Nigerian Stock Exchange – The Investment Power House

If you’re searching for the functions and objectives of Nigerian stock exchange, then this post is for you. We will not discuss the functions and objectives without considering the history, operations and other parts that made up the Nigeria stock exchange.

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The Nigerian stock exchange (NSE) is one of the largest stock exchanges in Africa. With daily transaction of billions of Naira and even trillions in some cases, it is wise you know everything about it.

As at the time of writing this report, Nigerian stock exchange market capitalization is over N13 trillion and has over 169 listed companies, which made it precisely the third largest in Africa.

Brief History

Nigerian stock exchange is among the establishments that came along with the Nigerian independent. This means it was established in the year 1960 as Lagos stock exchange. There was need to change the name since it was for Nigerians.

So, in the year 1977 the name was changed from Lagos stock exchange to Nigerian stock exchange. It will interest you to know that it is one of the establishments that were not moved from Lagos to Abuja, after making Abuja the federal capital territory.

The corporate head office of Nigeria stock exchange is at 2-4 custom street, Lagos island.  There are 13 branches of Nigerian stock exchange around the country.

Click Here to Learn More on NSE

Nigerian Stock Exchange – Operations

Nigerian stock exchange provides platform through which investors buy company shares, federal government bond and ETFs. Other name for company shares is equities. In other words, Nigerian stock exchange is where investors buy or invest their money in any listed company and federal government bond through a registered stock broker. That is why you can call it investment power house.

The transactions are done through an automated trading system where the prices and performance of all the listed companies are presented for transparency.

To ensure equal level playing ground for investors or safety of investors’ money, the Nigerian stock exchange is regulated by Securities and Exchange Commission (SEC).  The main duty of SEC is to ensure that there is no unfair manipulation of share prices and trading practices.

Other areas of bad conducts, which Securities and Exchange Commission checkmate in the Nigerian stock exchange are:

  • Inside trading
  • Market manipulation
  • Pump and dump
  • False press release
  • Investors abuse
  • Deceptive media campaigns, paid promotions or analyst recommendation
  • ​Churning
  • Circular or triangular trade
  • Front running
  • Violations of securities trading rules governing members, etc

Also Read: How to Access Loan Without Collateral 

Though, SEC has this entire mandate but that does not stop the exchange itself from developing a strong surveillance department. The surveillance department of the exchange has the responsibility of maintaining a fair and orderly market.

All these surveillance is to have stock exchange with open, competitive, transparent and financial sound market.

Nigerian Stock Exchange – The Players

There are basically two players in the Nigeria stock exchange. They are the investors and the listed companies, with the stockbrokers serving as middle men. There are two types of investors, namely the long term investors and short term investors.

The long term investors buy company shares, federal government bond or ETFs with the view of gaining dividend or bonuses over a long period of time. They enjoy compound interest of dividend and bonuses on their investment.

While the short time investor buy company share, federal government bond and ETFs for capital gain. They buy low and sell high. They don’t hold shares for a long time unless otherwise. So, if you are reading this post now, what sort of investor will you like to be? Take time to study yourself before deciding.

The middle man between the companies and investors is the stockbroker. Brokers get the  license  from Nigerian stock exchange to trade stock for public or their clients. There are more than 200 stock brokerage firms in Nigeria. Therefore if you’re considering investing in shares, federal government bond and ETFs then contact a broker today.

Nigerian Stock Exchange – Functions  

The main function of the Nigerian stock exchange is to regulate and protect investors’ fund in companies’ shares, by providing facilities that aid in buying and selling of shares transparently. That is why their mission statement is “To provide investors and businesses a reliable, efficient and an adaptable exchange hub in Africa, to save and to access capital.”

Other functions or roles of the stock exchange are:

  • Development of Nigeria economy

The stock exchange helps in developing of Nigeria economy because it gives room for foreign direct investment. The exchange allows foreign brokers to enlist as dealers, which makes it easy for foreign investors to invest in the country freely.

  • Provide Real Time Information

They Nigeria stock exchange has the sole responsibility of providing investors with detailed information of all the listed companies. Also, they mandate listed companies to publish their financial statements periodically for investors’ consumption

  • Regulate The Stockbrokers

Every stockbroker in Nigeria must have a license and regulated by the exchange. They periodically train and educate brokers on the international best practices in carrying out their duties.

In addition, they also regulate the financial activities of the listed companies. Companies that fail to adhere to regulatory provisions of the law on corporate governance and extant post-listing guidelines are suspended from the trading on the floor of Nigerian stock exchange.

  • Helps in Raising Business Capital

Companies approach Nigerian stock exchange with the aim of raising money for their businesses in a way of IPO, PP or RI. IPO stands for initial public offer. PP stands for private placement while RI stands for right issue.

IPO is when the companies sell their shares to the general public. Private placement is the act of selling companies share that is not listed on the floor of Nigerian stock exchange to the public. Right issue is the allocating of share to only existing share holders. All these are ways companies raise money for business

Nigerian Stock Exchange – Conclusion

I hope you have gain the basic knowledge of the Nigeria stock exchange. It is a place to make money as a Nigerian if you have the right information. Therefore, in the next article, I will give you details on how to make money on the Nigerian stock exchange.

 

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