Who is involved in the Capital Markets?
- Regulators i.e. Securities and Exchange Commission (SEC), the Nigerian Stock Exchange (NSE) and Central Bank of Nigeria (CBN).
- Investors i.e. individuals, organizations etc.
- The Stockbroker, who remains the most useful market operator to the Investors, as it is only through a broker that the investors can buy and sell shares on the stock exchange.
- Registrars
- Issuing Houses
- Banks and other Unit Funds e.g. Pension Funds, Insurance Companies etc.
- Companies whose shares are traded on the floor of the exchange.
Who is a Registrar?
The custodian of the list of registered members of a company. Also plays an active role in the dematerialization of the certificate for conversion to electronic record with the CSCS.
What is Dematerialization?
Share certificate verification or dematerialization refers to the process of converting the documentary certificate, by the registrar’s confirmation of the shareholder’s details and signature, into an electronic record kept by the CSCS.
How long does Dematerialization take?
Dematerialization can take anything from 1 week to a few months depending on the schedule of the stockbroker , registrar or issues that may arise from the dematerialization process.
What issues can delay Dematerialization?
Irregular signature, different signature, incomplete banker’s confirmation, incorrect details on certificate or covering documents.
What is the CSCS?
The Central Securities Clearing System is the governmental organization that is responsible for keeping electronic records of all share transactions that are effected on the floors of the Nigerian Stock Exchange and from the dematerialization process.
Can I use my shares in CSCS as collateral for a loan?
Yes, your shares on CSCS can be used as collateral for obtaining a loan, in just the same way as the certificate. Banks however now prefer stock already listed on CSCS as collateral.
Can I transfer my account between stockbrokers?
Yes you can transfer your account between stockbrokers by filling out an inter-member transfer form for all the stocks you’re transferring and having your existing broker sign off on the transfer.
Do I have a different number when I transfer my account?
Two numbers identify the shareholder on the CSCS, the alphanumeric CSCS number and the investor's account number. The alphanumeric CSCS number remains the same irrespective of the stockbroker your account is domiciled with but your investor’s account number will differ.
What is P/E ratio?
The P/E ratio, known as the price to earnings ratio is a valuation ratio of current market price of a stock compared to its present earnings per share. Thus a lower P/E ratio may imply a company is undervalued while a higher P/E ratio may imply over valuation.
What services does a STOCKBROKING firm provide?
A member firm's services include:
- Buying and selling of securities (Shares and Bonds);
- Research and advice on investment; which shares to buy or sell and the best time to do so
- Securities management (looking after your portfliio of shares)
- And much more depending on their depth of expertise
What benefits do I get as a SHAREHOLDER?
As a shareholder you are entitled to:
- The right to attend annual general meetings
- Dividends
- Bonuses
- Rights offer to acquire more shares
Can I have more than one STOCKBROKER?
Yes, you can have more than one stockbroker
How do I select a FINANCIAL ADVICER / STOCKBROKER?
It does not take long to be able to find out the following:
- Competence: are they competent? Do they know what they talking about?
- Character: - are they credible?
- Integrity? What is their antecedent?
- Agreeable Terms: - Is the term of providing service agreeable to you?
- Service: do they provide adequate feedback proactively, what is their service delivery like?
What are the KEY BENEFITS of investing in SHARES?
- Capital appreciation. However, be aware that depreciation can also occur
- Dividend Income: - A slice of the company's profit in proportion to the units of shares held
- "Free Share" - Bonus
- Saving Strategy for the future
- Leveraging Benefits i.e. you can use it to borrow in the future
- Emergency backup i.e. as a safeguard for your financial future
- Right to attend Shareholders meeting and company's annual general meeting (AGM)
- Right to vote during AGMs
- May give you a seat on a company's board depending on company policy
How do I participate in the Capital Market?
You can participate by buying shares through:
- Primary Issue: - often advertised in the news media and with posters in banking halls and stock broking offices. This is not a regular event.
- Secondary Market: - This market occurs every working day, and all you need is to give purchase or sale orders to your stockbroker e.g Mbcsec
- Some Commitment (Money & Time):- Like all things worth doing, you need a quantity of this
What are RIGHT ISSUES?
A rights issue is an invitation by the company to existing shareholders to acquire more of the company’s shares. This invitation unlike a public offer isn’t open to the public and may usually be offered at a discount to current market price.
What is the difference between a shareholder and a unit holder?
A shareholder holds a unit of share in a company while a unit holder holds a unit of share in a fund, which pools together money to invest in the shares of various companies.