Frequently Asked Questions About the Nigeria Stock Exchange
(Over 20 years investing experience in Nigeria’s financial markets)
Anyone who has surplus funds after current living expenses must make an important decision. Should these surplus funds be used to improve current living stands? Or should it be invested to earn more income or build capital for the future? If investing is the choice, one of most popular avenues over the years has been common stocks (or shares). This questions and answers session is designed to clarify the myths about the stock market.
What is a Stock Exchange?
A stock exchange is an arrangement whereby large and small investors alike buy and sell through stockbrokers, securities (shares and bonds) of companies and government agencies. This arrangement could be through Computer, Internet, Telephone, Fax, Trading floor etc. The Stock Exchange provides the essential facilities for companies and government to raise money for business expansion and development projects through investors who own shares in corporations for the ultimate benefits of the economy.
When was the Nigerian Stock Exchange set up?
The Nigerian Stock Exchange (formerly The Lagos Stock Exchange) was incorporated in 1960, as a company limited by Guarantee, with Head Office in Lagos and branches in some cities like Abuja, Kano, Onitsha, Port Harcourt, Ibadan, Uyo, Yola etc, each providing a trading floor.
Who are the owners of the Nigerian Stock Exchange?
The owners (shareholders) of the Nigerian Stock Exchange are financial firms and institutions. In exceptional cases, individuals with integrity and experience in finance and business are also accepted as shareholders.
How does a person apply for membership?
Application is made on behalf of an applicant, by two members of the Exchange, and one of whom must be a council member.
How is the Nigerian Stock exchange governed?
It is governed by a team of shareholders at an Annual General Meeting. These shareholders are referred to as the council (Board) of the Stock Exchange. The council is presided by over by a President, while the daily administration is led by a Director General.
What are the duties of the council?
- Makes policies.
- Enforces discipline among members.
- Makes rules and regulations for dealing members.
- Grant quotation and listing for securities.
- Protects interest of the investing public
- Considers complaints about and among the members.
Who are the principal agents at the Nigerian Stock Exchange?
They are the Stockbrokers and issuing houses.
Who is a stockbroker?
A stockbroker is a person or a firm who buys and sells securities on behalf of investors for a commission called brokerage?
What is an issuing house?
As a member of the Stock Exchange, it is a firm that helps to prepare prospectuses and to sell securities offered to the public by government and companies.
They are Investment Banking institutions that assist companies in raising funds in the capital market by acting as sponsors for these securities. They may sponsor the issue as a broker ( selling the security at the best possible effort basis) or as an underwriter (by taking up those securities not taken by the public).
What are securities?
Securities are written or printed documents by which the claims of the holder in specified property are secured. They could be shares, bonds and debentures.
What are stocks and shares?
Stock and shares represent ownership interest in a business. It also refers to units of capital in a company.
What are bonds and debentures?
They are legal instruments representing a promise by the company or the government to pay back a loan, plus a certain amount of interest over a definite period of time.
Who is an investor?
A person or an institution who uses his savings or borrowing to buy securities.
Why do people buy shares?
To share in the fortunes of the companies they invest in. Some people buy shares with the hope of seeing their capital grow. I will advise you to read my last article on the benefits of shareholding.
With how much money should I venture into the Stock Market?
Most income levels can venture into the stock market. Some wealthy people and institutions invest millions and billions of Naira but lower income investors can participate with as little as One thousand Naira.
Frequently asked questions about the Nigerian Stock Exchange will be continued next week.
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References
- A Dictionary of Finance by Omotayo Gbede (2003)
- Questions and Answers on the Nigerian Stock Exchange by the Council of the Nigerian Stock Exchange (2002)
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Did you know?
That the accumulated pension fund is now valued at over N3.7 trillion, and the fund is expected to grow to over N11 Trillion in 2016.
The fund is growing at a rate that our fund managers cannot find asset classes or ventures to invest the funds in.
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Book for the Month
You can be a stock market genius by Joel Greenblatt.
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Memorable investment quotes
It usually takes a long time for investors to become sophisticated enough to realize how simple and interesting, investing can be.
Peter Di Teresa
