Nigerian Stock Market: All You Need To Know About It


Investing in the Nigerian Stock Market

There are several easy ways to invest in the stock market. The first way is to set up your own online brokerage account with some of the many online firms that are now operating, including E-Trade, Fidelity, AmeriTrade, Charles Schwab, Share Builder, and others.

Another popular way to invest in the stock market, which can be useful to beginners for the extra guidance that is provided, is to seek the help of a broker or financial advisor to place the stock trades for you. Here you may pay higher fees per transaction, but you will get the advantage of consultation and education about stock trading from a professional in the field.

Beginner Investment Tips

For rank beginners to the stock market, experts often suggest a softer strategy of beginning first to invest into mutual funds rather than jumping right in to pick individual stocks. This strategy give a beginner two important benefits.

First, you will diversify your risk, since mutual funds are nothing less nor more than a collection of publicly traded commodities pooled together into “shares”, so each share has a lower risk rating than any share of an individual stock might carry.

Second, you are able to invest in the stock market and learn the ropes without having to manage your investments completely on your own, since each mutual fund has a manager or management team that oversees the fund’s performance and adjusts accordingly to keep the fund’s investors happy with their choice.

In short, investing in mutual funds is just as easy as investing in stocks, but the risk is lower, making for a win-win for beginners.

The Nigerian Stock Exchange (NSE)

The Nigerian Stock Exchange (NSE) was established in 1960 as the Lagos Stock Exchange. As of December 31, 2013, it has about 200 listed companies with a total market capitalization of about N12.88 trillion ($80.8 billion).

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The main purpose of the organization, which has its headquarters in Lagos, is the listing and trading of securities in Nigeria.  All listings are included in the Nigerian Stock Exchange All Shares index.

Operation

The NSE is regulated by the Securities and Exchange Commission, which has the mandate of Surveillance over the exchange to forestall breaches of market rules and to deter and detect unfair manipulations and trading practices.

The Exchange has an automated trading System. Data on listed companies’ performances are published daily, weekly, monthly, quarterly and annually.

The Nigerian Stock Exchange has been operating an Automated Trading System (ATS) since April 27, 1999, with dealers trading through a network of computers connected to a server. The ATS has facility for remote trading and surveillance.

Consequently, many of the dealing members trade online from their offices in Lagos and from all the thirteen branches across the country. The Exchange is in the process of establishing more branches for online real time trading. Trading on The Exchange starts at 9.30 a.m. every business day and closes at 2.30 p.m.

In order to encourage foreign investment into Nigeria, the government has abolished legislation preventing the flow of foreign capital into the country. This has allowed foreign brokers to enlist as dealers on the Nigerian Stock Exchange, and investors of any nationality are free to invest. Nigerian companies are also allowed multiple and cross border listings on foreign markets.

Pricing

The Nigerian Capital Market was deregulated in 1993. Consequently, prices of new issues are determined by issuing houses and stockbrokers, while on the secondary market prices are made by stockbrokers only.

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The market/quote prices, along with the All-Share Index plus NSE 30 and Sector Indices, are published daily in The Stock Exchange Daily Official List, The Nigerian Stock Exchange CAPNET (an intranet facility), newspapers, and on the stock market page of the Reuters Electronic Contributor System.

Regulation

The NSE is regulated by the Securities and Exchange Commission, which has the mandate of Surveillance over the exchange to forestall breaches of market rules and to deter and detect unfair manipulations and trading practices.[3] The exchange has an automated trading System. Data on listed companies’ performances are published daily, weekly, monthly, quarterly and annually.

Transactions on The Exchange are regulated by The Nigerian Stock Exchange, as a self-regulatory organization (SRO), and the Securities & Exchange Commission (SEC) – apex regulator, which administers the Investments & Securities Act of 1999.

The All-Share Index

The Exchange maintains an All-Share Index formulated in January 1984 (January 3, 1984 = 100). Only common stocks (ordinary shares) are included in the computation of the index. The index is value-weighted and is computed daily.

The highest value of 66,371.20 was recorded on March 3, 2008. Also, The Exchange has introduced the NSE-30 Index, which is a sample-based capitalization-weighted index plus four sectorial indices. Similarly, five sectoral indices have been introduced to complement existing indices. These are NSE-Food/Beverages Index, (Later renamed NSE – Consumer Goods Index) NSE Banking Index, NSE Insurance Index, NSE Industrial Index and NSE Oil/Gas Index.

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