Have you ever for once ask yourself that, how the hell can I invest in Nigerian Stock Exchange or how does the investors make money in the stock market?
The gospel truth is that, stock market in Nigeria and around the world is quite lucrative market, with trillions of dollars been shared on a daily basis. This huge sum is shared among the market participants daily also known as “investors” – which makes investing in Nigerian Stock Exchange one of the most lucrative businesses or investing idea in the country.
The sad part is people’s inability to comprehend the business pattern, terms and trends.
With that in mind, this article will walk you through the terminologies, how and where to buy stocks, and most importantly how to invest in the Nigeria stock exchange (NSE).
So. Let begin!
About the Nigerian Stock Exchange (NSE)
Back in 1960 what we now know as the Nigerian stock exchange was launched, with its original nomenclature being Lagos Stock Exchange. It was since changed in 1977 to its current name, since then, over 200 firms have been registered with a market capitalization of over N200 trillion.
The NSE is regulated by the Securities and Exchange Commission (SEC) – the agency responsible for checking abnormal practices and thereby taking necessary action to maintain credibility in the system. The NSE is current the biggest stock exchange in the continent (Africa), in terms of market capitalization.
With its automated trading system, it’s able to generate data which are displayed on a daily, weekly, monthly, quarterly and annual basis.
Most importantly, the NSE serves as a marketplace for buying and selling of shares. But not all firms are eligible to invest in Nigeria Stock Exchange because as a company, you’d be required to have not less than fifty shareholders and must be a public company.
Terms You Need to Know Before You Invest in the Nigerian Stock Exchange
Here are some terminologies to familiarize yourself with before dealing with stocks, and the Nigerian stock exchange;
- Dividend – This is the share of a firm’s profits given out to its shareholders, usually in the percentage of market share value. This value is decided by the top guns of the respective firm.
- Initial Public Offering (IPO) – For upcoming firms or startups, this is the initial share offered to the public in a bid to generate more funds, and also gain more investors.
- Debenture – It’s a form of debt that doesn’t require any assets or collateral, supported on by the creditworthiness of the issuer.
- Equity – Equity are shares owned by a company
- Market Capitalization – This is usually used in gauging the size of a company’s wealth. To get this value we have to multiply the current market price of a share with the remaining share.
- Risk – The term ‘risk’ in stock exchange is quite similar to what we all know it to be; this are typically the profit patterns, this is often put into consideration when investing
- Securities – It’s basically a documentation of possession of stocks, bonds, assets, and other forms of assets which is owned by an individual. Securities could be transferred at some certain point.
- Yield – Yield is usually measured in percentage, it’s the measure of returns on your investment.
So here are some of the basic terminologies to get accustomed with when trading in the stock market. As you delve in deeper, you’d get to discover other term.
Some requirements for getting listed on the Nigerian Stock Exchange
- Financial Statement
At least financial statement of account, stating all financial engagements in the last three years must be presented.
- Pre-Profit Tax
A form of tax before profit usually called pre-profit tax be presented, this should be for the last 3 years of at least three hundred million.
- Market Capitalization
The NSE requires a market capitalization of not less than 4 billion naira before enlisting in its floor.
- At least 3 years of operation
For any firm(s) seeking to be listed in the floor of the NSE, a proof of operations for the last 3 years must be presented, and also, that of its core investors.
- Registration
Any company seeking to appear on the floor of the NSE must be a fully registered LLC with the CAC.
There are other requirements which can be found on the NSE’s site – https://www.nse.com.ng
Now, let talk about investing…..
As I iterated earlier, this business is probably the most lucrative of all forms of investment business, and as such requires lots of guidance to master to tricks and best practices.
As lucrative as it is, you aren’t guaranteed of profit on your investment, so don’t just throw in your money yet and expect returns – there are certain patterns to follow.
How to Invest in Nigerian Stock Exchange (Like a Pro-investors)
1. Choose a company to invest in
This is probably one of the most important factors to consider, once you get this all wrong at the start, that’s it! Not all firms are worthy to investing in, or should I say buying their stocks in the NSE.
Before investing, you should take out time going through the company’s income, debt and credit profile, seeing their profit patterns. If you’ve seen a consistent trend of profit through your analysis, it’s a good sign to go ahead and invest. In a situation where that trend is missing, you could attempt to predict the future, will this business grow with time or not – this especially the case with startup companies.
If you’re able to get your predictions correct – positive or negative, your success or failure in stock trading is determined.
If you choose to invest in a startup, it may be difficult for you to predict. This is where you employ the services of a financial expert, with this your job just got easier.
· 7 best firms to invest in Nigerian Stock Exchange
I. Unilever Nigeria Plc
We all know about Unilever, it’s one of the oldest firms in the country but is still doing great. It wouldn’t be a bad idea in buying their shares as they do pay dividends to their holders.
II. Total Nigeria
Total is one of the top oil exploration companies in Nigeria, with branches spread all over the country. Getting Total’s share is one of the best investments you could make right now at the Nigerian Stock Exchange.
III. Nestle Nigeria Plc
Producer of some of the popular beverage drinks; Nestle has grown over the years and maintain its reputation in the Nigerian stock market as one of the best to invest in.
IV. Dangote Sugar Refinery
A subsidiary of company owned by the Richest Man in Nigeria, under the Dangote group. Dangote Sugar refinery has shown lots of potentials for growth with its steady and arithmetic growth pattern these past few years.
V. Guarantee Trust Bank
Yes, banks in Nigeria are one of the best firms to invest in the stock market and its trading games. But among these banks, GT bank is one good option.
VI. Zenith Bank Plc
Another bank in our list, Zenith bank is an award-winning Nigerian commercial bank and putting your money here is a pretty fair choice.
VII. Seplat Petroleum Development Company
This firm is concerned with the development of petroleum products in and around the country with seeing they have N15.32 as their price per share, it would be a nice good investment if you do.
N/B: As a beginner in this field, it’s much easier to invest in startups but don’t fall into such temptation as the result are highly unpredictable, you do not want that.
Now after finding a standard firm to invest with, what next?
2. Find an Expert trader
To invest in Nigeria stock exchange will require you to be guided by experts in the field. The best place to find expert traders are in broking houses. There are lots of these houses in the country but some of the best are; Meristem Registrars Limited, BGL limited, GTI Capital Limited, and so on.
I will write about these top brokers in my future blog post.
These firms listed above houses some of the best traders in the Nigerian stock exchange market today and you should check out any of them.
3. Now, Invest!
Committing money into any business is a critical decision that should be well thought out, the same goes with investing in Nigerian stock exchange (NSE). The stock market is characterized by fluctuation of prices, as price of company’s stocks are affected directly or indirectly by certain factors of the economy.
There are lots of risks involved in stock trading, especially as a beginner so one of the best counter measures for this is to invest in mutual funds. This type of funds is sold publicly in form of shares, it’s gotten from many companies. With this type of investment your risks are minimized.
When starting out, you’d want to get registered with a stockbroking firm in Nigeria, some of the best are listed earlier.
The main reason for this is that, you can’t just buy stocks and start trading on your own, the stockbroking firm will give you an account which would be funded with some money – basically money you’d be using for trading.
It’s also the duty of this firm to trade on your behalf, but it can’t be done without your permission. There are certain charges on your account by this firms, but not to worry the prices don’t vary as it’s regulated by SEC.
With all this in place, you could start buying and selling of company’s share listed on the NSE floor, this is done with the aid of your stockbroker. They’ll let you know if a share is cheap or expensive; they are experts, so they understand the terrain that comes with investing in Nigerian Stock exchange (NSE) much better than you currently do.
At some point, you may be required to hold your stocks, this is because the share prices have been predicted to rise in the future and this will bring you profit.
· 5 Best Stocks to buy at the Moment in the Nigerian Stock Exchange
- Access Bank
Since the merger with Diamond bank, Access has seen increased growth in its net profit and also interest profit. With this in the radar, experts believe that investing now will yield a good amount of profit in few months’ time.
- Dangote Sugar Refinery
A lot is expected from this outfit as we head into the new year and this is the right time to invest in such a reputable firm – although quite new in the industry, there’s no present competitor at the moment and this is a good sign.
- Jaiz Bank
Not your conventional commercial bank, but this Islamic bank has grown over the last few years to what investors can proudly put their money on. In 2019, the bank has grown in all aspects and yes, it’s one of the best places to invest in.
- Cadbury Plc
Cadbury is the manufacturer of some of the popular food beverages in the country and when 2019 is put in retrospect, Cadbury group has seen growth in its share prices and it’s best you invest now.
- Chams Plc
For users of smartcards you’d be familiar with Chams Plc – a business entity that provide smartcard facility for businesses and corporations. In 2019 alone, a 52% growth has been witnessed by the firms and experts believe the best time is now.
So that’s it – How to Invest in Nigerian Stock Exchange (and make profits!)
The stock exchange market, especially the Nigerian Stock Exchange could be a really complicated market – not your usual marketplace! This tips above will surely help you navigate its murky waters easily.
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