The Nigerian Stock Exchange hasn’t precisely sizzled lately. A local banking difficulties and political turmoil cut the MSCI Nigeria Index, 60% from its record 2014 highs.
But the capacity of Africa’s most populated country is large. A 60% drop tells me that it’s a perfect time to scour sub-Saharan Africa’s second largest stock exchange for a bargain.
But as that may be now, I will say first things first. I need a Nigerian brokerage account. But the question remains, how exactly do I go about opening one? How about we show you how to invest in Nigerian Stock Exchange and ways the Nigerian stock exchange daily price list work? Read on…
In my previous post in this “Nigerian stock market” procedure, I have reached out to almost every stockbroker enrolled as a dealer member from each exchange trade. I must admit that I didn’t succeed in doing that. Why not? There are 327 brokers licensed to trade on the Nigerian Stock Exchange.
I narrowed the lists down by going to each of their sites. Any sites that appeared to be outdated or not as much as authority looking, didn’t make the shortlist. I concluded that that was a completely subjective method that may have omitted some fine brokers in Nigeria, but I was expecting to start somewhere.
Hence, I sent a report to all brokers that survived my starting website assessment – a couple of dozen on the whole. I asked each broker whether they would like to invest in Nigeria stock exchange, the amount needed to open an account, and what documentation was needed. I found out those nine brokers with reasonable account records to be very useful and responsive.
Commissions and fees are surveyed on a sliding scale that is standard across all brokers. For transaction less than N1, 000,000 (generally $6,350.00) you will pay 1.86% when buying a stock and 2.19% when offering to sell one. For bigger transactions, commissions and fees total 1.49% of the total transaction value to purchase and 1.82% of the total transaction value to sell.
Opening a Nigerian Brokerage Account
At the moment, we should walk you through the processes of opening an account with a Nigerian stockbroker and purchasing your first shares.
Step 1: Complete the CSCS Account Opening Form
The Central Securities Clearing System (CSCS) records the ownership of securities through electronic accounts. When you request that a broker open a trading account, they will send you a copy of the CSCS Account Opening Form (ARM Securities). You will then be provided with a CSCS account number. This number will go with each Nigerian stock trade you operate, allowing the CSCS to keep a record of every one of your assets in Nigerian Stock exchange market.
Step 2: Complete the Broker’s Account Opening Form
After your first email to the representative asking for information on how to open an account, they will likewise send you a blank account opening form, in case you make a mistake with the original form. The form usually requires exposure of your international ID number or other ID number, your location/address, and banking details.
Step 3: Gather two color passport photographs of yourself
You should get a lot of them while you’re preparing the forms. They typically appear to be something you need to have handy.
Step 4: Make copies of your International Passport
If you don’t have an international passport, a photocopy of your driver’s license may be enough.
Step 5. Photocopies of utility bills that can be used to verify your home address/residence
Most brokers in Nigerian Stock exchange require a water or electric bill dated within the last three months.
Step 6. Send the original CSCS form, the account opening form, passport photographs, photocopy of your ID, and a copy of your utility bill to your broker through DHL or FedEx
You may email photocopies of all reports to your broker to get ahead on the account opening processes; however they should in the end get the original documentation. And help yourself out by sending it via a courier like DHL or FedEx. Couriers are costly, but they’re more dependable than the postal service. I’ve learned that through the hard way.
Step 7. Wire Funds to Your Brokerage Account
After opening your Nigerian Stock exchange trading account, your broker will provide you its bank account details so that you can add funds to your account. The most important approach to do this is through wire transfer. If you haven’t sent a worldwide wire sometime recently, I suggest that you take your agent’s banking information to your local bank offices and request that they walk you through the processes. They’ll verify that your funds are deposited securely. Note that most US banks charge about $25 for active international wires.
Step 8. Present a Trade Order
You’ve done your research and discovered a stock that you’d like to purchase. What’s next now?
While a few brokers will ask for a signed “trade mandate form”, for most brokers, you should do nothing more than sending an email to your broker with your trading guidelines you have mapped out. Remember that a few shares on the Nigerian Stock Exchange are fairly illiquid so I encourage you to indicate a limit price for all parts of your orders. This will help you avoid paying essentially more for your shares than you had expected to pay.
Your broker will then execute your trading and send you an agreement note that indicates the purchase or offer value, commissions, and fees. Settlement of share trading takes about four business days on the Nigerian Stock Exchange, so if you’ve sold shares, don’t hope to get the returns of the transaction before then unless you’re willing to incur a fine to settle the trade promptly.
A Note on Dividends
Collecting profits from Nigerian stocks is generally easy. After opening your account, just let your broker know in writing that you would like all dividends paid on your holdings to be deposited into your trading account.
In conclusion, that is it! Follow these steps described above and you’ll be good to go to start putting money into Nigerian stocks.
The processes of opening a foreign brokerage account can be befuddling. On the hands, if you find this article to be useful, Post your comments below and I’ll do my best to get answers to the questions. Do not forget to share with your friends on Facebook, Twitter and Google+.
Good Luck with your investment!