The Nigerian Stock Exchange, formerly the Lagos Stock Exchange, was introduced on September 15, 1960, and has since been a breeding ground for fearsome investors to thrive. Investors have been rewarded through dividends, bonus shares, and capital appreciation (a rise in equity price).

Becoming a potential investor in the Nigerian Stock Exchange (NSE) in 2024 is a pivotal step for those who aim for financial freedom. In this article, I’ll put you through the necessary steps to become involved in the Nigerian Stock Exchange market. Also, you’ll learn the pros and cons of being an investor in the Nigerian stock exchange market.

Interested? Let’s delve into the topic right away. However, let’s look at an overview of the Nigerian stock exchange market and how it operates. 

What Is the Nigerian Stock Exchange?

The Nigerian Stock Exchange (NSE), now called the Nigerian Exchange Group, is the commission in charge of all Nigerian stock exchanges. It was founded in 1960 and has since become a household name as it has housed hundreds of equities over the past 64 years. 

As of January 14, 2024, the Exchange Group has a total of 155 listed companies on its platform (check here), with 8 domestic companies on the premium board, 132 companies on the mainboard, and 4 on the Alternative Securities Market (ASeM) board. 

Operations at the Nigerian Stock Exchange officially began on August 25, 2024, with a total of 19 securities listed on the exchange. However, based on some reports, informal operations started in June 1961. 

Based on a Wikipedia report, operations were first conducted inside the Central Bank building with four firms as market dealers: Inlaks, John Holt, C.T. Bowring, and ICON (Investment Company of Nigeria).

Since April 27, 1999, dealers at the Nigerian Stock Exchange have been operating on the Automated Trading System (ATS). In 2013, the NSE released its next-generation trading platform, X-Gen, to facilitate electronic trading for the retail and institutional segments.

In 2021, the demutualisation of the NSE was launched, which led to the establishment of the Nigerian Exchange Group (NGX Group) Plc and three divisions: Nigerian Exchange (NGX) Limited, NGX Regulation (NGX RegCo) Limited, and NGX Real Estate (NGX RelCo) Limited.

Tinuade Awe was appointed the CEO of "NGX RegCo Limited," while Temi Popoola was appointed the CEO of the Nigerian Exchange (NGX) Limited.

Trading on the exchange begins at 9.30 a.m. and closes at 2.30 p.m. every Monday - Friday. Market prices, such as the All-Share Index, NSE 30, and Sector Indices, are published daily in The Stock Exchange Daily Official List, The Nigerian Stock Exchange CAPNET (an intranet facility), and newspapers. Historical price and performance data are also posted on the NSE website.

The Nigerian Securities and Exchange Commission regulates the NSE. The NSE says its mission is to help businesses and investors have reliable access to capital and provide secure saving systems and structures for effective and efficient business operations. 

How to Invest in the Nigerian Stock Exchange

Investing in the Nigerian Stock Exchange (NSE) has been very easy following technological advancements. Long before now, many investors preferred to use the classical paper-based methods to perform operations, but now they prefer electronic methods for registrations and onward trading on the exchange. However, both options are still readily available, even though many investors prefer using the electronic method. In this section, I'll show you four steps you can take to become an investor in the NSE without stress.

1. Apply In-Depth Research and Choose a Reliable Stockbroker

A stockbroker is the only authorised agent that buys, executes, or sells instructions on an investor’s account. A broker-dealer company registered with the SEC, and a dealing member of the NSE is referred to as a stockbroker within the context of the Nigerian stock market.

When you want to decide on a stockbroker, it's essential to look at these requirements:

• Their ease of access

• Their affordability

• Their integrity/reputation

• Their status with the NSE/SEC

Also, make sure that you confirm the stockbroker's status with the NSE and SEC before making any transactions.

2.  Create an Account on the Central Securities Clearing System (CSCS)

Before investors can participate in the NSE, they must be registered on the CSCS. The Central Securities Clearing System is an associate company of the NSE. It is an electronic database that records the ownership of Nigerian securities. When you initiate registration, the system gives you a special account number to hold all Nigerian stock trades you execute.

Opening an account on the CSCS is done through the platform provided by your stockbroking firm.

To complete registration with the stockbroker, investors have to do the following:

• Investors have to fill out the registration form given to them by the broker, which can be done online or manually.

• Investors need to provide KYC (know your customer). These include documents such as a valid means of identification, which could be PVC, National ID, Driver’s License or International Passport, proof of residential address (bill or receipt no later than three months); a passport photograph; and electronic signature (if filling out the form online).

A notarised means of ID and proof of residential address will be required for coming investors not based in Nigeria.

3. Fund Account and Start Trading

After completing the above step, the stockbroker will issue you their bank account number for you to fund, after which they will fund your account as soon as payment is confirmed. Investors trade on the floor of the exchange only through stockbrokers. Trading instructions given to investors are from stockbrokers—this can be through the usual traditional order papers, which will be sent by email or courier. The other way is through online platforms, which have become mainstream for trading on the NSE.

However, non-experienced investors need to take caution to avoid uninformed trading when using these platforms, which can lead to massive losses.

4. Start Receiving Benefits on Your Investments

Investors can benefit through capital appreciation, dividends, and bonus shares. Many companies issue a final dividend at the end of every financial year, while a few companies issue what we call an ‘interim dividend,’ which is done every half-year. However, paying dividends to shareholders is not compulsory.

When profits increase, a company might decide to reinvest some of this profit to create new shares and, in return, reward shareholders with these extra shares as a scrip issue or bonus.

What Are the Advantages of Investing in the Nigerian Stock Exchange?

As an investor willing to invest in the Nigerian Stock Exchange in 2024, it’s important to know some pros and cons. This would help you stay ahead. Below is a tabular representation.

Frequently Asked Questions (FAQs)
When Was Nigerian Stock Exchange Established?

The Nigerian Stock Exchange was founded on September 15, 1960, and is currently the second-biggest financial hub in sub-Saharan Africa.

What Is the Nigerian Stock Exchange?

The Nigerian Stock Exchange (NSE), now called the Nigerian Exchange Group, is the commission in charge of all Nigerian stock exchanges.

What is the Nigerian Stock Exchange? 

The Nigerian Stock Exchange is a company that offers exchange services to customers across Nigeria. Its services include listing and trading, electronic clearing, settlement and delivery, and market data dissemination.

How the Nigerian Stock Exchange Works

Trading Licence Holders can participate on equal terms and compete on a hierarchical basis based on Price, Cross, and Time priority on the Nigerian Exchange Limited (NGX) Automated Trading System (ATS) platform with a central order book.