LEARN · STEP 2 OF 5
How shares work
A share is a slice of ownership in a company. You make money two ways: dividends (your cut of profits, paid in cash) and capital gains (selling at a higher price than you paid). Prices move with supply and demand — and shares can fall as well as rise.
Owning a slice
When a company lists on the NGX, it divides itself into millions of shares and sells them to the public. Buy 1,000 shares and you own 1,000 tiny pieces of that business — its factories, its profits, and its problems. As an owner you may get a vote at shareholder meetings, but for most beginners the point is simpler: a claim on future profits.
The two ways you earn
- Dividends: when a company makes a profit, its board may share some with shareholders as a cash dividend — say ₦2.50 per share. Dividends are usually paid once or twice a year and face 10% withholding tax in Nigeria.
- Capital gains: buy at ₦100, sell later at ₦130, and the ₦30 difference (minus fees) is your gain. Nobody guarantees the price will rise.
Why prices move
Share prices are simply the latest price a buyer and seller agreed on. Good earnings, a dividend announcement or a rate cut can pull buyers in and push prices up; bad news, panic or investors pulling cash out (like the ₦3.55tn drained ahead of the Dangote IPO) push them down. Day to day it is noise; over years it roughly tracks how the underlying business performs.
The risk, stated plainly
Shares can lose value — sometimes a lot, sometimes permanently if the business fails. Never invest money you need soon (rent, school fees, emergency funds). The stock market rewards patience and punishes desperation.
Quick summary
- A share = a slice of a real company.
- You earn through dividends (cash payouts) and capital gains (selling higher).
- Prices move on supply and demand; they can fall. Only invest what you can afford to leave alone for years.