The Nigeria stock exchange was brought into existence in 1960 and was known as the Lagos stock exchange at that time. In 2013, the exchange market had about 200 companies with a market total of N12.88 trillion. I will show you how you can make money from the Nigerian stock exchange market.
The Nigerian stock exchange market runs a true and orderly market that brings in contact African merchants and investors from around the world. Investing in the Nigeria stock exchange market as a novice is a very wise decision, you will make at least 4000% return on your investment. It is advisable to go for the short-term trading in the Nigeria stock exchange when you finally want to invest. The best way to make quick money from the Nigerian stock exchange market is by speculating.
Even as a beginner, Investing in the Nigerian stock exchange market is one of the lucrative investments you can do in Nigeria. But you should understand that you can also lose money at the same while you make money. I will show you the steps in a jiffy;
Below is the step by step guide on how to invest in the Nigerian stock exchange:
Make a decision on the type of stock you want to Invest
You cannot invest without making a decision on what you want to invest. You can either invest in exchange-traded funds, one man stocks or other varieties. It is, however, important to note that any type of stock can be bought through the stock brokerage account.
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Find a reputable stock broker
Your stock brokers act as the middlemen between you and the stock market. They take care of the difficult and complex part of your transactions and get their own commissions for their services towards you.
What your stock broker will do is to assist you in opening a Central Security Clearing System account. The CSCS will help you in purchasing stocks, it is not necessarily compulsory you buy stocks on your own, you can go through a stock firm.
If you are purchasing from the primary market, you are required to state the name of your stockbroking firm and your CSCS account number. And that is why having a stockbroker is so important.
On the other hand, if you are purchasing from a secondary market, it is a must you inform your stockbroker, then your stock broker will get the stock you want on behalf of you.
Open a Nigerian Brokerage Account/Investors account
If you make up your mind to invest in the Nigerian stock exchange market, you will need to open an investors account. Just like when you want to trade FOREX, an investors account is normally tied to your name. Your stock broker will help you open an investors account. The transactions that will be done will be written down in your name. Anytime your broker needs to buy stock for you, he purchases it into your account. To open a Brokerage account, you will need to:
Fill in the CSCS account form
The Central Security Clearing System registers the ownership of all Nigerian Securities using an electronic account. Moreover, When you ask any broker to assist you in opening a trading account, the broker will at first send you the CSCS form for you to open your account. After completing the form, you would be given a CSCS number that you would take to the stock trade. In addition, the CSCS number will make it easy for the CSCS to store the record of all stocks you do in Nigeria.
Fill in the broker account form
When you first contact the broker requesting for information on how to open your account, the account form will, therefore, be sent to you. In the form, you will have to put down your passport number or in any case your ID, also you are to fill in your bank details and the address of where you live.
Photocopy your passports
You will need to make a duplicate copy of your coloured passport-sized pictures, your ID and a new bill to verify where you live. On the completion of all these, you will then send the duplicate copies including the CSCS form to your broker. If you do not possess a valid passport, you can replace it with your driver’s license/
Send funds to your new brokerage account
You will need to send fund your account after opening a brokerage account. If you have not transfer funds internationally before, you can contact your broker for assistance. Your broker will help your funds deliver successfully. It is, however, advisable to wire transfer as the method of sending the fund.
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Submit a Trade Order
Earlier in this article, we talked about the type of stock you want to invest in. Before venturing into this stage, you should have made some enquires about what type of stock you want to buy. While a minority of brokers will choose to demand a signed trade mandate, Majority of brokers will all but demand you to send them an email with all your trade transaction. While this is done, it should be noted that a number of shares in the Nigerian stock market are illiquid. You should them put down a small price for all your transactions. This should be done in order to avoid paying more than what you thought.
After the completion of this, your broker will carry out the trade and send you a contract note. The contact information will contain the purchasing price, give out price also inclusive of the commissions and the fees charged. The whole transaction will take you at least 4 days before it is finally completed. To specify further, if you sold out shares, do not expect the return of gain before the 4 days complete unless you want to get extra charges for going too fast in the stock trade transaction.
How to Claim your Dividends From the Nigerian Stock Exchange Market
Collecting your dividends from the Nigerian stock exchange market is quite simple. Once you open your account, you should simply instruct your broker (in writing) that you would want to get paid from all your holdings into your trading account.
How you make money by investing in the Nigerian Stock Exchange Market
The game of making money from the Nigerian stock exchange is simple and at the same time dicey. It involves you making sure that you are aware of the rules of the game – should you decide to trade yourself.
All you need to do is to spot a good commodity in the market, predict its next movement. Then you buy, sell at the right time.
If you buy Dangote’s shares worth 30,000 at the price of 2.00 kobo per share; if at the end of 6 months, it appreciates to 5.00 kobo per share, it financially means that you’ve 5x your money your money.
Initially: 30,000 x 2 = 60,000
After 6 months
30,000 x 5 = 150,000 Naira
Rules of Investing in the Nigerian Stock Exchange Market
Never get influenced by others
A typical stock exchange investor is influenced by the actions of his/her friends, relatives and colleagues. This means that if everyone is investing in a particular kind of stock, there is a tendency for investors to do the same. But this strategy has bounced back severally in the long run.
If you don’t want to lose your hard earned money in the Nigerian stock exchange market, you shouldn’t get influenced by other’s decision. The rule stands that;
“Be fearful when others are greedy, but be greedy when others are fearful!”
Always make Informed Decision
You should proper research before investing in the Nigerian stock exchange market. The bad news is that it is rarely done. People just come around and hire some stock brokers to help them invest. The next result is that they lose all their money and go back to being broke.
Don’t invest in a stock because of the name of a company or an industry they belong to. It is not the right way to invest in the Nigerian stock market.
Invest in a business you have an idea about
If you have no idea about the business a company is into, don’t invest in such. Never invest in stocks, invest in the business you understand. In other words, before you throw your money into the stock market, make sure you know the business behind the stocks.
Don’t let emotions cloud your judgment
A lot of investors lose money in the Nigerian stock exchange market due to their inability to control their emotions – greed and fear in particular. Never use any of those emotions as a stock trader.
Expand your portfolio
One of the ways of getting success is the diversification of your assets and portfolios. The level at which you diversify your portfolio is dependent on the level of risk you are willing to take.
Remember to have some Savings
One of the first rules of investing is never to invest your life savings into any investment. You should have a reserve just in case anything happens to your investment.
I would advise that you shouldn’t dive into investing as a novice in the Nigerian stock exchange market unless you have millions that you can throw away for fun. You are making money as an investor in the Nigeria stock exchange boils down to making calculated decisions.
And finally, never let emotions becloud your judgements when it comes to stock exchange investments. If you can’t handle your emotions, hire an experienced stockbroker to help you. I wish you all the best!