Nigerian Stock Market Guide to Investing on the

Nigerian stock market; A domestic banking crisis and political turmoil slashed the MSCI Nigeria Index 60% from its record 2008 highs.


Nigerian stock market

But the potential of Africa’s most populous nation is enormous. A 60% drop tells me it’s an opportune time to scour sub-Saharan Africa’s second largest stock market for bargains.

First things first. I need a Nigerian brokerage account. So, how do I go about opening one? Let’s see.

Nigerian Stockbrokers

In all previous posts in this “How to Invest in the Nigerian stock market” series, I have attempted to contact every single stockbroker registered as a dealing member of each respective exchange. I must confess that I didn’t do that for this article. Why not? Because there are 327 brokers licensed to trade on the Nigerian Stock Exchange.

I narrowed this list down by visiting each of their websites. Any website that seemed out of date or less than professional looking, didn’t make the shortlist. This was a subjective process that may have excluded fine brokers, but I needed to start somewhere.

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Then I emailed all brokers that survived my initial website evaluation—a few dozen in all. I asked each broker if they catered to foreign investors, how much they required to open an account, and what documentation was necessary. Nine brokers were found with reasonable account minimums to be helpful and responsive. Each stockbroker below responded to my initial query within one business day.

ARM Securities N100,000 (approx. $635.00) Here Here
Cardinal Stone N1,000,000 (approx. $6,350.00) Here Here
Chapel Hill Denham None Here Here
Cowry Securities N500,000 (approx. $3,150.00) Here Here
Lead Capital N50,000 (approx. $315.00) Here No Recent Online Research
Meristem N2,500,000 (approx. $15,850.00) Here Here
UBA Stockbrokers N250,000 (approx. $1,585.00) Not Available Online No Recent Online Research
Zenith Securities N250,000 (approx. $1,585.00) Here No Recent Online Research

Trading Costs

They assess commissions and fees on a sliding scale standard across all brokers. For transaction amounts less than N1,000,000 (roughly $6,350.00) you will pay 1.86% when purchasing a stock and 2.19% when selling one. For larger transactions, commissions and fees total 1.49% of the total transaction value to buy and 1.82% of the total transaction value to sell.

Opening a Nigerian Brokerage Account

Now let’s walk through opening an account with a stockbroker in the Nigerian stock market and buying your first shares.

1: Complete the CSCS Account Opening Form

The Central Securities Clearing System (CSCS) records the ownership of Nigerian securities via electronic accounts. When you ask a broker to open a trading account, they will send you a copy of the CSCS Account Opening Form (sample from ARM Securities here). ACSCS then give you your account number. This number will accompany every Nigerian stock trade you execute, allowing the CSCS to keep a record of all your holdings in the country.

2: Complete the Broker’s Account Opening Form

After your first email to the broker requesting information on how to open an account, they will also send you a blank account opening form. You may find sample forms from each broker in the above table. The form typically requires disclosure of your passport number or other ID number, your address, and banking details.

3: Collect two color passport-sized photos of yourself

You might as well get a bunch while you’re at it. They always seem to come in handy.

4: Photocopy your passport

If you don’t have a valid passport, a copy of your driver’s license may suffice.

5. Photocopy a recent utility bill that can verify your place of residence

Most brokers require a water or electricity bill dated within the most recent three months.

6. Send the original CSCS form, account opening form, passport photos, a copy of your ID, and a copy of your utility bill to your broker via DHL or FedEx

You may email photocopies of all documents to your broker to get a head start on the account opening process, but they must eventually receive the original documentation. And do yourself a favor by sending it via a courier like DHL or FedEx. Couriers are expensive, but they’re more reliable than the postal service. I’ve learned that the hard way.

7. Wire Funds to Your Brokerage Account

When done with your trading account, your broker will provide you with its bank details so you can fund your account. The most efficient way to do this is via wire transfer. If you haven’t sent an international wire before, I suggest that you take your broker’s bank details to your local bank branch and ask them to walk you through the process. They’ll make sure that your funds arrive securely. Note that most US banks charge about $25 for outgoing international wires.

8. Submit a Trade Order

You’ve done your research and found a stock you’d like to buy. What now?

While brokers will request a signed trade mandate form, however for most brokers, all you need to do is email to your broker with your trade instructions. Keep in mind that some shares on the Nigerian Stock market Exchange are rather illiquid, so I advise you specify a limit price for all of your orders. This will help you avoid paying significantly more for your shares than you had intended to pay.

Your broker will then execute your trade and send you a contract note that specifies the buy or sell price, commissions, and fees. Settlement of share trades takes four business days on the Nigerian Stock Exchange, so if you’ve sold shares, don’t expect to receive the proceeds of a sale before then unless you’re willing to incur a penalty to settle the trade more quickly.

A Note on Dividends

Collecting dividends from Nigerian stock market is relatively painless. Upon opening your account instruct your broker (in writing) that you would like all dividends on your holdings paid directly into your trading account.