The stock market, Stock Exchange, shares, stockbrokers etc…

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A stock market is a place where you can buy and sell shares, stocks,
bonds etc. We call people who buy or sell small numbers of shares,
small investors. Organizations, which buy and sell large numbers of
shares, are large investors or institutional investors.

Why the need for a Stock Exchange?
A stock exchange is the place where companies can raise money to make
their businesses bigger and better. Companies raise this money by
selling shares or stocks to investors. At the same time, the stock
exchange gives investors an opportunity to invest in these companies
and benefit from any profits they may make. Government can also raise
money from stock exchange especially through sale of development
stocks, bonds etc.

WHAT IS A SHARE
A share is what one has to become a member of a company. When you buy
a share of a company you become a member (a share holder) of that
company. Being a member or shareholder means that you share in the
profits of the company

Companies issue shares. These shares represent the money which
shareholders (as members of the company) put down when they first
invested in the company.

Owners of shares (shareholders) are presumed to own the company. If
the company makes a profit, the shareholders have the right to a share
of the profit which is declared for distribution. We call such a slice
of the profit a dividend. A dividend is not a fixed amount

Each year the directors of the company make two important
recommendations about profits made by the company.
1. First, they recommend what slice of the profit the company should
keep in reserve for future expansion.
2. Second, the recommend what slice of the profit the company should
pay out to its shareholders as dividend

The profit that the company makes for the year determines how big each
slice will be. Shares are traded on the Stock Exchange during
every working day of the year.

FINDING A STOCKBROKER
A stockbroker is a dealing member of The Stock Exchange. He provides
services to anyone (an investor) who wants to buy and sell shares.
A stockbroker provides a personal service. So, before you begin, talk
to a few stockbrokers. Find out what services they offer.

What do you do if you don't know any stockbrokers?
You simply contact The Stock Exchange's Corporate
Affairs/Research & Information Technology (RITS) Department. They will
give you the names of stockbrokers.

There are many shares on the market. Let your stockbroker advise you
on which shares you should buy. Talk to him. Discuss the merits?
(Worth) of the company you want to buy or sell shares in.

BUYING SHARES
You normally buy shares in lots of 100. When you give your stockbroker
the order to "buy", he will buy your shares. He will buy them at the
best price in the market at that time through The Stock Exchange's
trading floors. You become the owner of the shares form the time the
deal is done.

When you give your order to buy your stockbroker must tell you whether
he is acting either as an `agent' or as a `principal'. If he acts as
an agent your stockbroker will go out to the market place and let
other stockbrokers know that you wish to buy shares form their
customers if they are willing to sell. If, on the other hand, he tells
you he is acting as a principal, you will be buying shares that the
stockbroker has bought and is holding for his firm's account and which
he then can sell directly to you.

You will, however, still have to pay the Government's charges (VAT)
according to the value of the shares you buy

Within a few days, you will receive a contact note from your broker.
This contract note is an important document. It shows the details of
the deal that the stockbroker has carried out for you. It also tells
you how you. Keep it safely for your records.

The share certificate will arrive later if the investor chooses to get
one.
If otherwise, he will receive a certificate of stockholding which
serves the same purpose. But for primary issues, share certificates
are issued once in a year. Your share certificate or certificate of
stockholding shows how many shares you own. It is also an important
document, so keep it in a safe place. You will need the share
certificate or certificate of stockholding if you want to sell the
shares at a later date. You can also use it as collateral for loans in
a bank or any financial institution.

WHEN DO YOU PAY?
You must pay for the shares you have brought within four business days
from the date of the confirmation of the trade (Transaction Day or a
maximum of three days after).

Trading Accounts of broker are debited or credited within three days
by the settlement bank.

WHAT DOES IT COST?
You will have to pay the cost of the shares you have bought,

PLUS
The negotiated brokerage +VAT+ Withholding Tax on Dividend when a
company declares dividend

PLUS
A stamp duty or other charges by statutory bodies.

Your stockbroker will tell you about these charges.
You will find the total amount you need to pay on the broker's note.
You will get this broker's note from your stockbroker

SELLING SHARES
When you want to sell your shares, contact your stockbroker.
Tell him which shares you want to sell. He will sell them at the best
price in the market. Remember, you will have to give him your share
certificate or certificate of stockholding for authentication at the
depository of The Central Securities Clearing System (CSCS). Your
broker will pay you with a crossed cheque for the shares you have sold.

UNDERSTANDING MORE ABOUT SHARES
Some daily newspapers in Nigeria publish the Daily Trading Summary of
The Nigerian Stock Exchange. The format includes names of quoted
companies, public quotation price, current market price, information
on dividend, business done daily, the price and quantity, the highest
and lowest price of the share in the year, Earnings Per Share (EPS),
and Price Earnings Ratio (PER).
Business Times publishes weekly the whole content of the Daily
Official List. But majority of the daily papers publish The Nigerian
Stock Exchange's daily trading summary.

THE STOCK EXCHANGE
HOW TO READ THE SHARE PRICE IN THE DAILY OFFICIAL LIST
Please note that all prices are expressed in value per share
Column Explanation
SHARE Name of
Security

CURRENT MARKET PRICE The current market price which means
the price on

Board or the ruling price

EX-DIVEX-SCRIP After payment of
dividend and after issuing bonus shares

BUSINESS DONE This means the price,
date, and quantity at which a share

Was
last traded

BUY The price
at which the buyer is prepared to purchase

SELL The price
at which a share is offered for sale

HIGH The highest
price attained by the share or stock during the year

LOW The lowest
price attained by the share or stock during the year

EPS Earnings
per share, which indicates how much income after
Tax a
unit of share has generated

P/E The
price/earnings ratio is the ratio of the price to the earnings,

Indicating how long it would take an investor to recoup his

Investment if he/she were to buy the stock at current price to

Earnings.