8 Steps to Invest in the Nigerian Stock Market and Enjoy dividends

See the 8 Steps to Invest in the Nigerian Stock Market and Enjoy dividends. You will need these guide, if you are planning to buy stocks from NSE for the first time.

8 Steps to Invest in the Nigerian Stock Market and Enjoy dividends

The Nigerian Stock Exchange commenced in 1960 as Lagos Stock Exchange. In 1977, its status was changed from the Lagos stock exchange to the Nigerian Stock Exchange. The Nigerian stock exchange as at   2016, listed 180 companies with a total market capitalization of about N10.16 trillion with all the listings included in the Nigerian Stock Exchange and All Shares index In terms of market capitalization.

The Nigerian Stock Exchange is regulated by the Securities and Exchange Commission, a commission vested with the responsibility to watch over the activities of the exchange, regulate and ensure fair and just trading practices. The exchange constitutes the third largest stock exchange in Africa.

The Nigerian Stock Exchange has gone through the process of automation since 1999 and is currently operating an Automated Trading System (ATS) enhancing dealers to trade through a network of computers connected to a server. Which has the facility for surveillance and remote trading? As a result member’s trade online from all the offices and branches across the country? With enhanced operations the exchange is focusing on expansion of new offices for online real time trading between 9.30 a.m. every business day and closes at 2.30 p.m…

To further boost the operation of the exchange the federal government has provided the platform for foreign investment into Nigeria, by the abolition of the legislation preventing the flow of foreign capital into the country. This has facilitated foreign brokers and investors of any nationality freely invest. While all the other Nigerian companies are also given access to multiple and cross border listings on foreign markets.

The Nigerian Stock Exchange (NSE) provides a channel for investors wanting to invest in stocks .It operates on a fairly, orderly and transparent market  where you can find the best of  Nigerian and African firms and approximately 6 million investors from around the world.

Prospective investors who want to invest in the Nigerian stock exchange whether, as an individual or firm, must select a stock​broker and open an account with the Central Securities Clearing System Plc.

​The reason for selecting a stock broker is because a stockbroker is the agent appointed and approved and who is authorized to execute, buy or sell inst​​​ructions on an investor’s account, while CSCS issues central securities identification numbers to investors​required for the clearing, delivery and settlement of transactions. A stockbroker, in this context, does not refer to a single individual, but to a broker-dealer firm who is a dealing member of The Nigerian Stock Exchange (NSE), and is registered with the Securities and Exchange Commission (SEC).

However it is important that you confirm the brokers’ status with the NSE and with SEC. The NSE also recommends that investors acquaint themselves with the specific services provided by the stockbrokers so as to ensure that it satisfies and match with their need expectation. The Stockbrokers and custodians have the fiduciary responsibility to manage and ensure the safe and transaction and keeping of stocks behalf of the client.  ​

​​Steps to Invest in the Nigerian Stock Market

1. Opening a Nigerian Brokerage Account

Prospective investors must first go through the process of opening an account with a Nigerian stockbroker before buying their first shares. The processes are enumerated as follows

2: Investors must complete the CSCS Account Opening Form

The Central Securities Clearing System (CSCS) keeps records of the ownership of Nigerian securities via the use of electronic accounts. When the investor request for the opening of a   trading account from the broker a copy of the CSCS Account Opening Form will be sent to the investor. The investor will then be assigned a CSCS account number. This number will identify all the Nigerian stock trade you execute and also enable the CSCS to maintain accurate record of all your stock holdings in the country.

3: The Investors must complete the Broker’s Account Opening Form

The investor must also request from the broker information on how to open an account, who will   then forward to the investor a blank account opening form. The information required on the form includes passport number or other ID number, your address, and banking details.

4: Collect and present two color passport-sized photographs of yourself

It is advisable to have a bunch of passport with you so you can use as the case demands.

4 Photocopy your international passport

An alternative is for you to present a drivers license if an international passport is not available.

Photocopy and present a current utility bill suitable to verify your place of residence. Some brokers require a current water or electricity bill

5. Submit Documents

The investor should then send the original CSCS form, account opening form, passport photos, copy of your ID, and copy of your utility bill to the broker through DHL or FedEx. It is also advisable to send photocopies of all the documents to the broker through an email to intimate him of the original documents sent for the account opening process. However ensure that they eventually receive the original documents for opening of the account

6. The investor must start Funding the Brokerage Account

When the trading account has been opened, the investor must obtain the brokers bank details so as to start funding the account.

7. The investor then must submit a Trade Order

When if an investor have identified a stock to buy through research, The investor must send a trade instruction to the broker through email specifying a limit price for all orders, since some shares on the Nigerian Stock Exchange are rather illiquid.

This will enable the investor to avoid paying higher for shares than what he intended.  .However some brokers may simply request for  a signed trade mandate form to this effect. When this is done the broker will then proceed to execute the trade and  send to the investor a contract note which specifies the buy or sell price, commissions, and fees.

The Settlement for traded shares is effected by the fourth day of business on the Nigerian stock Exchange. Early settlement attracts penalty.

8. Payment of dividends.

When the account has been duely opened, the investor can just simply issue an instruction to the broker to effect payments of all dividend on share holdings be paid and deposited directly into the trading account.

Once this process has been concluded investing in the Nigerian stock exchange market becomes easy and possible.

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