Next to the Foreign Exchange Market, it is a very significant investment window for long term financial growth
and return for every individual (particularly women) and organisation.
In any five years, research has shown it gives returns that outpace inflation and better returns over most other financial investment overtime.
It is best for investors comfortable with long term investments and returns.
It is truly a "market" with its attendant value fluctuations dependent on forces of demand and supply.
It allows for easy entry and easy exit.
The Nigerian Stock Exchange was incorporated on September 15, 1960 and it commenced business on June 5, 1961 as
the Lagos Stock Exchange. In December 1977, it became The Nigerian Stock Exchange, with branches established in
different parts of the country. At present, there are seven branches of The Nigerian Stock Exchange. Each branch
has a trading floor. The branch in Lagos was opened in 1961; Kaduna, 1978; Port Harcourt, 1980; Kano 1989; Onitsha,
February 1990; lbadan, August 1990 and Abuja Area Office in 1999. Lagos is the Head Office of The Exchange.
The Exchange, which started with only 19 securities, traded on its floors in 1961, now has 260 securities made up of 17 government stocks/bonds, 49 industrial loan (Debenture/Preference Stocks and 194 Equity/Ordinary Shares of companies all with a total market capitalization of approximately N620 billion as at September 24, 2001. Most of the listed companies have foreign/multinational affiliations and represent a profile of the various sectors of the economy, ranging from automobile, banking, airlines, breweries, through pharmaceutical to agro-allied, publishing, textile, petroleum and insurance companies.
With the internationalization of The NSE, quoted companies can now access funds from international markets through Global Depository Receipts (GDR) or American Depository Receipts (ADR) etc. using their shares as underlying securities. Its operations are automated. Specifically, there is Central Securities Clearing System (CSCS) which takes care of clearing, delivery and settlement while trading has been changed from the Manual Call-Over System Automated Trading System (ATS), a computerized system.
It currently operates a T+3 settlement system and further details can be got from www.nigerianstockexchange.com
Regulators i.e. Securities and Exchange Commission (SEC), the Nigerian Stock Exchange (NSE).
Investors i.e. individuals, organisations, women, etc.
Spectators (e.g. some of you)
Banks and other Fund Surplus UNits e.g. Pension Funds, Insurance Companies, etc.
The stockbroker remains the most useful market operator to the Investors, as it is only through him/her that the investors can buy and sell shares on the stock exchange.
You can participate by buying shares through:
Primary Issue:- It is often advertised in the news media and with posters in banking halls and stockbroking offices. This is not a regular event.
Secondary Market:- This market occurs every working day, and all you need is give purchase orders to your stockbroker like APT.
Some Commitment (Money & Time):- Like all things worth doing, you need a quantity of this.
What are the key benefits of investing in shares?
Dividend Income:- A slice of the company's profit in proportion to the units of shares held.
"Free Share" - Bonus.
Saving Strategy for the future
Leveraging Benefits i.e. you can use it to burrow in the future.
Emergency backup i.e. as a safeguard for your financial future.
Right to attend Shareholders meeting and company's annual general meeting (AGM)
Right to vote during AGMs
Can give you a seat on a company's board
Disregarding common sense in investment decision
Unrealistic Short-Term Expectation
Dishonest Broker/Market Players
Poor/Unprofessional Advice (Friends, old wives tales)
Adverse Market Cycle
Change in Fundamental Company fortunes or key Economic Indices
Disregarding intuition and experience
Refusal to retain sound professional services or pay for profit making advice.
These are a function of many variables e.g:
It is a market and the cycle for each listed security is different.
The stocks or combination of stocks to buy will also depend on your short and long term objectives as well as how much money is available for this.
The general rule is a combination of stocks bought regularly over a period of time.
For a basic guide to list of available stocks and possible prices, you can use any of the daily papers.
In view of all this, you need to talk with a stockbroker or trusted adviser.
First, get a broker you can accept, comfortable with and afford to trust.
Read, Dailies, Books, Library facilities
Belong to or form an investments club.
The existence of the CSCS that has come with the automation of the capital market has enhanced transparency.
The Investors Protection Fund.
Established in 1960 as LSE and became NSE in 1977. it commenced business with only 19 stocks listed. Today it has
about 195 stocks listed.
In July 1998, Trading on Rights (Our First Derivative) commenced.
In April 1999, commenced Automated (Electronic) Trading System (ATS) on a T + 5 basis after 38 years of a manual trading system.
All shares index growth - 1990 (5672:76). 2001 (Crossed 11,00 mark)
ADB recent reports on market performance, 1st Africa, 3rd in the world (Total Return)
Cross border listing 1999 of two South African Firms. (M-NET/Super Sport).
Improved settlement period to T+3.
To enhance transaction transparency, it opened its e-portal in 2002
The Internationalization of the Nigerian Stock Exchange
The following are defining the potential and future depth of the market:
For 120,000 million people - only about 195 companies listed?
New company listing (local & Foreign).
Active Bond Market.
Democracy (an enabling corporate environment)
Current positive ratings by the International Financial environment.
It does not take long to be able to find out the following:
Competence:- Is he/she or are they competent? Do they know what they talking about?
Character:- Is he/she or are they credible? of Integrity? What is their antecedent?
Agreeable Terms:- Is the term of providing service agreeable to you?
A member firm's services are:
Buying and selling of securities (Shares and Bonds);
Helping the investor to plan his investments;
Research and advice on investment on which shares to buy or sell and when is the best time to do so;
Securities management (looking after your portfolio of shares).
And much more depending on their depth of expertise and financial clout.
When you buy or sell shares you pay a maximum of 4% as total fees. This covers charges of the stockbroking firm, VAT and those of all regulatory agencies. These are spelt out in the contract notes issued you by your stockbroker. Apart from this specific charges, all other fees for various services are as set by individual firms and hopefully subject to negotiations.
It may vary depending on their style of operations, but the most basic are the following:
A Receipt (for your cash or cheque)
A Broker; Contract Note (max of 2-3 weeks after the receipt)
A CSCS Statement (This is issued quarterly by the CSCS through your broker. You can also request for it independently as often as you desire for a fee payment of NGN100 only).
A regular statement of your account with your broker. The regularity depends on the volume of your transaction. (Please, do make time to go though this statement).
Buy and Hold Long Term (Three-Five years average: Best recommended strategy)
Buy on Bad news & sell on good news (Constrain Investing)
Sell too soon - Baron Rothschild
In all or any of these strategies, it will be more than helpful to work with a professional stockbroker.
You normally can buy or sell shares in lots of 100. When you give your stockbrokers the order to 'buy' or 'sell', he will buy or sell your shares. He will buy or sell them through The NSE's trading floor. The transaction is done on the best price in the market that time. You become the owner of the shares from the time the deal is done.After a few days you will get a broker's contract note.
Talk often with your broker
Keep an up-to-date file. Best if you can keep all information received on your computer.
Ask for these documents regularly (if you do not receive as and when due):- Receipt, Contract Note, CSCS Statement, Dividend Slips, Bonus Certificate.
Find a convenient way of ensuring you fund your investment account regularly. Often, timing of purchase can provide significant advantages and benefits.
Where you may not have the time to do all this by yourself, you may require a PORTFOLIO SERVICE.
All Certificates will be kept in one vault at this depository. Because all the share certificates will be in one
place, an electronic database is created to give all the shareholders' details. This way, share transactions can
be paid for very safely. This is another benefit of the CSCS.
In exchange , at the purchase of shares from the SECONDARY MARKET, a certificate is no longer issued. The CSCS issues a statement (similar to a bank statement) to all investors evidencing your holding in respective companies.
However, for purchase of shares through PUBLIC OFFERS and RIGHTS ISSUES, physical certificates are still issued. The same goes for Bonus offers.