Stock market participation in Africa remains extremely low. A report published in Nigeria by Nairametrics some months ago indicated that there are about 5 (five) million accounts with the Central Securities Clearing System (CSCS) in Nigeria, of which only about 100,000 are active. This means that less than 2% of Nigerians have CSCS accounts at all, and only about 0.05% of the population is actively participating in the Nigerian stock market. Of course, the picture is similar across most African countries.
While this remains the case, we have recently come across a growing number of questions from individuals seeking to understand how to get started participating in the stock market and investing in shares of quoted companies. This article is an attempt to provide a thoughtful response to such requests and, in doing so, help as many people as possible take their first steps in their wealth creation journey.
What is the Stock Market?
The stock market is where securities—also referred to as stocks or shares—of publicly listed companies are traded on every working day. In Nigeria, participation in such trading requires that the company be listed on the Nigerian Exchange Group (NGX) and remain compliant with regulations set by the Securities and Exchange Commission Nigeria (SEC).
Broadly speaking, there are two ways through which investors can buy shares of publicly quoted companies, and understanding this distinction provides useful context for anyone just getting started.
Primary Stock Market
The primary market is where securities are created and sold for the first time, typically during an Initial Public Offering (IPO) or similar public offer, with the objective of raising capital for a company. Once issued, these securities subsequently become available for trading on the secondary market.
A recent example of participation in the primary market can be seen in how some Nigerian banks, in a bid to comply with the Central Bank’s recapitalization requirements, raised capital through public offerings. Several other companies have done likewise over time as a means of entering the Nigerian stock market.
During such public offerings, the investing public is able to subscribe directly to shares of these companies through the channels provided for the offer, without necessarily having to register first with a stockbroker. In that sense, participating in the primary market is relatively straightforward. However, once the offer is completed, and an investor wishes to trade those shares, it becomes necessary to register with a stockbroker in order to access the secondary market where such transactions can be done.
Secondary Stock Market
The secondary stock market is where investors buy and sell securities among themselves, rather than directly from the issuing company. This is what most people typically refer to as the “stock market,” and it is where existing stocks, bonds, and other securities are traded after their initial issuance.
In a more fundamental sense, the secondary market is what provides liquidity to the system. It enables tradability, fungibility, and by extension, gives value to financial assets. Without it, investors would be effectively locked into their investments with no clear exit path.
Examples of organized secondary markets include the Nigerian Exchange Group (NGX), the New York Stock Exchange (NYSE), and the London Stock Exchange (LSE) among others. So, when people ask how they can participate in the stock market, it is almost always this secondary market that they are referring to.
How to Participate in the Stock Market in Nigeria
To participate in the secondary stock market in Nigeria, intending investors are required to register with a licensed stockbroker. The stockbroker, in turn, will open a brokerage account on the investor’s behalf, facilitate the opening of a CSCS (Central Securities Clearing Systems) account, and assign a Clearing House Number (CHN) to them, which enables access to the Stock exchange.
These days, the registration process is significantly easier than it used to be and can typically be completed within 48 hours or less, depending on how quickly you can provide all required information and documents to set up your account. It is generally advisable to register with a licensed stockbroker that has a strong digital presence, as this simplifies both the onboarding process and the subsequent trading experience, without the need for manual instructions or back-and-forth communication to execute trades.
There are several licensed stockbrokers in Nigeria, and you can check out some below (this is not a recommendation):
- StanbicIBTC StockBrokers: https://www.stanbicibtcstockbrokers.com/nigeriastockbroking/stockbroking
- Investment One Stockbrokers: https://stockbrokers.investment-one.com/
- CardinalStone Stockbrokers: https://cardinalstonesecurities.com/equities/
A more comprehensive list of Licensed Nigerian brokers can also be found on the website of the Nigerian Exchange Group.
It is always prudent to ask about the applicable fees both for registering and trading—statutory and brokerage commissions—before proceeding. In most cases, however, these costs are relatively modest and should not constitute a barrier to entry.
On Investment Apps and Ease of Access
In recent years, a number of investment apps have emerged, allowing intending investors to download, register, and begin trading with relative ease. Many of these platforms operate in partnership with licensed stockbrokers, effectively standardizing the process at the backend.
While these apps offer convenience and accessibility, there is still merit in understanding the underlying structure of the market and, where possible, engaging directly with a stockbroker. This not only provides clarity but also gives the investor a stronger sense of control over their investment journey.
Getting Started and What to Keep in Mind
Once registration is complete, the process of getting started becomes fairly straightforward. Your stockbroker will provide guidance on how to fund your trading account and how to execute trades on their platform, which connects directly to the exchange.
At this point, the more important consideration shifts from access to decision-making. It becomes necessary to carry out proper research on companies and the stocks you intend to invest in, rather than approaching the market speculatively.
It is worth noting that the minimum investment required to begin trading can be as low as ₦5,000. In light of this, it remains somewhat surprising that participation levels are still as low as they are, not just in Nigeria but across Africa more broadly, yet a lot of Africans want to build wealth.
There is perhaps a deeper behavioural dimension to this. It often appears significantly easier to convince individuals to participate in speculative ventures—such as Ponzi schemes or sports betting—than to engage with this more structured and regulated wealth generating and transfer mechanism called the Stock market. Yet, over the long term, it is the latter that has consistently proven to be more sustainable.
Conclusion
At its core, the stock market represents more than just a platform for trading securities; it is a mechanism for wealth creation, capital allocation, and economic participation. Getting started may seem daunting at first, but in reality, the barriers to entry are lower than many assume.
Hope with this article we have been able to provide guidance on how to get started on the Stock market in Nigeria, and help get as many people as possible to get started in their wealth creation journey. This process is largely similar across most African countries. Once you establish contact with a licensed stockbroker, the pathway becomes clearer, and the steps required to get started are relatively easy to follow.
If you have gone through this article and would like to explore further, particularly on related topics such as how to claim your unclaimed dividend, check out our article on it here. You may also find additional guidance through our other articles here.
Ultimately, the most important step is the first one.
Happy investing. Feel free to share this article within your network.
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