Making Choices
If you want to start making money from stock-trading (buying and selling stock) in Nigeria, it is better to start by being bullish (buy to sell quickly), on short-term (in a matter weeks or months); rather than being bearish (buy to hold) on longer time basis (years). Buying to hold makes you more of a part-owner of the company than just a trader; in that regard, you would be entitled to the dividends of the company from time to time.
Understanding the Transaction Flow
It is possible to buy stock worth N500, 000 or less and quickly make gain by selling it within the next few weeks or months. If you bought a stock (units of shares) worth N500, 000 at the price of 1.00 kobo per share, for example, and by next month the price appreciates to 2 kobo per share, this means that you have made 2 times your money after selling, which will amount to N500,000 x 2 = N1,000,000. On that trade, you will pay 1% commission of about N10, 000 on the deal and smile to your bank with your profit of N490, 000.
However, because of the volatility (risks and fluctuations) in the market, it is possible to buy the stock at N500, 000 and watch your money nose-dive by half (i.e., reduce to N250, 000) within the next few weeks. You may decide to trade with a cash of more than N500, 000, any amount that you can raise for the purpose. This all depends on the volume you want to trade or the amount of risks you want to take.
The need for information
Stock trading is a win-or-lose game. That is why you have to be well informed about the undercurrents of the Nigerian Stock Market before dabbling into trading. You will get some background information by following market trends, particularly the past performances of profitable stocks. You could rely on your own knowledge and ability to make brilliant speculation that will lead you to strike a good deal; or you could rely on the advice of your stock broker. The stock broker is an agent with whom you would first open an investor’s account, who will thereafter buy stock on your behalf from the stock market.
In Nigeria, past experiences have shown that stock-brokers are not usually trusted for information at the very first time for the reason that some of them retain preferred old customers to whom they apparently reveal much of the insider information. Hence, in addition to registering with a stock broker it will not be a bad idea, in the alternative, to approach a financial advisor who will help you analyze the market independently, and give you the best advice in the circumstance. That way, you will tread more cautiously and avoid the associated market risks.
Top performers in the Nigerian Stock Market from recent trends
Year 2020 reopened with the following top-10 performing stocks; including the shares of: Transnationwide Express Plc, Guinness Nigeria Plc, Okomu Oil Palm Company Plc, Evans Medicals Plc, Costain (W/A) Plc, Ikeja Hotels, Cutix Plc, Smart Products Plc, P.Z Industries Plc, and Associated Bus Company (ABC) Plc.
Transnationwide Express Plc (Tranex) came from the second position towards the end of 2019 to lead the gainers at the dawn of 2020. The share price rose by 23.36 per cent or N0.25 to close at N1.32 from N1.07. The company which was faced with decreasing fortune as far back as 2014 is now beginning to do well. Despite 46.2 per cent increase in tax expense for the period, the company’s profit after tax witnessed a huge 102.2 per cent increase from N14.09 million recorded at the turn of 2014 to N28.48 million during the first week of 2020.
Guinness Nigeria Plc followed on the list with 18.90 per cent or N24.19 appreciation to close at N152.19 from average of N128.00 the previous weeks. The company was among seven other companies that received commendation from the Nigerian Stock Exchange, NSE, for timely submission of their various financial reports and accounts for 2015 (excellent corporate governance).
Okomu Oil was the next as its share price rose by 14.19 per cent or N3.37 to close at N27.12 in the beginning of 2020 from N23.75 per share prevailing towards the end of 2019. The company has notably entered a deal to purchase 11,400 hectares of land in Ovia North East Local Government Area of Edo State on which it intended to plant about 10,000 hectares of palm oil, ostensibly to position itself as a potential beneficiary of the Oil Palm Financing Initiative of the Central Bank of Nigeria. Recently, Okomu Oil paid N250 million dividends to the shareholders, which translated to 25 kobo per share.
Evans Medicals, another top performer recorded an average of 12.50 per cent increase in its share price between 2019 and 2010. Costain (W/A) Plc recorded 12.28 per cent; Ikeja Hotels Plc 10.50 per cent; Cutix Plc 9.68 per cent; Smart Products 8.89 per cent. P.Z Industries advanced by 7.99 per cent, whereas ABC Plc went up by 7.55 per cent.
Conclusion
I hope this guide will help you.
The author can be reached for further enquiries through his email address: chukwudiodili902@yahoo.com
