The Nigerian Stock Exchange

The Nigerian Stock Exchange (NSE) was started in 1961 and was formerly called the
Lagos Stock Exchange. As at March 2003, over 200 securities could be traded on the
Nigerian Stock Exchange. The NSE has its head office in Lagos, with branches in
Port Harcourt, Kaduna, Onitsha and Ibadan, Kano, and Abuja. Shares are traded
from 11:00AM to 1:00PM on the NSE from Monday to Friday with the exception of
public holidays. A computer system is used by dealers (stockbrokers) to buy and sell
shares. This computerized system known as the ATS (Automatic Trading System)
allows dealers to enter buy and sell orders for shares into a computer which matches
the buying and selling orders at the matching prices.


The Securities and Exchange Commission

The SEC is the government agency that regulates the stock market. Its function is to
protect the investor and to build a strong stock market. The SEC passes and enforcesregulations to which quoted companies must abide.




Stockbrokers

As a private investor you cannot buy shares from the stock market yourself, you have
to go through a stockbroker. A stockbroker is licensed to trade shares on the floor of the stock exchange. Stockbrokers charge a commission termed brokerage for this.
The brokerage fees charged by stockbrokers are regulated by the Securities and
Exchange Commission (SEC).


For example, if you buy shares worth N10,000.00
you pay* -

Brokerage commission = 2.75% of 10000.00 = 275.00
Sec Levy = 1.00% of 10000.00 = 100.00
Contract stamp = 0.075% of 10000.00= 7.5
VAT =5.00% of 275 = 13.75
Total = N396.25


And if you sold shares worth N10,000.00 you pay a total of


Brokerage commission = 2.75% of 10000.00 = 275.00
NSE levy = 0.25% of 10000.00 = 25.00
CSCS = 0.25% of 10000.00 = 25.00
Contract stamp = 0.075% of 10000.00= 7.50
VAT = 5.00% of 275 = 13.75
Total = N 346.25


These rates may change over time.


Stockbrokers also provide you with investment advice. They may offer to manage
your investments for you. Stockbrokers also assist companies which want to float
(launch) new shares and bonds on the stock market.

To buy shares you need to open an account with a stock broking firm. Just like banks,stock broking firms require you to have a minimum amount before you can open an account with them. Some of the big firms will need you to have at least N100,000.00 while some smaller firms can open an account for you with just N2,000.00. The money you use to open the account with the stockbroker is your money and is used to buy shares for you. You are not paying it to the stockbrokers. The stock broking firm profits by taking a commission from every trade they carry out for you.

WHAT IS A STOCK MARKET?

“I want to be so rich, that when I write a cheque, the bank will bounce”
– Robert Allen in “ Multiple Streams of Income” stock market (or capital market) is a place where stocks, bonds, and other securities are traded. A stock exchange is the body that runs a stock market.


Some stock markets are not run by any major body, but are coordinated by their
dealers. These are termed over the counter (OTC) e.g. the NASDAQ in America. The
stock market in Nigeria is run by the Nigerian Stock Exchange (NSE).


Functions of the stock exchange.

The stock exchange helps companies generate capital. As a primary market, it
provides an avenue for them to sell new shares and bonds to investors. The
companies can then use the proceeds from these sales to expand their businesses,
develop new products, buy new equipment etc.


The stock market also provides a means for investors to trade in the shares of
companies they own among themselves. In other words, it serves as a secondary
market. For example, one who bought the shares of a company at a particular price
may sell it to another investor. The investors are the ones who profit from this type of trade – companies do not.


The stock exchange also has the function of upholding rules and regulations so that
shady people do not cheat investors of their hard earned money. It gives investors
security. The stock market also provides a means for investors to trade in the shares of companies they own among themselves. In other words, it serves as a secondary market. For example, one who bought the shares of a company at a particular price may sell it to another investor. The investors are the ones who profit from this type of trade – companies do not. The stock exchange also has the function of upholding rules and regulations so that shady people do not cheat investors of their hard earned money. It gives investors security