerging successfully from financial emergencies depends on how well you can prepare ahead, steady your ship, and navigate the terrain. The good news is that if you are one of those who planned early enough, you are less likely to stay long there than those who are unprepared. Remember that your goal should not be to learn how to deal with the difficulty as it comes, but rather focus on being prepared ahead.