How to Buy Shares in Nigeria: A Step-by-Step Guide

Nigerians living at home and in the diaspora can use the Nigerian stock market to invest in the long-term growth of the companies that operate in the sectors of the Nigerian economy. These include but are not limited to the Banking sector, Telecommunications sector, Fast-moving Consumer Goods (FMCG) sector, Heavy industry, and the Oil and Gas Sector.

Investing in shares is a good way to grow your long-term wealth. However, for the novice investor, understanding how to buy shares in Nigeria can be daunting. While the process can seem complicated, it is really made up of several simple steps. You would need to choose a broker, open a trading account, fund the account, research companies, and finally place an order to buy shares in companies of your choice.

This article will explain how to buy shares in Nigeria, provide an overview of what investors need to know, and cover what Nigerians living abroad need to consider.

Have not made up your mind about where to put your money? Compare shares with other investments.

Investment Opportunities in Nigeria

If you want to learn more about the best ways to invest your money, have a look at our other articles too.

Understanding The Stock Market

Learning the basics of the Nigerian Stock Market is very useful for potential investors.

Public companies are able to sell shares on the Nigerian Exchange (NGX) and other stock exchanges. These give the public an opportunity to buy and sell ownership interests in that business.

Most of the time, individuals will use an appointed stock broker to buy and sell shares on their behalf.

The main factor that determines share prices is supply and demand. In addition to that, other factors that impact share prices can be the company’s performance, the economy, and expectations of investors.

Investing in the stock market is not as simple as finding the cheapest stock available. In order to do it successfully, you need to learn about the company you are investing in and understand the factors that drive the share prices.

How to Buy Shares in Nigeria

The process for buying shares in Nigeria is as follows:

1. Understand Your Investment Objectives

You must understand your objectives for investing your money before you open an investment account.

For example, you may want to invest your money for a long time to be able to build your wealth. Alternatively, you may be interested in investments that give you a chance to earn dividends in the short to medium term.

2. Pick Your Platform

You must decide where you want your money to work for you. Some individuals choose to invest in companies listed only on the Nigerian Stock Exchange (NSE) while some prefer to invest their money in companies listed on other international stock exchanges.

For Nigerians in the Diaspora, it could also be a way to invest in opportunities available in Nigeria.

In either case, you have to decide on a platform to achieve your investment goals.

3. Decide on Your Allocation and Timeframe

Depending on what your goals are, you have to decide on the companies you want to invest in and the time you want to hold your shares. You may want to consider a long term investment, a medium term investment, or a short term investment.

It is advisable not to invest money that you may need to pay for immediate expenses or unexpected costs.

2. Select a Registered Stockbroker

Generally, to buy shares in Nigeria, you will need to use a registered stockbroker or an investment platform in an appropriate regulated market.

A broker (or stockbroker) is a member of a stock exchange that gives you access to that exchange.

When reviewing brokers, you need to look at things like:

• Trading and transaction fees
• Account fees
• Online trading
• Customer service
• Investment research
• Withdrawal and deposit facilities
• Service to the Nigerian Diaspora

Do not use a platform just because it is popular on social media.

Check if the broker is duly licensed and authorised to conduct business.

3. Open Your Investment Account

After choosing your broker, the next step is to open an account with them.

It may be mandatory for you to go through a Customer Due Diligence (KYC) process. The nature of documentation required will depend on your broker and if you are within or outside of Nigeria.

They may request the following from you:

• ID
• Address proof
• Bank details
• Phone number

If you are in the Nigerian Diaspora, additional documentation may be required.

Ask your broker what is required for investors in the Nigerian Diaspora.

4. Structure Your Investment Account

Your broker will also help you set up an account structure that will allow you hold your investments.

This is important so your shares can be properly recorded and linked to your investor details.

Check all personal details when opening the account. Incorrect names or bank details can create problems.

Maintain important investment documents and account information and store them in a secure place.

5. Fund Your Trading Account

After opening an investment account, you will need to fund it to be able to buy shares.

Your broker or investment platform will provide you with instructions to fund your account.

If you reside outside Nigeria, consider the cost of transferring money.

For instance, you may need to consider the following;

• The cost of converting a currency
• The fee for international money transfer
• The fee charged by your bank for the transaction
• How long it will take for the money to be transferred
• Movements in the exchange rate of the Naira

These can all affect your investment returns.

Never send money to an unknown person to buy shares for you.

6. Research Companies Before Investing

The process of opening a trading account is fairly easy. Choosing which companies to buy shares of requires further research.

Avoid purchasing shares of companies just because the share price seems low.

Look into the following;

• How fast is the company growing
• Is the company profitable
• Is the company in debt
• Is the business model good
• Is the management good
• What is the company's competitive position
• Does the company pay dividends
• What is the industry outlook
• What is the historical performance of the company
• What is the sector of the company
• How will the economy affect the company
• How will the economy affect other sectors

Research is more effective for long-term stock market success than following gossip or social media fads.

7. Determine the Amount You Want to Invest

You do not need a large amount of money to start investing.

How much you need depends on the shares you want to purchase, their prices, and the requirements and costs of the trades.

More importantly, figure out how much you want to invest without impacting your everyday finances.

It is also good to consider how much you can lose.

8. Determine the Shares You Want to Buy

You should have a reason for wanting to own each company you research.

Do you see good long-term growth potential for the company?

Does the company have a good track record of profits and is it a company with a good history of paying dividends?

9. Make Your Purchase

After you have figured out the reasons for your investment, you need to make the purchase.

You do this by going through your broker or trading platform and selecting the company you want to buy shares of.

Enter the quantity or monetary value of shares you want to purchase.

There may also be different order types available to you based on the platform you are using.

Execution will depend on the condition of the market at the time of your order, as well as the availability of buyers and sellers at the price you have specified.

It is important that you check your account to see that the shares have been credited to you after the transaction has been completed.

You have learned the basics of buying stocks in Nigeria.

Can Nigerians Living Abroad Buy Shares in Nigeria?

Yes. Nigerians living abroad can buy shares on the Nigerian stock market, if they fulfill the account opening, identification, banking and regulatory requirements. The procedures are comparable to those of investing while in Nigeria, but there are additional factors to consider for investors in the Diaspora. For example, the value of your investment in Nigeria may increase in Naira terms, but what that is worth in your home currency may reduce due to adverse movements in the foreign exchange rates. Therefore, Diaspora investors must take into consideration the investment performance, and adverse movements in foreign exchange rates. There are several other factors that may affect your taxes, such as your country of residence, type of income and personal conditions. Diaspora investors may wish to visit DiasporaWise for more investment related information and resources.

How Much Money Do You Need to Buy Shares in Nigeria?

There is no particular amount that every investor must have before he/she can buy shares on the Nigerian Stock Exchange. The amount required will depend on various factors including the price of the shares, number of shares bought and the costs of the transaction.

Consider what you can afford to invest and work backwards from there.

People starting out with investing may wish to invest gradually and not put a large lump sum all at once into the stock market.

Gradually investing also allows you to become more familiar with different companies and learn more about how the stock market operates.

How Can You Make Money From Nigerian Shares?

Shares are risky assets. However, they do have the potential to yield a profit. The two primary ways investors can make money from shares are through capital appreciation and dividends.

Capital Appreciation

One way investors can make money from shares is from an increase in the share price. This is called capital appreciation.

If you bought shares for ₦10,000 and the price went up to ₦15,000, you could sell the shares for a profit of ₦5,000.

Share prices can also go down.

Dividends

Another way investors can make money from shares is through dividend payments.

Not all shares pay dividends.

Risks of Investing in the Nigeria Stock Market

The stock market is one of the riskiest investing options. Understanding the risks of the stock market can help you make more informed decisions.

One risk of the stock market is called market risk.

Market Risk

Market risk occurs when the price of a share goes down. There are many reasons why the share price can go down.

Having a good understanding of the risks of the stock market can help you make informed decisions.

Company Risk

When sales decrease, debt and/or competition increases, and/or management becomes poor, this can hurt a company and its share price.

Currency Risk

Nigerian diaspora investors should note the risks associated with the fluctuating value of the naira against foreign currencies and how it can impact the international value of their investments in Nigeria.

Economic Risk

Government policies and changes in economic conditions can positively or negatively impact a company’s performance and share price.

Liquidity Risk

Some shares are more readily tradable than others. This means a large position of some shares may be harder to sell or buy compared to others.

These are just a few of the main risks of share investing in Nigeria, and understanding them can assist you to invest in shares in Nigeria responsibly.

Should You Put All Your Money Into One Stock?

Investors can become overly reliant on a single company if they have an over-concentrated position in that company.

Rather than being overly reliant on a single company, many investors opt to have exposure to numerous industries.

Diversification can be applied to other assets as well.

As mentioned earlier, many Nigerian diaspora investors consider various investment opportunities, including real estate. Learn more about managing your real estate investments and property in Nigeria.

Stocks and real estate can serve different investment objectives and can be used together or separately in an investment strategy.

Common Mistakes Beginners Should Avoid

Many new investors become distracted when they hear or read sensational stories about people who made large profits in a short period of time and end up investing in speculative or penny stocks or plunging into complex products they don't understand.

One of the most common mistakes is buying shares because you have heard on social media, WhatsApp or an online forum that the price is about to increase.

Another common mistake is chasing shares once their price has increased significantly.

Other common mistakes include:

• Not researching a company before investing
• Placing too much money in one stock
• Not taking into account the cost of the transaction
• Using money that you need in the short term
• Acting emotionally to normal market movements
• Not doing due diligence when selecting an investment platform
• Hoping for guaranteed returns
• Buying shares based only on historical performance

Long term investing usually involves some degree of research and realistic expectations.

Stocks vs Real Estate in Nigeria

Investors in the diaspora usually ask whether they should invest in Nigerian stocks or real estate at some point.

There is no universal answer because the two investments work differently.

Nigerian stocks usually require less upfront capital than real estate and are relatively easy to purchase and sell. Investors can also spread their money among different companies.

Owning rental real estate provides the owner with a physical asset and an additional source of income but requires management which can be capital intensive.

For Nigerians in the diaspora, property management becomes a challenge because of the remoteness of location, maintenance and management of tenants.

If you are considering multiple options our guide on the best investments in Nigeria can help you understand your options.

How to Choose Stocks for Long-Term Investment

There is no guaranteed formula for selecting the best stock.

Long-term investors are also not concerned with short-term market movements. They are interested in the viability of the company over the long haul.

Some of the things they should be considering include:

Is the company profitable? Is the revenue of the company growing? Does the company have too much debt? Is the company in an industry that should have long term demand? Does the management of the company have a good strategy? Can the company compete? Has the company consistently generated cash over the years?

Rather than ask only “Will this stock go up next month?” you should ask, “Would I be comfortable owning this stock for several years?”

You should try to shift your mindset from short-term market movements to longer term considerations.

Frequently Asked Questions

How do I buy shares in Nigeria?

To buy shares in Nigeria, you need to first research and select the company. Open an account with a registered Nigerian broker. Fund your account. Once your account is set up and funded, you can research and place an order to buy shares.

How can a beginner buy stocks in Nigeria?

To be a beginner in the Nigerian stock market you first have to familiarize yourself with the stock market. Open an account with a registered broker. Decide the risks you want to take and the company you want to buy shares of.

Can Nigerians abroad invest in Nigerian stocks?

Yes. As a Nigerian living outside Nigeria, you can invest in the Nigerian stock market if you meet the regulatory requirements.

What is the potential gain from investing in Nigerian stocks?

The potential gain from stocks is from increases in share price and dividend payments.

Is it risky to invest in stocks?

As a general rule, the more an investor pays for a stock, the greater the risk of loss. The converse is also true. For many investors, the potential for loss is risky.

What is the minimum amount I should invest in stocks?

The absolute minimum amount is zero. However, many experts advise against investing an amount that is significant relative to your annual income and/or the size of your savings.

How can I purchase Nigerian stocks online?

There are brokers and investment platforms that provide access to the Nigerian stock market, and many investors are able to use these services online. Do your due diligence on any new service to make sure the entity, and the people associated with it, are legitimate.

Is it more advantageous to buy stocks or real estate in Nigeria?

You should buy what meets your financial goals, available capital, and tolerance for risk.

Final Thoughts

Learning how to purchase stocks in Nigeria is the starting point for those looking to enter the Nigerian Stock Market. The mechanics of buying stocks in Nigeria is quite simple. Potential investors are required to locate a registered broker, open an account, fund the account, do research on the various stocks, and finally place their order.

The interesting and sometimes difficult part is determining what to do after buying stocks.

Good investing involves a good understanding of the risk involved with the various stocks owned. It also requires making decisions based on research rather than hearsay.

Nigerians living outside Nigeria must take into account the movement in various foreign currencies, the cost of international money transfers, taxes and a host of other issues.

It is important that any investment a person makes should be aligned with his overall financial goal. This includes investments in Nigerian shares or property.

For more practical guides on investing, real estate, and securing your financial future in Nigeria, visit DiasporaWise.

Disclaimer: The content in this article is for general information and educational purposes only and should not be construed as financial, investment, tax or legal advice. Investing carries risk, including loss of principal.