How to Invest in Stocks in Nigeria: Guide for Beginners
One of the most efficient and successful ways of building wealth over a long period of time is through investing in stocks.
All the most successful people have dedicated themselves to investing. One of the prime examples of stock investors is Warren Buffet.
Investing in stock allows you to invest your money in a company and reap the benefits of the company’s growth through the years.
The biggest misconception that exists or existed is that there’s a barrier to entry due to large funds being involved in the stock market. But it’s not at all true. With the technology and facilities that exist today, you can invest as little as N500 to start.
As an investor who is looking to invest in stocks, you need to start by depositing money into an online investment account. From there onwards, you can find yourself a suitable investment broker and start investing in stocks.
How do you invest in stocks?
You always hear some of your friends say that they have started investing in stocks, but you are unaware of how to do it? Or what is it all about?
In this guide, we will help you clearly understand all the steps and procedures needed to start investing in stocks or trading them.
- Choose how you want to invest
There are so many different ways to start investing in stocks, but the first and foremost question you need to answer is that whether you need help with your investments or whether you are aware of what you are doing and you know which stocks to buy.
If you are someone who knows what stocks they want to buy, then it is best that you start off by opening an individual account with a stockbroker and start investing in stocks as per your investment strategy.
If you are someone who needs help with your investments, then it’s ideal to invest in mutual funds or ETFs. Mutual funds are managed by qualified professionals and there are many funds with different investment strategies. Some invest in gold, some in equities etc. and you can choose one based on which markets you want to invest in. Mutual funds are usually safe since they are regulated and managed by professionals.
With a mutual fund, you don’t need to do any research on your own. There is someone who is willing to do all the work for you for a small fee. Everything is taken care of and you needn’t do much apart from providing funds for investments.
- Create your investment plan
Before you begin investing in stocks, the question you will need to ask yourself is why are you interested to invest? Is it because you want to make quick money? Or you want to have a secure source of income for the long term?
As an investor, you need to decide whether you are looking at short term or long-term gains. There’s no doubt that you can make money with short term as well as long-term investing but long-term investing mitigates risks like short-term market volatility and gives you a more secure investment.
Let me explain short-term and long-term through an example. Due to COVID-19, the markets fell by as high as 40 per cent, but within a few months, the market recovered and has since then recovered all the losses.
So, if you were a short-term investor buying a stock, you would likely have lost a lot of money due to market crash had you not held on until the market regained. But if you were a long-term investor, these market conditions wouldn’t have affected your investments a lot.
Long term investors generally focus on value investing and select companies they want to invest in for many years. While short-term investors focus on trading and making money from market movements.
So, set your goals accordingly, don’t expect your money to double over a day or a week, the prices of stocks gradually increase and your wealth gets accumulated over years. This is why you need to be patient and allow market forces to react and drive your prices up. If you have chosen a good company to invest in, then you can be certain that the prices will go up in a few years.
Use a savings and investment compound calculator tool to manage your goals, plan your investments and decide how much you want to save or gain in 10 years.
If you made a small investment as little as 38,12,500 Naira in S&P 500 Index 30-40 years ago, then would have been a millionaire today. This is what the stock market can do for you.
Here’s an example for you that gives you a rough idea about how much you can earn with a small investment over a long period of time:
If you start with N38,050.00 in a savings account earning a 7 per cent interest rate, compounded monthly, and make N3,805.00 deposits on a monthly basis.
After 10 years, your savings account will have grown to N738,897.07 of which N494,650.00 is the total of your beginning balance plus deposits, and N244,247.07 is the total interest earnings.
- Open a trading account
If you are looking to invest in local companies, you can check the Nigerian Exchange (NGX) Limited and choose a stockbroker that will allow you to invest in NGX.
But if you want to invest in international companies that are not listed on the NGX but listed somewhere like New York Stock Exchange (NYSE), then you can choose an online trading platform such as Bamboo, Chaka, Weath.ng etc.
If you are only looking to trade securities i.e., buy or short sell them for the short term, then you can also trade stock CFDs via a Tier-1 licensed forex broker or you can trade stock options via an international broker that accepts Nigerian clients.
As per research by Forex Brokers SA, there are no locally regulated CFD brokers in Nigeria but there are 40+ FSCA regulated South African derivative brokers that accept traders from Nigeria. These brokers offer NASDAQ, American and European stock CFDs.
There are several online platforms in Nigeria that allow you to invest in stocks all around the world, so choose a platform that allows you to invest in a wide variety of stocks and other commodities.
For new investors who are not aware of how the market functions or you are not familiar with the investment process, its highly advisable that you open your account through a Mutual Fund advisor so they can assist you with the entire process and you also will be able to learn and adapt quickly.
Every online platform or stockbroker requires you to complete KYC before you start trading as it’s mandatory. You would normally be asked for your BVN number, ID proof and address proof.
Make sure you provide the correct details and original documents for verification. If there is an error in KYC documents, then there are high chances that you will not be allowed to open your account or likely face issues during withdrawals.
- Decide which stocks do you want to buy
Once you have opened your trading account; you can view all the stocks available on the platform or what the stockbroker offers.
Experienced investors diversify their investments into different stocks and other asset classes like metals, commodities since it is more secure and helps you build a diverse portfolio.
So, avoid investing in just one company, look around the platform and view what other options you might have.
A word of advice to new investors is that don’t invest in every stock you see; you need to understand what the company does and what their business is. After you understand everything about a company and how it is doing, you can further decide to invest in it.
If you are considering investing in a particular company, then you might want to calculate their intrinsic value, which would include analysing the margin of safety, EPS, book value, cash flow and earnings before interest, taxes, depreciation, and amortization (EBITDA).
Once you are aware of all these things, then it will help you make an informed decision.
- Make a budget
The budget is entirely dependent on your lifestyle.
First list all your expenses and take away money for your rent, utilities and groceries and keep it away. The next is to list all your debts and liabilities such as loan repayment, EMI etc.
Once you know what you need for your necessities and liabilities, you will know how much you can spare every month. After this, it will be easy for you to see how much you can invest every month.
One of the biggest mistakes that new investors make is that they will not be able to invest regularly due to other commitments.
So, if you are planning to start investing then make sure that you are regular with your investments. If you make a plan that you will invest N50,000 (approx. $100) every month, no matter what then make sure you do it.
If you feel that there may be an emergency, then save a small amount of money from your income every month so that you can use that fund for emergencies. This way, you needn’t take money from your investments.
If you ensure that a minimum of 40 per cent of your income goes into investments then in 10 years’ time you will definitely start reaping the rewards for years of investment. So, make sure you can invest as much as you can after covering your expenses and liabilities.
There’s a famous saying that if you can’t buy something twice then you can’t afford it. Try cutting down all your expensive wants so you can invest and grow your investments.
A good place for investors with low funds is Exchange Traded Funds (ETF) since the minimum investment requirements are very low.
Warren Buffett once said in his investor letter “The goal of the non-professional should not be to pick winners — neither he nor his “helpers” can do that — but should rather be to own a cross-section of businesses that in the aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.”
- Diversify and manage your portfolio
You can only fully gain from stock market investments over a period of time. Building a diverse portfolio enables you to park your money into more than a single asset class. This is not only safer but it’s less risky than investing all your money into one stock.
If in case the stock that you are invested in crashes, then you lose your entire investment. So, it’s always better to invest in more than one stock. Non-professionals should invest in blue-chip stocks only, or the index fund.
If you are finding it hard to diversify your investments, then invest in a Mutual Fund. Even if you are investing in a mutual fund, then you also need to be absolutely sure about all the costs, fees, expected returns and risks involved with that too.
Another big advantage of building a diverse portfolio is that it will help you fight market volatility without suffering major losses. Since your investments are tied into different stocks, assets, it will lower the risks that come with markets.
You should look at stock market investing as a long-term process rather than checking daily returns and let your investments handle themselves. You should just wait for your investments to mature.
Investing in stocks is a good way to building long term wealth but it requires you to be patient and regular with your investments. If you are looking for short term gains then stock market investments aren’t the best option for you.
If you are regular with your investments, it can almost be assured that a good portfolio might even allow you to retire early.
Also, be fully aware of the risks, and don’t invest money that you cannot afford to lose. Do your full research & invest wisely.
Bitcoin, Ethereum, Others Plunge as US Sues Binance, Founder
By Adedapo Adesanya
The cryptocurrency market is under fresh headwinds as the United States Securities and Exchange Commission (SEC) accused Binance and its Chief Executive Officer, Mr Changpeng Zhao, of mishandling customer funds, misleading investors and regulators, as well as breaking securities rules.
Bitcoin (BTC), Ethereum (ETH), and a host of other digital coins are now trading at their lowest in almost three months.
The US SEC complaint filed in a federal court in Washington, D.C., listed 13 charges against Binance, Mr Zhao, and the operator of its purportedly independent US exchange.
The agency laid out a range of alleged violations against the world’s biggest crypto exchange and its leader and warned that “The public should beware of investing any of their hard-earned assets with or on these unlawful platforms.”
The SEC alleged that Binance artificially inflated its trading volumes, diverted customer funds, failed to restrict US customers from its platform and misled investors about its market surveillance controls.
The SEC also claimed that Binance and its billionaire founder and one of the crypto industry’s highest-profile moguls, secretly controlled customers’ assets, allowing them to commingle and divert investor funds “as they please.”
Binance created separate US entities “as part of an elaborate scheme to evade U.S. federal securities laws,” the SEC also alleged, citing a number of practices first reported by Reuters in a series of investigations into the exchange published this year and in 2022.
From almost three years ago until June 2022, the SEC also alleged that a trading firm owned and controlled by Mr Zhao, Sigma Chain, engaged in so-called wash trading that artificially inflated the trading volume of crypto asset securities on the Binance.US platform. The SEC said Sigma Chain spent $11 million from an account on a yacht.
SEC Chair Gary Gensler said, “We allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”
In a blog post, Binance, in its defence, said: “We intend to defend our platform vigorously,” adding that “because Binance is not a US exchange, the SEC’s actions are limited in reach.”
“All user assets on Binance and Binance affiliate platforms, including Binance.US, are safe and secure,” the blog post said.
In the statement, Binance said it had “actively cooperated” with the SEC from the start and respectfully disagreed with the SEC’s allegations.
Binance said it had been trying to find a “reasonable resolution” with the SEC, but the agency “at the eleventh hour” issued new requests and went to court, adding the SEC’s actions appeared to be an effort to “claim jurisdictional ground from other regulators.”
As the events continue to unfold, the market is reacting negatively as BTC has lost over 4.1 per cent in the last 24 hours to trade at $25,721.67 while ETH has lost 3.00 per cent to $1,817.01 while Binance Coin (BNB), Binance’s token, has lost nearly 8 per cent of its value as it trades at $277.33.
Other tokens like Cardano (ADA), Solana (SOL), Litecon (LTC), Polygon (MATIC), and Dogecoin (DOGE) have also lost more than 6-7 per cent of their respective values.
BUA Cement Gets $500m for Two New Production Lines
By Adedapo Adesanya
Nigeria’s second-largest cement producer, BUA Cement, has gotten a $500 million financing package from the International Finance Corporation (IFC) to develop two new production lines in Sokoto State.
In what is IFC’s largest-ever investment in northern Nigeria, the financing package, which saw input from African and European partners to BUA Cement Plc, will help the company part-finance and develop two new, energy-efficient cement production lines that will create up to 12,000 direct and indirect jobs.
The funding includes a $160.5 million loan from IFC’s account, a $94.5 million loan through the Managed Co-Lending Portfolio Program (MCPP), and $245 million in parallel loans from syndication partners; the African Development Bank (AfDB) – $100 million, the Africa Finance Corporation (AFC) – $100 million, and the German Investment Corporation, Deutsche Investitions- und Entwicklungsgesellschaft (DEG) – $45 million.
The financing was announced during the Africa CEO Forum in Abidjan, Cote d’Ivoire.
It was disclosed that the plants would run partly on alternative fuels derived from waste and solar power. Each will produce about three million tons of cement annually when complete, serving markets in Nigeria, Niger, and Burkina Faso.
Speaking on this, Mr Abdul Samad Rabiu, Chairman and Founder of BUA Group, said that “BUA is delighted to partner with IFC and other esteemed institutions in securing this $500 million facility to develop energy-efficient cement production capacity and strengthen our equipment and logistics capabilities in northern Nigeria.
“In line with our commitment to sustainability and ESG principles, this investment will create jobs and contribute to economic and infrastructural development within Nigeria and the greater Sahel region.
“We are particularly pleased to have successfully gone through the rigorous process with IFC, AfDB, AFC, and DEG, which validates our responsible business practices. By focusing on greener fuels and enhancing our equipment and logistics platform, BUA Cement is building a foundation for sustainable infrastructure growth and a more inclusive society,” he said.
“We are pleased to join with our partners to support BUA with an investment that will boost industrialization, create jobs and deliver economic growth in northern Nigeria, a region with significant economic potential,” said Mr Makhtar Diop, IFC’s Managing Director.
Investing in northern Nigeria is integral to IFC’s strategy to promote sustainable development in underserved regions. This includes areas with limited opportunities and a need for increased private-sector engagement.
The new plants will provide local developers with a reliable and affordable source of cement, and bolster the construction of essential infrastructure, fostering economic growth and prosperity for the region.
The project is expected to create about 1,000 direct jobs and 10,800 indirect jobs. Direct jobs include those in manufacturing, engineering, and advanced automation systems. Indirect jobs include those in the cleaning, maintenance, mining, and transportation sectors.
The financing package will also allow BUA to replace some of its diesel trucks with vehicles that are run partly on natural gas, over time producing fewer emissions. As part of the project, IFC will also advise BUA on developing a gender-inclusive workplace strategy that creates more opportunities for women across its operations.
“Following an initial $200 million investment in BUA Group in 2021, we are proud to play another key role in this landmark manufacturing project to transform northern Nigeria’s construction sector and the entire country. Investing in this project will sustainably build Nigeria’s local manufacturing capacity, empower local communities, and create employment opportunities. AFC is committed to working with our partners to accelerate development impact through infrastructure solutions that support value addition, industrialization, and job creation throughout Africa,” added Mr Samaila Zubairu, CEO & President of Africa Finance Corporation (AFC).
“The African Development Bank is pleased to be partnering with IFC and BUA on this expansion project as it is aligned with our priority strategies of industrializing Africa and improving the quality of lives of Africans through the increase in cement production, which will lead to the development of additional affordable housing and critical infrastructure in Nigeria and neighbouring West African countries while supporting the use of cleaner energy at BUA’s Sokoto facility,” said Mr Solomon Quaynor, Vice President of AfDB’s Private Sector, Infrastructure and Industrialization arm.
“DEG’s mission is to be a reliable partner to private sector enterprises as drivers of development and creators of qualified jobs. We are pleased to contribute to this transaction together with our development finance partner institutions. Together we support BUA in its transformation towards a more sustainable production by implementing innovative technology. The significant reduction of CO2 emissions and the creation of decent jobs in a region with many vulnerable households are key factors for DEG’s financing,” said Mr Gunnar Stork, Senior Director at DEG.
The investment in BUA is part of IFC’s strategy to promote diversified, inclusive growth and job creation in Nigeria, where IFC supports the manufacturing agribusiness, healthcare, infrastructure, technology, and financial services sectors. IFC has an active investment portfolio of $2.3 billion in Nigeria.
Nigeria’s OTC Stock Market Depreciates by 1.40%
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange opened the week in the negative territory as the bourse witnessed a 1.40 per cent loss on Monday, June 5.
This was influenced by the sole price loser, FrieslandCampina Wamco Nigeria Plc, which fell by N4.00 to sell at N71.00 per unit compared with the preceding session’s N75.00 per unit.
The milk-producing firm pushed down the efforts of Niger Delta Exploration and Production (NDEP) Plc and Industrial and General Insurance (IGI) Plc to lift the OTC stock market.
NDEP gained N1.16 during the session to finish at N246.21 per share versus N245.05 per share, and IGI Plc appreciated by 1 Kobo to 8 Kobo from 7 Kobo.
At the close of business, the market capitalisation of the bourse decreased by N14.30 billion to N1.008 trillion from N1.022 trillion, and the NASD Unlisted Securities Index (NSI) recorded a 10.35 points decline to wrap the session at 728.86 points compared with 739.21 points of the previous session.
Amid the weak sentiment, there was a 1,768.8 per cent rise in the volume of securities traded at the bourse yesterday to 22.7 million units from the previous trading session’s N1.2 million, the value of shares transacted by investors rose by 151.0 per cent to N142.9 million from the N56.9 million reported last Friday, as the number of deals surged by 500.0 per cent to 48 deals from eight deals.
Geo-Fluids Plc remained the most traded stock by volume (year-to-date) with 832.1 million units worth N1.3 billion, followed by IGI Plc with 628.3 units valued at N49.5 million, and UBN Property Plc with 395.9 million units valued at N336.6 million.
Similarly, VFD Group Plc was the most traded stock by value (year-to-date) with 11.0 million units valued at N2.5 billion, trailed by Geo-Fluids Plc with 832.1 million units worth N1.3 billion, and FrieslandCampina Wamco Nigeria Plc with the sale of 17.1 million units worth N1.2 billion.
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