The 5 Powerful Things You Absolutely Must Know Before Investing in the Nigerian Stock Market - Nigerian Stock Market - Nigerian Stock Exchange -


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The 5 Powerful Things You Absolutely Must Know Before Investing in the Nigerian Stock Market



So now you have your $1,000 and you are thinking of investing them in the Stock market?  There are very many benefits that accrue in investing in the stock exchange. One of the main reasons of investing in the stock market is the ultimate chance to grow your money. Nigeria is the African economic giant which boasts of a steadily growing economy. The country also has a young population. 




The stock market in Nigeria is the place where many investors make huge returns. You can make a lot of money simply from speculation. You can as well get a stock unit of let’s say $1,500 and quickly double your money. However, before you invest your money in the Nigerian stock market, there are several things that you need to consider.





In this brief, I am going to give a list of factors that you need to consider before investing in the Nigerian stock market


1...Find the best Nigerian stocks to invest in

This is the first thing that every stock investor needs to know before you get down and set a certain amount of money for investing in the stock exchange, you have to decide whether you are going to invest in individual stocks, exchange traded funds or other vices. The Nigeria stock exchange is characterized by the two investable stocks.  These two types of stocks exchanges have a huge difference despite the fact that they can be bought through a stock-brokerage account. 




·       Individual stock-The shares on an individual stock often indicates that you partially own the company. This means that once you buy shares from a Home Depot then you automatically have a share of ownership of the company.

·       Exchange Traded-Fund-This form of stock investment represents an investment made by a company that pools a number of assets and securities. This means that you automatically become a partial owner of the pool or the assets once you invest in ETF.

In addition, the two offer different risk rates. ETF have a certain known reputation and the returns tend to be in the average range.  Typically, this makes them a little bit safer than the individual stock. Stocks are easy to buy and trade. You can just call your broker or even register online and eventually make the transaction. Also, ETFs in Nigeria are offered in one transaction. 





2...Find the Nigerian Stockbrokers

You need to now follow up with a stock exchange broker who is registered as a dealing member of each respective exchange. In Nigeria, there are more than 327 licensed brokers who are given the permit to trade on the Nigerian Stock Exchange. You need to take the move and visit their sites before making the decision of contacting one of them. In this article, I checked some of the main Nigeria Stock Exchange Brokers and Narrowed the list into this:

ARM which requires a minimum initial deposit of $635

Zenith Securities with a minimum initial deposit of $1,585

The list of the Stock exchange brokers in Nigeria is long, you can do some additional research to determine the company that fits your expectations. 





3...Check what the company you are opting for their stock does and your risk tolerance  

Have you ever wondered about the factors that affect the share value? The company’s business sector it is offering its products and services can be a great weight here. In simple terms, the stock prices are determined in the market place where the buyers and the sellers meet to transact. This doesn’t mean that there is a clean equation that tells us how the prices should be determined. Once the demand falls or rises for the company’s products, then the share values inflate or deflate accordingly. The higher the risk, the greater the returns. Therefore, you need to determine your risk tolerance and set your mind to invest. If you are a risk averse individual then you can opt for low risk stocks but if you are not highly sensitive to the risk, you can take chances with greater values. 




That said, there are several other factors that move a stock up and down. However, they all fall under three categories; technical factors, market sentiments and fundamental factors. Things in the stock market would be easier if only the fundamental factors set the stock prices. Technical factors are the leading cause of losses in the stock market. They range from the activities of the government, activities of the company to the activities of the consumers in the market. Therefore, choose a company that offers more solid services and products to the public. 




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4...Educate yourself

You need to have a basic knowledge on the factors that affect the stock price so that you will be able to determine the way to invest. Nigeria is a country whose government is stable and therefore you can expect due news about the company’s performance and profitability. There are several company factors that can affect the share prices that you should look for. Take a close look at the news released about the company’s earnings and profitability and also the future estimated earnings. Also consider the introduction of a new product or service to the public that might in one way or the other affect the company’s performance. Consider the company’s accounting errors and scandals that you think are significantly influential and lastly take into consideration employee layoffs and anticipated takeover or merger. 





5...Currency Policy and the amount to invest

This is another factor that we cannot understate its impact on the ROI. Some countries in the world rely on petrodollars unlike Nigeria. They usually don’t have this problem simply because they adopted a different currency policy. The Nigeria’s central bank did not let their currency Naira slide with the prices of Oil to make non-oil exporters competitive. The central bank is under the central government and they decided to keep the currency high. This is what affects the amount of money that you can invest in the Nigeria stock market. The greater the amount of money you want to invest, the greater the returns and the higher the risk. You can hence decide to invest a large amount of money and get huge returns but be prone to greater losses.

The results of the above measure by the central government were shortages of dollars in the country. The investors in the country are waiting for the Naira to reach market levels and invest. Therefore, this is also an important factor to consider when investing in Nigeria stock Exchange. 





Bottom Line

When considering to invest in the Nigeria stock exchange, you must be ready to overcome the anxiety of risk. This country has several investment opportunities but the main devil is political instability, terrorism and corruption. However, if closely analyzed, the Nigerian stock market is the best way to put your money in an investment. However, remember to diversify your portfolio as a way of spreading risk.










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