The Stock Markets: How it Works in Nigeria

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Most people believe that the stock market is a no-go area for them and should be left for only the financial experts. But that is not the right attitude to have, the stock market is not reserved to a specified class of people with specified level of intelligence. As the name implies it is merely a market, and like all markets is open to whosoever is able to and willing to trade within it. If you have absolutely no idea what the stock market is about, this article will give you an overall basic education on it.

First of all, you should know that the terms “stock market” and “stock exchange” refer to the same thing. They are simply platforms where corporate entities like companies, industries etc and government securities are sold. But then what sets this platform aside from just any other trading platform is that it is regulated. It is not a “black market” affair. It is simply a type of investment.

So who regulates the stock market and ensure is does not turn chaotic?

The Security and Exchange Commission (SEC) is regulates the Nigerian Stock Market. It is in turn supervised by the Federal Ministry of Finance.  There is also the Nigerian Stock Exchange (NSE) which was formerly known as the Lagos Stock Exchange, it is at the centre of the Nigerian stock exchange and so far has over 200 companies listed under it.

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So how do you trade on the Stock Market?

The first thing you have to do to qualify to buy or sell stocks on the Nigerian Stock Market is to be a licensed trader. Traders usually work for brokerage houses, the housed in turn take orders to buy and sell stocks from customers.

Stocks can be bought directly from the primary market, during the IPO (Initial Public Offering) or on the secondary market from other people who wish to sell their shares. On rare occasions, companies sometimes buy could buy back their stock on the market. The stock market is made up of investors and traders who buy and sell stock, and whose demand rates push up the prices or bring them down.  The only time you can buy stocks directly from the company is during the IPO, after that, you are just buying from other traders on the market.

Stocks are issued out by companies to raise cash, and after the IPO the stock continues to trade on the market through other people that want to sell or buy. Aside the profit you will make when you sell your shares on the market, there are other perks attached to owning stock or shares. There are dividends (dividends are your part of the company’s profit as a shareholder)to earn from the company whose shares you own, and you also have voting rights as a shareholder.

In all, the stock market is prone to fluctuations as much as any other platform. And as such could be a quite risky. You could make a fortune on it or lose a fortune in it.


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