The Nigerian stock market is up roughly 31% this year and is in a bull run despite the country’s tough economic climate.
Thanks to technology, investing in Nigerian stocks is more accessible and transparent.
A dozen or so listed businesses on the NGX have a market capitalization of at least N1 trillion, including Airtel Africa, BUA Cement, Dangote Cement, FBN Holdings, MTN Nigeria, BUA Foods, Seplat, GTBank, Zenith, UBA, Transpower, and Geregu.
NGX data also confirms that the wealthiest men in Nigeria—Aliko Dangote, Femi Otedola, Mike Adenuga, Jim Ovia, Abdul Samad Rabiu, and Tony Elumelu—have significant exposure to the Nigerian stock market.
Investing is key to growing wealth and keeping up with high inflation and the devaluation of the naira. Oando, priced at N5 a year ago due to regulatory issues and high debt, gained more than 70% this month to close above N44. Investors have made at least N15 trillion this year from their exposure to Nigerian equities.
The bullish momentum in Nigerian stocks is attributed to favorable financial outcomes and noteworthy policy decisions, including the elimination of fuel subsidies, the unification of exchange rates, the Central Bank of Nigeria (CBN) recapitalization policy, and the cessation of fund allocations to Bureau De Changes (BDCs).
How to Begin the Journey of Stock Investing in Nigeria
Brokers are designated to carry out buying or selling orders on behalf of investors. A licensed stockbroker is usually registered with the Nigerian Securities and Exchange Commission (SEC) and is a member of the Nigerian stock market.
When selecting a stock brokerage firm, it’s important to consider accessibility, affordability (as some require a minimum deposit to open an account), integrity and reputation, and the company’s status (active or inactive) with the SEC.
You will need an investor account. Retail investors are the only ones who can open personal accounts linked to their names. You will need to submit proof of identity, banking details (such as the BVN), a picture of your passport, the account holder’s signature, and, if it’s a personal account, the contact details of your relatives.
If you have a bank account, opening one takes less than a day. You can trade with some brokers online without visiting their physical offices because they have online trading platforms. Visit their app or portal of interest for additional information.
Holding Nigerian stocks under a regulated custodian is safe, though you should have a CSCS account attached to an investment account. If a regulated stock brokerage firm goes bankrupt, select another registered stockbroking firm to authorize them to take over your CSCS account.
Continue to Learn
Investing in the stock market requires perseverance, long-term planning, and in-depth knowledge of the NGX market cycle. Keep up with Nigerian political and economic developments that could affect the market. Profitability is not guaranteed.
Experts advise investing money you can afford to lose and being prepared for market swings. Keep learning as much as possible about the markets to advance your investment skills.
The Nigerian stock market has a shorter market cycle than the American stock market. You can’t just throw money in and expect miracles; that’s why knowledge is critical. Developing analytical skills and emotional intelligence is essential for long-term success. Diversification is a fundamental component of investing.
Diversification entails distributing your investments among various industries and businesses. Investments can be made in different economic sectors including consumer goods, healthcare, telecommunications, and finance.
A novice investor should consider the company’s market value. Although large-cap stocks, such as blue-chip stocks and Nigerian banks, are easily bought and sold, mid-cap and small-cap stocks have the potential for higher returns.
It is highly recommended to read books and other financial news-related materials, such as Bloomberg and Nairametrics, to learn more about Nigerian stocks and stay updated on market developments. Understanding market movements is easier if you know when and how they occur. Your strategy must incorporate risk mitigation techniques like negative balance protection.
Fundamental and technical analysis can also improve trading profits through informed investment decisions. You can determine the best time to exit a position and the degree of risk involved by knowing when earnings will hit the market. Check the stock chart two to three weeks before the anticipated earnings release date to see if the price is trending higher or recovering from a recent decline.
Here, you can decide how much to pay and, by taking a cautious stance, determine how many shares to purchase. Invest early and watch the price rise as the expectedly good earnings report brings about an increase in value. Monitor the daily movement of prices.
In conclusion, both novice and seasoned investors can find substantial investment opportunities in the Nigerian stock market. Making educated investment decisions can be achieved by learning the fundamentals of how the market works, understanding key players, exploring your options, and being aware of the risks. Never forget that it’s a good idea to do extensive research, consult with qualified/licensed experts, and keep up with industry developments.
[Nairametrics]