The basics of investing in Nigerian Stocks

  by Olumide Adesina

When it comes to growing your wealth and keeping up with inflation in Nigeria, investing is a must. Inflation saps the buying power of cash over time. As a result, if you do not invest in a worthy instrument, the value of your monthly savings from salaries will diminish each day.

The Nigerian stock market has attracted a significant number of investors, both local and foreign with the Nigerian equity market returning 5% so far in 2021, well behind the 50% it delivered last year when Bloomberg ranked the Nigerian equities market first in the world among the 93 markets it tracked.

Technology has greatly simplified the process of investing in Nigerian stocks over the years. Consequently, here are a few tips you need as you consider investing in the Nigerian stock market.

Choose a regulated investment bank or stockbroker

Investors appoint stockbrokers to carry out buy or sell instructions on their behalf. A stockbroker is a broker-dealer registered with the SEC that is a member of the Nigerian Stock Exchange.

When choosing a stockbroker, important factors to consider include ease of access, affordability (because some firms require a minimum deposit for opening an account), integrity and reputation, and their status with the Securities and Exchange Commission (active or inactive).

Open investor’s account

The moment you decide to trade in the Nigerian bourse, you are becoming an investor. Therefore, you will need an investor’s account. Investor accounts are uniquely attributed to investors and are tied to their names.

You would normally open it along with a CSCS account, into which you would transfer your stocks. Online options are opened for you by a stock brokerage firm or broker. By using an online broker, one can trade securities or any other investment instrument online.

Your broker buys stock in your investor’s account each time he wants to buy for you. You can also buy bonds through the account.

Secure Trading Capital

I would say your trading cash needs will be proportional to the amount of risk you want to take, or the volume you want to trade.

In finance, knowledge is more important than anything else. Keeping track of the latest trends and updating your knowledge of the market is essential. You should be adept at spotting opportunities and be able to predict trends.

Sell the news and buy the rumours. Among investors, that saying is very popular. In other words, don’t trade on emotion.

Continually learn

There is no exact science to investing in Nigerian stocks. If you want to improve your trading skills, you should continue to learn about the market and trade as much as possible. Long-term success depends on developing analytical skills.

To learn about Nigerian Stocks, it is best to read books and other financial news-related materials like Nairametrics, Bloomberg, to understand the history of the markets. Understanding how and when the markets fluctuate will give you a better understanding of why they do.

If you want to make money through trading, you need an effective trading strategy. You should include risk mitigation measures such as negative balance protection in your strategy.