Not very many Nigerians know the activities of the Nigerian Stock Exchange. But some people only know that the financial institution is a place where investors buy and sell securities.
The Nigerian Stock Exchange was established in 1960. The organization has since grown to become a giant financial institution with over 169 listed companies and a total market capitalization of over ₦13 trillion Naira.
The Nigerian Stock Exchange offers benefits to both companies and investors alike. Their wide range of services are also duly standardized towards ensuring safety. In other words, NSE gives the investors avenue to build their wealth and be a part of economic development.
it also provides a wide access to finance companies that are quoted on it. The operations of the Nigerian Stock Exchange are standardized and its functions are just as guided as any other exchange across the globe.
In this article, we shall take a look at the overview of the Nigerian Stock Exchange functions and its peek into the everyday operations of the exchange.
Functions of the Nigerian Stock Exchange
The overall expected outcome of the Nigerian Stock Exchange is to:
“Contribute to improving liquidity in the market, and to renew investor and issuer confidence, by increasing competiveness, and creating greater visibility into our capital market for global investors, analysts and data vendors.”
Its specific functions include:
– To provide an opportunity for investors to buy and sell securities.
– To provide an opportunity for businesses to raise funds from the general public.
– NSE serves as a catalyst for economic growth and development.
– The Nigerian Stock Exchange also provides relevant information for the general public – both potential investors and owners alike – to make relevant decisions.
– It helps in assessing the Nigerian economy in terms of liquidity while also facilitating dealings in government-owned securities.
– Finally, to provide guiding rules and principles to protect the public from fraud and other wrong dealings.
Trading Periods:
The Nigerian Stock Exchange opens 30 hours per week which is average. Most stock exchanges are open 25 to 35 hours per week with 5 days of trading per week excluding weekends.
On its working days, Monday to Friday, it opens at 10.00am and closes at 4:00pm. There are however extended hours of trading that cover both pre-market trading which is before 10:00am and after-market trading which takes place after 4.00pm.
The essence of this period is to give room for investors to act quickly on information that comes out when markets are officially closed. While Stocks can only be traded on the Nigerian Stock Exchange during official trading hours, unofficial extended hours trading markets will carry trades until markets re-open.
Clearing of funds: Is another day to day operation of the organization.
When trade takes place, whether buying or selling, the transactions are not concluded immediately. Rather, it takes a period of 4 days before the entire transaction is concluded.
In the NSE, clearing and settlement is T+3 which represents time + 3 days.
There are 12 sector companies that can be listed on The Nigerian Stock Exchange. They include:
- Agriculture
- Construction/ Real Estate
- Consumer Goods
- financial services
- Healthcare
- Industrial Goods
- Information & Communications Technology
- Natural Resources
- Oil & Gas
- Services
- Utilities and Conglomerates.
Market segments:
The NSE also has some market segments that show the different liquidity levels of the market. They consist of the Main Board, the Premium Board, and the Alternative Stock Exchange Market (ASEM) respectively.
The Premium Board includes the most capitalized stocks on the exchange, the main board includes about 190 stocks and is as liquid as the Premium Board and the ASEM is a market for smaller stocks and is highly illiquid.
Obtaining Data: Has to do with the order for investors to make relevant decisions. They need to have access to relevant and timely information, which is the data from the company itself in terms of their financial statements.
The NSE also offers information on its website regarding closing day prices and others, comprehensive market data regarding your investments including portfolio management.
In summary, the Nigerian Stock Exchange is indeed a giant pillar of the country’s economy. It offers benefits to both companies and investors alike, provides wide range of services that are duly standardized towards ensuring safety and gives the investors avenue to build their wealth and be a part of economic development.