Have you been considering an investment in stocks?
You must however, have a working capital to be able to purchase shares.
Buying of shares is the responsibility of Stock Brokers as they have been licensed by the Nigerian Stock Exchange (NSE) to do so. Therefore you need to decide on the type of shares you want to buy before you choose a broker.
You have the option of buying shares directly from a company when they advertise or from the open stock market.
Whichever method you choose you will be required to go through a stock broker to handle all the transactions for you.
The Stock Brokers will handle the trading of your shares at a certain fee as well as commission. The fees are calculated using a standardized sliding scale and is the same across all brokers.
Here is a step by step guide on how to buy shares in Nigeria.
Opening a Nigerian Brokerage Trading Account
This is an electronic account which you must open as directed by the Central Securities Clearing System (CSCS). To open the account, your broker will provide you with the CSCS account opening form and you will be assigned a CSCS account number. This account number will be on every stock or shares you trade therefore the CSCS can track the record of all your holdings.
Documents required to fill the form include:
- A valid form of identification which can be any Government issued ID with a number on it. You can use your international passport, Driver’s License or National ID card for this purpose.
- Two coloured passport photographs of yourself
- A photocopy of a recent utility bill. This is required for verification of your physical address or residence. You can make use of you electricity or water bill dated within the immediate past three months.
- After filling the CSCS form you will be required to submit the form along with the account opening form, copy of an ID, your passport photograph and a copy of your utility bill to your broker. This can be sent initially via email but you must send the original documents later. This should be sent using registered mail as they are safer and more reliable than the traditional postal service.
Funding Your Brokerage Account
After you have opened a trading account, your broker will give you the details of the account and you can fund the account. You can do this easily via wire transfer.
Submitting a Trade Offer
You should carry out research before deciding on which shares to buy. This stage involves laying out a set of instructions to your broker letting them know the type and number of shares you want them to purchase for you.
An important point to note is that the shares on the Nigerian Stock market are illiquid, therefore you should set a price limit for any share you wish to buy so you don’t end up paying more.
Once this is achieved, your broker will send you a contract note in which you have details on the shares bought, the sell price, the commission as well as the fees charged.