To invest in the Nigerian stock market, you will have to open two accounts, namely:

1. A Stock broking Account with your Stock Broker, and

2. A clearing account with the Central Securities Clearing System Ltd

Usually, your stock broker opens these two accounts for you when you approach him for account opening. If you do not have a bank account, you will also have to open one to be able to clear your dividend warrants as well as receive proceeds of your sale mandates from your stock broker. This is important because the rules now discourage cash transactions.

While your stock broking account with the brokerage company shows your transactions with the company in terms of cash and cheque deposits for purchase of stocks as well as credits for stocks sold on your behalf, the CSCS account shows your portfolio position at all point in time. The CSCS is the central depository for capital market transactions in Nigeria keeping and maintaining the portfolios of investors in electronic form. Your Broker is simply a transfer agent who has your mandate to deal on those shares. The CSCS gives you alert via SMS on every trade that occurs on your account. This way, you will know when unauthorized transactions are executed on your account by your stock broker.

Opening a stockbroking account in Nigeria is simple. You however, have to do due diligence on various stock brokers to help you decide on which to use. The major process in opening an account with your stock broker involves documentation in line with Know Your Customer (KYC) rules of the Nigeria Stock Exchange and the Securities and Exchange Commission.

For an individual account, the process includes:

1. Obtain and complete the brokerage house account opening forms. Most houses have their account opening forms on their websites for your download;

2. Attach a means of identification to your duly completed account opening forms. At the moment accepted means of identification include: International Passport, Driver’s License and Utility Bill;

3. Attach passport photographs. Some houses require two photographs.

4. Write and include your cheque for the minimum deposit or pay it into the brokerage house bank account,

5. Attach a mandate letter. This gives the broker the mandate to transact on your portfolio on your behalf;

6. Submit completed forms with all the attached documents to your stockbroker, including evidence of payment of the initial deposit for stocks.

Note that the minimum deposit shall be credited to your account with the brokerage house and applied to buying stocks for you based on your instructions. These stocks if purchased through the secondary market will reflect in your CSCS account. The KYC documentation for a corporate body shall include those required for an individual account holder in addition to the following:

1. Certificate of Incorporation

2. Memorandum and Articles of Association

3. Form CAC 7 (i.e particulars of directors)

4. Board Resolution authorizing the appointment of the brokerage house as the company’s stock brokers

5. Signature mandate.

For your broker to forward your account opening request to the Central Securities Clearing System Ltd, you are also required to complete a different set of KYC documents. These documents will be forwarded to you by your broker. You can also download them from the stockbroker’s website. The documents include: Share Transfer Forms, Particulars of Shareholders and online access form to enable you access your portfolio online from anywhere in the world.

Once you have decided on a stock broker, he will guide you through the account opening processes. Bear it in mind that some brokerage houses may charge you a small amount as administrative cost.

Can one open an account and trade on your own without going through a stock broking firm?

Informative

Huw:
Informative

@Rosicky7 you can't open an account by yourself. Find a good stockbroker with online trading platform and you can do your buying/selling by yourself.