Now and then, people find themselves at some sort of crossroads when it comes to what to do with their hard-earned money.
Those who believe in living in the moment may decide to just spend it all, believing that “there’ll be more where that came from”, but such a lifestyle is pretty risky and in some cases, may result in bankruptcy.
Others prefer to deposit all of it (or at least most of it) in the bank, believing that it will help them be less extravagant, but this financial choice fails to take the effects of inflation into consideration.
Some choose to invest in landed property, which is economically viable as land appreciates, but this also comes with the unfavourable possibility of compulsory government acquisition of such landed property, on grounds of “overriding public interest”.
Then, there exists the class of people who choose to invest in what is known as the Stock Market.
Stock in financial and economic terms simply refers to the capital raised by a company through the issue of shares to the public.
An organisation that trades in stocks of company for money, involving the buying of stocks by individuals from companies, is referred to as a Stock Exchange.
Examples of Stock Exchange organisations around the world include: the New York Stock Exchange, the London Stock Exchange, and of course, the Nigerian Stock Exchange.
Over the years, investing in stocks has undergone a difficult phase, one not unconnected to the economic recession which rocked the globe, and from which recovery has been pretty slow around the world.
For Nigeria in particular, a major banking crisis and political turmoil have dealt significant blows to trade on the Nigerian Stock Exchange.
Nevertheless, it remains a viable mode of financial investment. Investing in stock exchange is usually facilitated by companies known as stockbrokers. Examples of stockbrokers in Nigeria include; UBA Stockbrokers, Lead Capital, Zenith Securities and ARM Securities.
Buying stocks in Nigeria, while not altogether difficult, is not a straightforward affair. This is because it involves a number of steps, which are discussed below:
#1. Completing the CSCS Account Opening Form: An individual interested in buying stocks will have to approach a stockbroker to open a trading account. The stockbroker will then send the intending buyer a copy of the Central Securities Clearing System (CSCC) Opening Form. The intending buyer is then assigned a CSCS account number, which will accompany every Nigerian stock trade he will execute. This is to allow the CSCS keep a record of all the buyer’s holdings via electronic accounts.
#2. Completing The Broker’s Account Opening Form: After completing the CSCS procedure, the intending buyer will be sent a blank account opening form by the broker. This form requires disclosure of passport number or other ID numbers, address of the intending buyer, as well as other banking details.
#3. Acquiring Passport Photos: There will be need for an intending buyer to hold a bunch of colour passport-sized photos as he goes along. Depending on the stage and procedure, such photos more often than not would come in handy.
4. Photocopying of Valid Means of Identification: The need would also arise to create photocopies of passport, or other valid means of identification such as a driver’s licence.
#5. Photocopying of Utility Bills: These include water or electricity bills. Making photocopies of these is important, as most stockbrokers require evidence of such bills to verify the intending stock buyer’s place of residence.
#6. Sending Original copies of Documents to the Stockbroker: Even after furnishing photocopies of the relevant documents, it is absolutely necessary to send original copies of the CSCS form, Account Opening Form, Passport Photo, Means of Identification and Utility Bills to the stockbroker. It is advisable to engage courier services such as DHL or FedEx.
#7. Funding the Brokerage Account: The broker will provide the intending buyer with its bank details for the purpose of funding the account. It is advisable to do this via wire transfer, which can be facilitated by either the stock buyer or his bank branch.
#8. Submitting of Trade Orders: This can be done by either forwarding a trade mandate form to the broker, or by sending instructions to the broker via email. The broker would then execute the trade and send a contract note to the buyer, specifying the buying and selling price and well as commissions and fees.
#9. Collecting Dividends: Here, the stock buyer simply instructs the stock broker (in writing) that all dividends on his holdings be paid directly into his trading account.
So, there, that’s how to be a trader on the Nigerian Stock Exchange. It is a secure and transparent process, and ultimately a rewarding mode of financial investment.
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