Nigeria Financial Info, Market Reports



Investing in the Nigerian Stock Market

The Nigerian Stock market has been around since the 60's, but the awareness has not been as much as now. A lot of people did not show interest in the Nigerian Stock market until the Banking consolidation of 2005 that forced most banks out to the market place to source for cheap funds to boost up their capital base.

Suddenly, everyone is talking about the stock market, and the gold rush is on. Speculators have invaded the market looking for a kill. In the wild stampede, there is the temptation to believe that everyone wins.

A lot of folks play the market as pools. Listen in on most discussions about stocks, and the predominant topic is which is the next stock to double in price. Instead of becoming investors, folks are becoming gamblers. They don't care what the company does, who runs it and the future outlook. So far as the stock is bullish, that is the place to be.

There is nothing wrong in capitalizing on capital gain; however banking on a stock price to rise sometimes is akin to tossing a dice. You can bet on the wrong horse.

Buying a stock of a company is simply owning a slice of it. There are two broad ways of investing:

a) Start your own company and run it
b) Put your money in a company not run by you

In (a), you determine what happens in the company, you know it inside out. You are an insider. In (b), you are on the outside. The degree of your closeness to the inside depends on the size of your stake in the company.



Basically, the closer you are to the inside, the more knowledgeable you are about the goings on in the company, and the brighter your chances of making informed decisions. If you depend on the newspapers to get your news about a company, then it is too late, if the situation demands that you bale out. The information is now public domain, and there will be a stampede.

If you don't know how to, or have the time to analyse companies financial figures, nose around to find out what is really happening in the company (beyond its beautified figures), understand the sector the company is operating in, the company's strengths, weaknesses, opportunities and impact of competition, you better get a fund manager to run your portfolio to you, and give him a cheque monthly to buy stocks for you.

It is very tempting to rush into a bullish market. The bulls tire out after a while and the bears stage a comeback. The Nigerian Stock market is generally bullish at the time being, and in the immediate foreseeable future because of heightened awareness of making money in the stock market, foreign investors, including Nigerians in diaspora joining the gold rush plus pension fund managers pumping workers contributions into the market (well, the percentage they are allowed to by PENCOM).

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