How to Buy Shares in Nigeria
How to Buy Shares in Nigeria revealed. We tested and verified the best way to buy Shares in Nigeria.
This is a complete guide on how to buy shares in Nigeria.
In this in-depth guide you’ll learn:
- What are Shares?
- How to buy Shares in Nigeria?
- How to buy shares for beginner traders?
- Which broker can you use to buy shares?
- Which broker offers a signup bonus for first-time traders?
- Which brokers offer a $5 (2 076 NGN) minimum deposit for investing in shares?
- How many shares should you buy?
And lots more…
So if you’re ready to go “all in” with the shares for Nigerians…
Let’s dive right in…
👉 Definition: a share is a percentage of ownership in a company, or a financial asset. Investors who hold shares of any company are known as shareholders.
How to Buy Shares in Nigeria (Updated 2023)
A comprehensive guide to buying shares in Nigeria step-by-step
Step1: Evaluate Brokers and Carry Out extensive research on them
👉 Any other transactions you make cannot be compared to the Nigerian Exchange Group purchase. You cannot compare buying shares from NGX to buying groceries, where you go to the supermarket and place goods in a shopping cart. You cannot do this by visiting the floor of NGX and adding shares into a basket.
👉 You will need a stockbroker if you want to purchase shares listed on the Nigerian Exchange Group. Brokers’ fee schedules, customer service, and financial advice may vary widely and are factors that you need to evaluate when you evaluate different stockbrokers.
👉 Because of this, you must choose a stockbroker who is in sync with your specific investment goals and requirements. When you place a trade with a stockbroker, the stockbroker will finish the deal for you after you have created an account with them, and you will have to factor in their costs for facilitating the trade.
👉 A stockbroker is a designated agent is a dedicated agent that will purchase or sell stock on behalf of an investor. Broker-dealer firms that are members of the Nigerian Stock Exchange and registered with the Securities and Exchange Commission (SEC) are the only entities that can deal in shares on the NGX. Thus, when you are evaluating brokers that offer NGX access, you must verify their regulation and registration with NGX and SEC.
Step 2: Register an Account with your broker of choice
👉 You become an investor the minute you begin trading on the Nigerian stock market. An investor’s account is subsequently required to buy and sell shares.
👉 A CSCS account, into which your equities would be transferred, is often required to register a share dealing or trading account. A stock trading company or broker will set up an online account for you and you will subsequently receive a CSCS account number.
👉 This number can be found on every stock or share that you purchase, allowing CSCS to track your holdings. To complete the application form, you will need additional documentation such as:
➡️ A valid identification document such as a Government-issued ID that shows your identification number, an international passport, driver’s license, or a national identity card.
➡️ Two coloured passport photos.
➡️ A copy of your most recent utility bill – is required to verify your physical address. You can use any electricity or water bill that is not older than three months.
➡️ Once you have completed the CSCS form, you need to provide these documents via email.
👉 Each time your broker wishes to purchase shares on your behalf, they do it using your share trading or dealing account that has the CSCS number. The broker’s share dealing or trading account can also be used to purchase bonds, as can any number of other financial instruments.
Step 3: Funding your new trading account
👉 Once you have registered an account and it has been approved, you can now fund the account, giving you the necessary capital to purchase shares.
👉 Every broker offers typical funding options such as bank transfer, bank wire, credit and debit card payments, and a range of electronic payment gateways such as Neteller and Skrill, to only name a few.
👉 Depending on the broker, deposit fees could be charged on certain payment methods. In addition, depending on the deposit currencies allowed by the broker, there could be currency conversion fees charged if your deposit currency must be converted to match your base account currency with the broker.
👉 These are details that you must verify with your selected broker before you start the process of registering an account.
Step 4: Research different companies and their stock to decide which you want to purchase
👉 When doing your research, avoid being overwhelmed by the deluge of data and the real-time movements in the market.
👉 Once you have identified companies, you can start evaluating their stocks. You can do this by accessing SEC filings of quarterly earnings, or other documents and information that can indicate whether the company is a worthy option.
👉 This could be a very overwhelming and daunting task for beginners, which is why beginners must ensure that they gain enough knowledge before they start trading shares. Beginner investors in Nigeria can also consider buying exchange-traded funds (ETFs) instead of choosing individual shares.
👉 ETFs are baskets of shares that originate from different companies that are spread across different industries. Not only does this help minimize the risks involved with choosing individual stocks, but it also helps beginner Nigerian investors diversify their investment portfolios.
Step 5: Choosing the number of individual shares to buy
👉 At no point should you be under the impression that you need to acquire a certain number of shares or your whole portfolio at once. Begin with purchasing a single stock to get a feel for what it is like to own an individual stock and whether you are willing to risk more.
👉 As you gain more experience, you can invest more and build your portfolio. A new option from online brokers enables buyers to purchase small portions of shares rather than the full unit, making fractional equities an appealing choice for inexperienced stock investors.
Step 6: Place an order to purchase shares
👉 Two of the most common orders when buying and selling stocks are:
➡️. Market Order – At the time of purchase, you indicate that you want to buy or sell at a price that is at least equal to the current market price. Trying to acquire a million shares and attempt to gain control is impossible with a market purchase since there are no price restrictions on the transaction. When buying and selling shares, you will find that the price you pay and the amount you receive when you sell differ. This is attributable to the fact that bid and ask prices fluctuate during the day.
➡️. Limit Order – Investors who buy and sell smaller trading equities, which are more likely to be based on spreads because of investor activity, may benefit from using limit orders. When the stock market is volatile or when the price is more important than order fulfilment, they make an excellent investment.
👉 Other typical orders that you will come across when buying and selling shares in Nigeria include:
➡️ All or nothing (AON) orders can only be completed if all the equities you wish to trade are within the price you have selected.
➡️ A “Good For the Day” (GFD) order expires at the end of the trading day, regardless of whether it has been completely fulfilled at the time of the order’s placement.
➡️ Orders marked “good till cancelled” (GTC) are valid until either the customer cancels them or the order itself is cancelled.
👉 Buying shares in Nigeria is a very simple process that can be done easily, even by beginner Nigerian investors and stock traders. To buy shares, Nigerian investors will be connected to the Nigerian Exchange Group (NGX), the local and official stock exchange in Nigeria.
👉 To purchase securities in either the primary or secondary Nigerian market, investors must work through a stock or CFD broker who has a registered trading license with NGX for account registration, general dealing, and trading operations.
👉 In addition, Nigerian investors, or any other investors who are interested in buying Nigerian shares, must hold assets that are domiciled with the Central Securities Clearing System (CSCS) through their broker.
A Brief Introduction to Shares
👉 Shares are fractional ownership units in a firm. While most businesses issue shares, only publicly listed corporations’ shares are exchanged on stock markets.
👉 Shares represent a company’s equity capital, and there are two primary kinds of shares: ordinary shares and preferred shares. Therefore, the terms “shares” and “stock” are often used synonymously.
👉 The two most common types of shares are:
➡️ Common shares provide voting rights and the possibility of capital appreciation and dividends.
➡️ Preferred shares do not appreciate but may be redeemed at a discount and pay regular dividends.
Understanding how shares work
👉 A company’s founders can choose between issuing common and preferred shares to investors when founding the corporation. Investors purchase ownership interests in companies in return for cash that is then used to fund the company’s growth and operation.
👉 While debt capital is legally obligated to be repaid to investors in the form of interest payments or dividends, equity capital does not have this requirement. Every company, from the smallest of partnerships to the world’s largest corporations, issues stock.
👉 Stock in privately held firms or partnerships is often owned by the company’s founders or partners. Shares of enterprises are traded on the stock market as they grow and attract new investors. Among the prominent investors in start-ups can be close friends and family members, in addition to angel and VC investors.
👉 If the company continues to grow, it can seek further equity capital through an Initial Public Offering (IPO). To become publicly traded and listed on a stock market, an initial public offering must be completed. Most companies in Nigeria issue stock that are traded on the Nigerian stock market.
👉 Having a residual claim on the company and its earnings provides shareholders with the opportunity to increase their capital as well as their dividend pay-outs. Additionally, common shares provide voting privileges to their holders, giving them greater control over the business.
👉 Voting rights allow shareholders of record to vote on specific company operations, elect directors, and approve the issuance of additional securities or dividend payments.
👉 If the company ever goes public with fresh shares, stockholders of certain classes of common stock have the option to buy them before everyone else.
👉 Instead of providing considerable market appreciation or voting rights in the corporation, preferred shares typically provide neither. But this kind of stock frequently has defined payment terms and regular dividends, making it less risky than conventional stocks.
👉 Since preferred stock takes precedence over ordinary stock if the corporation declares bankruptcy and is required to repay its creditors, preferred shareholders get paid before regular shareholders but after bondholders. Preferred shareholders are less risky than normal shareholders since they are paid first in the case of bankruptcy.
Why should you buy shares in Nigeria?
➡️ Equity returns have historically outperformed the returns on cash or fixed-income assets like bonds over lengthy periods. Stock prices, on the other hand, fluctuate over time. Overall, this stock market volatility tends to average out, so investors may want to consider a long-term equity portfolio view.
➡️ Taxes and inflation may influence your wealth. The long-term tax advantages of equity investments may help mitigate or even avert the negative consequences of taxes and inflation.
➡️ Others reward shareholders in the form of dividends or other special payments. Because of the favourable tax treatment of equity investments, these payments may offer you monthly investment income and so increase your return on your investment (ROI).
Overall Best CFD and Forex Broker in Nigeria
👉 We chose Exness as the overall best CFD and Forex Broker in Nigeria based on the range of retail investor accounts, low-cost trading and non-trading opportunities, educational materials, and the MetaTrader 4 and MetaTrader 5 desktop, web, and mobile trading apps for Nigerians.
Best Proprietary CFD Trading Platform for Nigerians
👉 We chose Plus500 not only for its proprietary trading platform but also for the range of markets that the broker offers Nigerian traders. With Plus500, Nigerian traders and investors have access to over 2,000 instruments that they can trade through powerful, innovative trading software.
Largest range of Stocks and Stock CFDs for Nigerians
👉 IG is our #1 choice for this category because the broker offers over 17,000 financial instruments that can be traded through a choice of trading platforms, both proprietary and third-party. With IG, Nigerian traders have the assurance that their funds are safe, that they can expect some of the best trading conditions, and that they can trade across several stock exchanges in the world.
Best ECN Forex and CFD Broker for Nigerian Retail Traders
👉 Pepperstone is not only one of the largest forex and CFD brokers, but one of the best that provides ECN trade execution, which ensures that Nigerian traders can expect razor-thin spreads, low commissions, and a safe, fair, transparent trading environment.
Best Social Trading Platform for Nigerians
👉 eToro is one of the most popular names in the forex and CFD industry, which is why we assign it as the best social trading platform for Nigerians. eToro is a leader in providing the best social trading software, allowing beginner traders to access the trades, opinions, insights, and ideas of professional Nigerian stock traders.
What is a stock?
A stock is a unit of a share of a company in Nigeria that is traded publicly on the floor of the Nigerian Exchange Group (NGX).
What is the difference between shares and stocks in Nigeria?
While the terms “share” and “stock” are used interchangeably, there is some difference between them. “Stocks” is a very generic term that is used to describe a piece of ownership of more than one company. “Shares” refers to a more specific number of units of ownership in a specific company.
Where do Nigerian shares come from?
Every publicly-traded company has shares that are listed on the Nigerian Exchange Group. Investors can buy and sell these shares through a stock or CFD broker who is registered with NGX.
Can I buy any number of shares that I want in Nigeria?
All financial markets have a limited amount of supply and demand. Companies have certain limits on the number of shares that are outstanding and only a portion of this is offered to investors. If a company only has 2 million outstanding shares, it means that you and other investors can only buy 2 million.
Can I buy shares from the Nigerian Exchange Group on my own?
No, you cannot. You can only purchase shares from the NGX through a stockbroker or a CFD broker.
Is it easy to invest in the Nigerian Stock Market?
Yes, it is easy to invest in Nigerian shares if you work through a well-regulated broker who offers access to Nigeria’s stock market.
Is stock investment suitable for Nigerian Beginner Traders and investors?
Yes, buying stocks is an activity that is suitable for beginner investors and traders in Nigeria.
👉 No matter how diligently we strive to maintain accuracy, the overall stock market is a volatile environment that may change at any time, even if the information supplied is correct at the time of going live.