Investor Dictionary

• Stocks

  Shares representing ownership in a company, giving holders a claim on part of the company’s assets and earnings.

• Stock Market

  A marketplace where stocks and other securities are bought and sold, providing a platform for companies to raise capital.

• Asset

  A resource with economic value owned by an individual or entity, expected to provide future benefits.

• Digital Asset

  An asset that exists only in digital form, such as cryptocurrencies, tokenized assets, or digital contracts.

• Options

  Contracts that grant the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price within a certain timeframe.

• Invest

  To allocate money or resources with the expectation of generating income or profit over time.

• Trade

  The act of buying or selling financial instruments such as stocks, bonds, or commodities, often for profit.

• Investor

  An individual or entity that allocates capital to financial instruments, assets, or businesses with the goal of earning a return.

• Trader

  A person who actively buys and sells financial instruments, often focusing on short-term price movements.

• Stockbroker

  A professional who facilitates the buying and selling of securities on behalf of clients in exchange for a commission or fee.

• SEC (Securities and Exchange Commission)

  The regulatory body responsible for overseeing the securities market and protecting investors in Nigeria.

• NGX (Nigerian Exchange Group)

  The main securities exchange in Nigeria, providing a platform for trading equities, bonds, and other financial instruments.

• ASI (All Share Index)

  A benchmark index that tracks the performance of all stocks listed on the Nigerian Exchange (NGX).

• Index

  A statistical measure that represents the performance of a specific group of securities or a market as a whole.

• Shares

  Units of ownership in a company that entitle the holder to a proportion of the company’s profits and assets.

• Asset Class

  A group of investments with similar characteristics, such as equities, fixed income, or real estate.

• Dividend

  A portion of a company’s earnings distributed to shareholders, usually in cash or additional shares.

• Dividend Yield

  A financial ratio that shows how much a company pays in dividends relative to its share price, expressed as a percentage.

• FMCG (Fast-Moving Consumer Goods)

  Products that are sold quickly and at relatively low cost, such as food, beverages, and personal care items.

• Market Capitalization (Market Cap)

  The total market value of a company’s outstanding shares, calculated as share price multiplied by shares outstanding.

• Ticker Symbol

  A unique series of letters assigned to a publicly traded company’s stock for identification purposes.

• Price-to-Earnings (P/E) Ratio

  A valuation metric that compares a company’s share price to its earnings per share (EPS).

• Portfolio

  A collection of financial investments like stocks, bonds, and other assets owned by an individual or institution.

• Fundamentals

  The basic financial and operational data used to evaluate a company’s value, such as revenue, profit, and assets.

• Technical Analysis

  A method of evaluating securities by analyzing historical price charts and trading volumes.

• Return on Equity (ROE)

  A measure of financial performance calculated by dividing net income by shareholder equity, indicating profitability.

• Cryptocurrency

  A decentralized digital currency that uses cryptography for secure transactions, such as Bitcoin or Ethereum.

• Sector

  A group of companies that operate in the same industry, such as technology, healthcare, or energy.

• Exchange Traded Fund (ETF)

  A type of investment fund that trades on stock exchanges, holding assets like stocks, bonds, or commodities.

• Free Float

  The proportion of a company’s shares available for public trading, excluding restricted or insider-owned shares.

• Growth Stocks

  Shares of companies expected to grow earnings at an above-average rate compared to the overall market.

• Blue-Chip Stocks

  Shares of well-established companies with a history of reliable performance and strong market presence.

• Value Stocks

  Stocks trading at a lower price relative to their fundamentals, often considered undervalued by the market.

• Magnificent 7

  A reference to seven high-performing companies dominating their sectors, similar to dominant stocks in the Nigerian market such as MTNN and Dangote Cement.

• Equity

  Ownership interest in a company, represented by shares of stock.

• Book Value

  The net value of a company’s assets as recorded in its balance sheet, calculated as assets minus liabilities.

• Beta

  A measure of a stock’s volatility in relation to the overall market.

• Liquidity

  The ability to quickly buy or sell an asset without significantly affecting its price.

• Bull Market

  A financial market characterized by rising asset prices, often driven by investor confidence.

• Bear Market

  A financial market characterized by falling asset prices, often driven by investor pessimism.

• IPO (Initial Public Offering)

  The first time a company offers its shares to the public in exchange for capital.

• Sector Leaders

  Top-performing companies within a specific sector, such as Dangote Cement in Nigerian construction.

• Non-Performing Loan (NPL)

  A loan that is in default or close to default due to missed payments.

• Debt Market

  A financial market where debt securities, such as bonds, are issued and traded.

• Foreign Portfolio Investment (FPI)

  Investments made by foreign investors in Nigerian securities like stocks and bonds.

• Fixed Income

  Investments that provide regular, fixed returns, such as bonds and treasury bills.

• Green Bonds

  Debt instruments issued to fund environmentally friendly projects, including renewable energy initiatives in Nigeria.

• Trading Volume

  The total number of shares traded in a specific period, often used as a measure of liquidity.

• Volatility

  A measure of the price fluctuation of a financial asset, indicating its risk level.

• Mutual Fund

  An investment vehicle pooling funds from investors to buy diversified securities such as stocks and bonds.

• Over-the-Counter (OTC)

  Securities traded directly between parties, rather than on an organized exchange like the NGX.

• Yield

  The income generated from an investment, often expressed as a percentage of the investment’s cost.

• Corporate Governance

  The system of rules and practices that ensures a company is managed in the best interest of stakeholders.

• Rights Issue

  An offer to existing shareholders to purchase additional shares at a discount, often to raise capital.

• eNaira

  Nigeria’s official digital currency issued by the Central Bank of Nigeria, designed to complement physical cash and facilitate secure, fast payments.

• Accelerated Book Building

  A fast-track method of raising capital where investors bid on shares within a short period.

• Active Share

  A measure of how much a portfolio’s holdings differ from its benchmark index.

• Asset Revaluation

  The process of adjusting the book value of an asset to reflect its current market value.

• Average Cost Method

  An inventory valuation method where the cost of goods is calculated as the weighted average of all inventory costs.

• Balance of Payment Deficit

  A situation where a country imports more goods, services, and capital than it exports.

• Blockchain

  A decentralized digital ledger that records transactions across many computers securely and transparently.

• Bridge Financing

  A short-term loan used to cover immediate needs before securing permanent financing.

• Callable Bond

  A bond that allows the issuer to redeem it before its maturity date.

• Capital Expenditure (CapEx)

  Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment.

• Capital Loss

  The loss incurred when a capital asset is sold for less than its purchase price.

• Carrying Value

  The value of an asset in a company’s accounting records, typically its purchase price minus depreciation.

• Central Bank Rate

  The interest rate set by the Central Bank of Nigeria to regulate lending between commercial banks.

• Commodity Exchange

  A marketplace for trading commodities such as oil, gold, and agricultural products, such as the Lagos Commodities and Futures Exchange (LCFE).

• Contingent Liability

  A potential financial obligation that depends on the outcome of a future event.

• Cost of Capital

  The cost of a company’s funds, including the cost of debt and equity financing.

• Cryptocurrency

  A digital or virtual currency secured by cryptography, enabling secure online transactions.

• Current Ratio

  A liquidity ratio that measures a company’s ability to pay short-term obligations with its current assets.

• Debt Equity Ratio

  A measure of a company’s financial leverage, calculated by dividing total liabilities by shareholder equity.

• Discount Bond

  A bond sold for less than its face value, with the difference representing the yield to maturity.

• Dual Listing

  The practice of a company being listed on more than one stock exchange, such as Seplat Energy on both the NGX and LSE.

• Economic Diversification

  A strategy aimed at reducing Nigeria’s dependency on oil by growing other sectors like agriculture and technology.

• Environmental Impact Bonds

  Bonds issued to fund projects aimed at improving environmental sustainability and addressing climate change.

• Ex-Rights Date

  The cutoff date on or after which a buyer of a stock is not entitled to participate in a rights issue.

• Feasibility Study

  An analysis to determine the viability of a project or investment before committing resources.

• Fixed Asset

  A tangible, long-term asset used in the production of goods and services, such as machinery or buildings.

• Forward Guidance

  A central bank’s communication about the likely direction of monetary policy in the future.

• Free Reserves

  The amount of funds that commercial banks hold in excess of the Central Bank’s reserve requirements.

• Green Finance

  Financial investments aimed at sustainable development projects, such as renewable energy and environmental conservation.

• Impact Investing

  An investment strategy focused on generating measurable social or environmental impact alongside financial returns.

• Income Bond

  A bond that pays interest only if the issuer has sufficient earnings to cover the payments.

• Infrastructure Bonds

  Bonds issued to fund public infrastructure projects, such as roads, power plants, and railways.

• Initial Public Offering (IPO)

  The first sale of a company’s shares to the public, marking its debut on the stock exchange.

• Investment Grade

  A rating given to bonds that are considered low risk and suitable for investment.

• Key Performance Indicators (KPIs)

  Quantifiable metrics used to evaluate the performance of an individual, project, or company.

• Liquidity Coverage Ratio (LCR)

  A requirement for banks to hold enough liquid assets to cover net cash outflows for 30 days.

• Monetary Policy Committee (MPC)

  A committee of the Central Bank of Nigeria responsible for setting interest rates and monetary policy.

• Non-Performing Loan (NPL)

  A loan that is in default or close to being in default due to missed payments.

• Overdraft Facility

  A credit arrangement allowing individuals or businesses to withdraw more money than is available in their account.

• Preferred Stock

  A class of ownership in a corporation with a fixed dividend that takes precedence over common stock dividends.

• Accelerated Depreciation

  A depreciation method that expenses an asset’s cost faster in the early years of its life.

• Acquisition

  The process of one company purchasing most or all of another company’s shares to gain control.

• Ad Valorem Tax

  A tax based on the assessed value of an item, such as property or goods.

• Aftermarket

  Trading of shares after an initial public offering (IPO) has occurred.

• Annual Percentage Yield (APY)

  The total return earned on an investment or deposit over a year, expressed as a percentage.

• Appraisal

  An evaluation of an asset’s market value, often conducted by a professional appraiser.

• Asset Turnover

  A measure of a company’s efficiency in using its assets to generate sales revenue.

• Automated Clearing House (ACH)

  An electronic network for processing financial transactions, including direct deposits and payments.

• Balance of Trade

  The difference between a country’s exports and imports of goods and services.

• Bank Rate

  The interest rate set by the Central Bank of Nigeria (CBN) for lending to commercial banks.

• Bilateral Trade Agreement

  An agreement between two countries to facilitate trade and reduce barriers like tariffs.

• Bond Duration

  A measure of a bond’s sensitivity to interest rate changes, expressed in years.

• Capital Adequacy

  A measure of a bank’s financial strength, ensuring it has enough capital to cover its risks.

• Capital Market Authority (CMA)

  A regulatory body that oversees the issuance and trading of securities in Nigeria.

• Commodity Futures

  Contracts to buy or sell a commodity at a predetermined price at a future date.

• Compulsory Acquisition

  The government-mandated acquisition of private property for public use, with compensation provided.

• Consolidation

  The process of merging multiple businesses into a single, larger entity.

• Credit Risk

  The risk of a borrower defaulting on a loan or failing to meet contractual obligations.

• Currency Arbitrage

  The simultaneous purchase and sale of currencies to profit from exchange rate differences.

• Debt Instrument

  A financial instrument representing a loan made by an investor to a borrower.

• Deferred Revenue

  Payments received in advance for goods or services to be delivered in the future.

• Derivative

  A financial contract deriving its value from an underlying asset, index, or interest rate.

• Discount Rate

  The interest rate used in discounted cash flow (DCF) analysis to determine present value.

• Economic Moat

  A company’s competitive advantage that protects its profitability and market share over time.

• Enterprise Resource Planning (ERP)

  Software used by companies to manage business processes and integrate operations.

• Exchange Control Regulations

  Rules governing the buying and selling of foreign currencies in Nigeria.

• Fiscal Policy

  Government policies on taxation and spending to influence economic activity.

• Fixed Rate Bond

  A bond that pays the same interest rate over its entire term.

• Free Trade Zone (FTZ)

  A designated area in Nigeria where goods can be imported, manufactured, and re-exported without customs regulations.

• Gross Margin

  The difference between a company’s revenue and cost of goods sold (COGS), expressed as a percentage of revenue.

• Guaranteed Investment Contract (GIC)

  An agreement where an insurer guarantees a fixed return on an investment for a specified period.

• Import Duty

  A tax levied on goods brought into Nigeria to regulate trade and generate revenue.

• Index Tracking

  A passive investment strategy that aims to replicate the performance of a market index.

• Industrial Bonds

  Bonds issued by companies in the industrial sector to finance operations and projects.

• Leverage Ratio

  A measure of the level of a company’s debt compared to its equity or assets.

• Loan Syndication

  A process where multiple lenders jointly provide a loan to a single borrower.

• Margin Call

  A broker’s demand for an investor to deposit more funds to maintain a leveraged position.

• Price-Earnings Growth (PEG) Ratio

  A valuation metric that adjusts the P/E ratio for a company’s expected earnings growth.

• Public-Private Partnership (PPP)

  A cooperative agreement between the government and private sector to finance and manage public projects.

• Zero-Based Budgeting

  A budgeting method where all expenses must be justified for each new period, starting from zero.

• Active Investing

  An investment strategy where the investor actively buys and sells securities to outperform a market index.

• Alternative Assets

  Investments outside traditional categories such as stocks and bonds, including real estate and private equity.

• Amortizing Loan

  A loan where the principal and interest are paid down through regular payments over time.

• Anchor Borrowers Program (ABP)

  A Nigerian initiative by the CBN to provide loans to smallholder farmers.

• Ask-Bid Spread

  The difference between the lowest ask price and the highest bid price in a market.

• Backtesting

  A process for testing a trading strategy using historical data to determine its effectiveness.

• Balance Sheet Recession

  An economic downturn caused by high levels of private sector debt.

• Bearer Bonds

  Bonds not registered in the investor’s name, with ownership determined by physical possession.

• Beta Coefficient

  A measure of a stock’s volatility compared to the overall market.

• Bogus Receivables

  False or inflated accounts receivable entries on a company’s financial statements, often a sign of fraud.

• Central Bank Digital Currency (CBDC)

  A digital form of fiat currency issued by a central bank, like Nigeria’s eNaira.

• Commercial Bank

  A financial institution that accepts deposits, offers loans, and provides other financial services.

• Consumer Price Index (CPI)

  A measure that examines the average change in prices paid by consumers for goods and services over time.

• Corporate Bond

  A debt instrument issued by a corporation to raise capital.

• Coupon Yield

  The annual interest rate paid by a bond, expressed as a percentage of its face value.

• Currency Depreciation

  A decrease in the value of a currency relative to other currencies in a floating exchange rate system.

• Dark Pool

  A private financial exchange where trades are conducted anonymously to reduce market impact.

• Deflation

  A decrease in the general price level of goods and services in an economy over a period.

• Development Finance Institution (DFI)

  An organization that provides long-term financing for projects promoting economic growth, such as the Bank of Industry in Nigeria.

• Direct Market Access (DMA)

  A service enabling investors to trade securities directly on an exchange without using brokers.

• Discount Window

  A tool through which central banks lend money to commercial banks, often during liquidity shortages.

• Downgrade

  A reduction in the credit rating of a company, country, or financial instrument, signaling higher risk.

• Elasticity of Demand

  A measure of how sensitive the quantity demanded of a good is to a change in price.

• Employee Stock Ownership Plan (ESOP)

  A program allowing employees to own shares in their company, often at discounted rates.

• Environmental, Social, and Governance (ESG)

  Criteria for evaluating a company’s ethical impact and sustainability practices.

• Eurobond

  A bond issued in a currency other than the currency of the country in which it is issued, often used by Nigerian companies to access foreign markets.

• External Reserves

  Foreign assets held by the Central Bank of Nigeria, used to stabilize the naira and manage trade.

• Factor Investing

  An investment strategy focusing on specific drivers of returns, such as value, growth, or momentum.

• Federal Allocation

  The distribution of revenue from Nigeria’s federal government to states and local governments.

• Fixed Overheads

  Costs that do not change with production levels, such as rent or salaries.

• Foreign Exchange Market (Forex)

  A global marketplace for trading national currencies, critical in managing the naira exchange rate.

• Gilt-Edged Securities

  High-grade bonds issued by governments or reputable corporations, considered low risk.

• Green Bonds

  Bonds specifically used to finance environmentally friendly projects, such as Nigeria’s green infrastructure initiatives.

• Haircut

  A reduction in the value of an asset, often applied during debt restructuring or margin calls.

• Hedge Fund

  An investment fund using advanced strategies to maximize returns for high-net-worth investors.

• Hyperinflation

  An extremely high and typically accelerating inflation rate, which can destabilize an economy.

• Import Substitution

  An economic policy aiming to reduce foreign dependency by producing goods domestically, widely used in Nigeria.

• Initial Coin Offering (ICO)

  A fundraising method using cryptocurrencies, where investors receive tokens in exchange for their investment.

• Junk Bond

  A high-risk, high-yield bond with a low credit rating.

• Adjusted Closing Price

  A stock’s closing price that has been modified to include dividends, splits, and other adjustments.

• Agency Theory

  A concept in corporate governance that addresses conflicts between managers and shareholders.

• American Depositary Receipt (ADR)

  A certificate issued by a U.S. bank representing shares in a foreign company.

• Annualized Return

  The average yearly return of an investment over a given period.

• Asset Backed Securities (ABS)

  Financial securities backed by assets like loans, leases, or receivables.

• Bank Verification Number (BVN)

  A unique identifier in Nigeria used to unify an individual’s banking information.

• Base Year

  A reference year used as a benchmark for economic or financial comparisons.

• Bear Spread

  An options strategy designed to profit from a decline in the price of an underlying asset.

• Bond Yield

  The return an investor receives from a bond, expressed as a percentage of its current price.

• Book Closure

  The date on which a company closes its register of members to determine eligible shareholders for dividends or bonuses.

• Capital Importation

  The inflow of foreign capital into a country’s economy, such as investments in Nigeria.

• Cash Reserve Ratio (CRR)

  The percentage of a bank’s deposits that must be kept in reserve with the Central Bank.

• Certificate of Capital Importation (CCI)

  A document issued in Nigeria to foreign investors to facilitate repatriation of investments and dividends.

• Common Stock

  A type of equity security representing ownership in a corporation and a claim on part of the profits.

• Contract Note

  A document provided by a broker to an investor, detailing the terms of a trade.

• Counterparty Risk

  The risk that the other party in a financial transaction will default on its obligations.

• Cross Currency Exchange Rate

  The exchange rate between two currencies, neither of which is the U.S. Dollar.

• Crowdfunding

  A method of raising capital through small contributions from a large number of people, often online.

• Custodian

  A financial institution that holds and safeguards a firm’s or investor’s securities.

• Debt-to-Income Ratio

  A measure of an individual’s ability to manage debt, calculated as total debt payments divided by income.

• Delisting Process

  The steps involved when a company voluntarily or involuntarily removes its stock from a stock exchange.

• Derisking

  The process of reducing the risk exposure in a portfolio, often by diversifying investments.

• Dividend Cover

  A ratio indicating the number of times a company can pay dividends to shareholders out of its profits.

• Economic Recession

  A period of economic decline marked by reduced trade and industrial activity, often accompanied by high unemployment.

• Efficient Market Hypothesis (EMH)

  A theory that states asset prices fully reflect all available information, making it impossible to outperform the market consistently.

• Enterprise Value (EV)

  A measure of a company’s total value, including market capitalization, debt, and cash.

• Escalation Clause

  A contract provision allowing for an increase in prices or rates under specified conditions.

• Fair Market Value

  The price at which an asset would trade in a competitive auction setting.

• Federal Inland Revenue Service (FIRS)

  Nigeria’s agency responsible for assessing and collecting taxes.

• Fixed Deposit

  A financial instrument provided by banks offering a fixed interest rate for a specific term.

• Foreign Direct Investment (FDI)

  Investments made by a foreign entity into a company or infrastructure in Nigeria.

• Front-End Load

  A fee charged upfront for purchasing shares in a mutual fund.

• Government Securities

  Debt instruments issued by the Nigerian government to finance its operations and projects.

• Holding Period Return (HPR)

  The total return earned from holding an investment over a specific period.

• Initial Margin

  The minimum amount of equity required to enter a leveraged position, such as futures contracts.

• Islamic Bonds (Sukuk)

  Sharia-compliant bonds offering returns to investors without interest, widely used in Nigeria.

• Market Depth

  The volume of buy and sell orders for a security at various price levels.

• Over-the-Counter Derivatives

  Customized financial instruments traded directly between parties rather than on an exchange.

• Real Interest Rate

  The interest rate adjusted for inflation, reflecting the real cost of borrowing or return on investment.

• Active Portfolio Management

  An investment strategy involving frequent buying and selling to outperform the market index.

• Aggregate Demand

  The total demand for goods and services in an economy at a specific price level and time period.

• Aggregate Supply

  The total supply of goods and services produced within an economy at a specific price level and time period.

• Amortization

  The gradual repayment of a loan over time, typically through scheduled payments.

• Asset Management Company (AMC)

  A company that manages pooled funds from investors to invest in securities, such as mutual funds.

• Automatic Stabilizers

  Economic policies or programs that offset fluctuations in a country’s economic activity without additional intervention.

• Balance of Payments (BOP)

  A record of all economic transactions between the residents of a country and the rest of the world.

• Base Currency

  The first currency listed in a currency pair, such as the Nigerian Naira in NGN/USD.

• Blue-Chip Companies

  Well-established companies with a history of reliable financial performance and stability.

• Bonds Market

  A financial marketplace where participants can issue, buy, or sell debt securities.

• Bookrunner

  The primary underwriter or lead manager in the issuance of new equity or debt securities.

• Cash Flow Statement

  A financial statement showing how cash is generated and used during a specific time period.

• Certificate of Occupancy (C of O)

  A legal document in Nigeria that certifies land ownership and property rights.

• Clearing Price

  The market price at which the quantity supplied equals the quantity demanded.

• Collateral

  Assets pledged by a borrower to secure a loan or debt obligation.

• Credit Default Swap (CDS)

  A financial contract that allows an investor to swap or offset their credit risk with another party.

• Credit Rating

  An assessment of the creditworthiness of an individual, company, or government.

• Currency Peg

  A system in which a country’s currency value is fixed relative to another currency, like the USD.

• Current Account

  A section of the balance of payments that records a nation’s transactions in goods, services, income, and current transfers.

• Debt Restructuring

  A process used by companies or governments to reorganize their debt obligations.

• Derivative Contracts

  Financial contracts whose value is based on an underlying asset, index, or rate.

• Discounted Cash Flow (DCF)

  A valuation method estimating the present value of expected future cash flows of an investment.

• Dollar-Cost Averaging

  An investment strategy where an investor regularly invests a fixed amount of money into a particular asset.

• Economic Diversification

  A strategy for reducing dependence on a single economic sector, common in resource-reliant countries like Nigeria.

• Exchange Control

  Government-imposed restrictions on the buying or selling of foreign currencies in Nigeria.

• Fair Value

  The estimated value of an asset, based on its current market price or intrinsic value.

• Fiscal Deficit

  The shortfall between a government’s total revenue and total expenditure.

• Floating Exchange Rate

  A currency exchange system where the value of the Nigerian Naira is determined by the market.

• Foreign Portfolio Investment (FPI)

  Investments by foreign entities in Nigerian securities like stocks and bonds.

• Gross National Product (GNP)

  The total value of goods and services produced by a country’s residents, including abroad, over a time period.

• Hostile Takeover

  An acquisition attempt by a company or investor that the target company’s board rejects.

• Insolvency

  A situation where an individual or company cannot meet its financial obligations.

• Investment Grade Bonds

  Bonds rated BBB or higher, indicating lower risk and a stable investment.

• Leveraged Buyout (LBO)

  A corporate acquisition strategy using borrowed money to fund the purchase of a company.

• Macroeconomic Indicators

  Statistics that reflect the economic performance of a country, like inflation, GDP, and employment rates.

• Market Capitalization Weighting

  A method of weighting index components based on their total market value.

• Microfinance Bank (MFB)

  Financial institutions in Nigeria that provide loans and savings products to low-income individuals and SMEs.

• Naira Devaluation

  A reduction in the value of the Nigerian Naira relative to foreign currencies, often due to market or policy changes.

• Quantitative Easing (QE)

  A monetary policy where the central bank injects money into the economy by purchasing government securities.

• Recession

  A period of economic decline characterized by negative GDP growth over two consecutive quarters.

• Trade Balance

  The difference between the value of a country’s exports and imports of goods and services.

• Advance-Decline Ratio

  A market breadth indicator comparing the number of advancing stocks to declining stocks over a given period.

• After-Hours Trading

  Trading that takes place outside the regular trading hours of the Nigerian Exchange or other stock exchanges.

• Allotment

  The distribution of shares to investors in an IPO or other new issuance of securities.

• Appreciation

  An increase in the value of an asset over time.

• Bid-Lot

  The number of shares a buyer is willing to purchase at the bid price.

• Bilateral Agreement

  A trading or financial arrangement between two parties, often used in trade finance.

• Book Building

  The process by which an underwriter attempts to determine the price to offer in an IPO based on investor demand.

• Brokerage Fee

  A fee charged by a broker for facilitating the buying or selling of securities.

• Capital Flight

  The movement of financial assets or capital out of a country due to economic or political instability.

• Central Bank of Nigeria (CBN)

  The apex regulatory authority responsible for monetary policy and financial stability in Nigeria.

• Certificate of Deposit (CD)

  A time deposit issued by banks offering a fixed interest rate over a specified term.

• Clearing

  The process of settling a trade by transferring funds or securities between parties.

• Convertible Preferred Shares

  Preferred shares that can be converted into a specified number of common shares.

• Dividend Reinvestment Plan (DRIP)

  A program allowing investors to reinvest their cash dividends into additional shares of the issuing company.

• Economic Value Added (EVA)

  A measure of a company’s financial performance based on residual wealth after deducting cost of capital.

• Emerging Market

  A developing economy with growth potential, like Nigeria, that offers higher risks and rewards to investors.

• Escrow Account

  A temporary account where funds are held before being transferred to the ultimate recipient.

• Ex-Dividend Date

  The cutoff date when a stock begins trading without the value of its next dividend payment.

• Float

  The total number of shares available for public trading after subtracting restricted shares.

• Forward Contract

  A customized contract to buy or sell an asset at a specified price on a future date.

• Front-Running

  The unethical practice of trading securities based on advanced knowledge of pending large orders.

• Guarantor

  An entity or individual that guarantees repayment of a loan or fulfillment of a financial obligation.

• Illiquid Asset

  An asset that cannot be quickly converted to cash without a significant loss in value.

• Implied Volatility

  The market’s forecast of a likely movement in a security’s price, derived from options pricing.

• Investment Club

  A group of individuals who pool funds to make investments and share knowledge about investing.

• IPO Prospectus

  A formal document issued by a company during an IPO detailing its business and risks for potential investors.

• Listed Company

  A company whose shares are traded on a public exchange like the Nigerian Exchange (NGX).

• Market Sentiment

  The overall attitude of investors toward a particular security or the financial market.

• Overbought

  A condition where a security’s price is considered too high relative to its intrinsic value.

• Undervalued

  A condition where a security’s price is considered too low relative to its intrinsic value.

• Abuja Securities and Commodity Exchange (ASCE)

  A commodities exchange in Nigeria focused on trading agricultural and solid mineral commodities.

• Accumulated Dividends

  Dividends on preferred shares that have not yet been paid by the company but are owed to shareholders.

• Alternative Investment Market (AIM)

  A sub-market for smaller companies to raise capital, including startup enterprises.

• Arbitration Panel

  A mechanism set up by the Nigerian Exchange Limited to resolve disputes between brokers, investors, or listed companies.

• Average Daily Volume (ADV)

  The average number of shares traded per day over a specific period for a particular security.

• Backlog

  Unfinished or pending orders, typically in trading or manufacturing operations.

• Bearer Shares

  Shares that are owned by the holder of the physical share certificate, often without registration.

• Bid Price

  The highest price a buyer is willing to pay for a security.

• Block Trade

  A large, privately negotiated securities trade that is executed outside of open markets to minimize the impact on the stock price.

• Bridge Loan

  A short-term loan used to finance an immediate need while awaiting permanent financing.

• Bull Market

  A market condition where prices are rising, often driven by investor confidence.

• Buy-and-Hold Strategy

  An investment strategy where investors purchase securities and hold them long-term, regardless of market fluctuations.

• Capital Adequacy Ratio (CAR)

  A measure of a bank’s financial strength, calculated as its capital divided by risk-weighted assets.

• Commodity Exchange

  A marketplace for buying, selling, and trading raw or primary products, such as the Lagos Commodity and Futures Exchange (LCFE).

• Convertible Bond

  A bond that can be converted into a predetermined number of shares of the issuing company.

• Coupon Bond

  A bond that pays periodic interest payments (coupons) to the holder until maturity.

• Cyclical Stock

  Stocks of companies whose performance is closely tied to the overall economy and business cycles.

• Debenture

  A type of unsecured debt instrument that relies on the issuer’s creditworthiness rather than physical collateral.

• Delisting

  The removal of a company’s stock from the Nigerian Exchange Limited, often due to non-compliance or mergers.

• Equity Participation

  An arrangement where investors acquire shares or ownership stakes in a business or project.

• Face Value

  The nominal or original value of a bond or security as stated by the issuer.

• Fiscal Year

  A 12-month accounting period used by companies to prepare financial statements, not necessarily aligned with the calendar year.

• Going Concern

  An accounting term indicating that a company can continue operations into the foreseeable future.

• Holding Company

  A company created to own shares in other companies, often to manage and oversee their operations.

• Interest Rate Cap

  A limit placed on the interest rate that can be charged on a floating-rate loan or mortgage.

• Jumbo Loan

  A type of financing that exceeds the limits set by local regulators, requiring higher down payments or interest rates.

• Lock-Up Period

  A timeframe after an IPO during which insiders are restricted from selling their shares.

• National Council on Privatisation (NCP)

  A government agency overseeing the privatization of public enterprises in Nigeria.

• Over-Allotment Option

  An option that allows underwriters to sell additional shares beyond the initial offering amount in an IPO.

• Private Placement

  A funding round of securities offered to a small group of investors, typically not publicly traded.

• African Securities Exchanges Association (ASEA)

  A regional body that promotes the development of stock exchanges across Africa.

• All Share Index (ASI)

  The benchmark index for the Nigerian Exchange Limited (NGX), representing the performance of all listed companies.

• Amalgamated Shares

  Shares that have been combined following a corporate restructuring or merger.

• Authorized Share Capital

  The maximum amount of share capital a company is authorized to issue as stated in its Memorandum of Association.

• Bearer Certificate

  A physical certificate that entitles the holder to ownership of the securities listed on it.

• Bid-Ask Spread

  The difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept for a security.

• Bonus Issue

  Free additional shares issued to existing shareholders based on the number of shares they own.

• Capital Market

  A market where long-term debt or equity-backed securities are traded.

• Central Securities Clearing System (CSCS)

  The Nigerian clearinghouse responsible for clearing, settlement, and custody of securities traded on the NGX.

• Commercial Paper

  A short-term, unsecured promissory note issued by corporations to raise funds.

• Corporate Action

  An event initiated by a publicly traded company that affects its shareholders, such as dividends or stock splits.

• Coupon

  The periodic interest payment made to bondholders.

• Cross Deals

  Transactions where a broker acts on behalf of both the buyer and the seller for the same security.

• Daily Official List (DOL)

  A publication by the NGX providing daily trading information, including stock prices and volumes.

• Debt Instrument

  A fixed-income security, such as a bond, issued by a corporation or government.

• Equity

  Ownership interest in a company, represented by shares of stock.

• Exchange-Traded Commodities (ETCs)

  Investment products that track the performance of commodities like crude oil or gold.

• Extraordinary General Meeting (EGM)

  A meeting other than an Annual General Meeting (AGM) held to address urgent company matters.

• Fixed Income Securities

  Investments that provide regular, fixed returns, such as government bonds.

• Free Float

  The percentage of a company’s shares available for trading on the stock exchange.

• Growth Stock

  Shares of a company expected to grow at an above-average rate compared to others in the market.

• Initial Public Offer (IPO)

  When a company offers shares to the public for the first time to raise capital.

• Insider Trading

  The buying or selling of a security by someone who has access to material, non-public information about the security.

• Investment Grade

  A bond or other debt security with a relatively low risk of default, rated BBB- or higher.

• Investor Protection Fund

  A fund established by the NGX to compensate investors in case of broker insolvency or malpractice.

• Issuing House

  A financial institution that assists companies in raising capital through the issuance of securities.

• Liquidity Provider

  An entity that ensures sufficient trading volume and price stability for a security.

• Margin Account

  An account that allows investors to borrow funds from a broker to purchase securities.

• Market Depth

  A measure of the market’s ability to sustain large buy or sell orders without impacting the price significantly.

• Market Maker

  A broker or dealer that provides liquidity by being ready to buy or sell a security at publicly quoted prices.

• Merger

  The combining of two or more companies into one, often to achieve economies of scale.

• Mutual Fund

  An investment vehicle pooling money from multiple investors to buy diversified assets.

• Nigerian Exchange Limited (NGX)

  The primary securities exchange platform in Nigeria for equities, bonds, and other financial instruments.

• Parastatal

  A government-owned corporation or agency that operates commercially.

• Preferential Allotment

  The allocation of shares to specific investors at a predetermined price, typically during a private placement.

• Price Floor

  The minimum price set for a security below which it cannot trade on the exchange.

• Price Limit

  The maximum daily price movement allowed for a security on the exchange.

• Profit-Taking

  The act of selling securities to lock in profits after a rise in value.

• Recapitalization

  A corporate restructuring strategy to change the capital structure of a company, often by issuing more shares or debt.

• Right Issue

  An offering that gives existing shareholders the right to purchase additional shares at a discount.

• Secondary Market

  A market where investors buy and sell securities they already own, such as the NGX.

• Share Buyback

  A corporate action in which a company repurchases its own shares from the marketplace.

• Stockbroker

  A licensed professional who buys and sells securities on behalf of clients.

• Treasury Bills

  Short-term debt instruments issued by the Central Bank of Nigeria to finance government spending.

• Underwriting

  The process by which investment banks or financial institutions assume the risk of issuing new securities.

• Yield Curve

  A graphical representation of the interest rates on debts of different maturities.

• Z-Category Stocks

  Stocks of companies that fail to comply with exchange rules, often tagged with higher risk.

• Alpha

  A measure of an investment’s performance relative to a market index or benchmark.

• Annual Report

  A comprehensive report detailing a company’s financial performance over the past year, provided to shareholders.

• Arbitrage

  The practice of taking advantage of price differences between two or more markets for the same asset.

• Ask Price

  The lowest price a seller is willing to accept for a security.

• Balance Sheet

  A financial statement showing a company’s assets, liabilities, and shareholder equity at a specific point in time.

• Beta

  A measure of a stock’s volatility in comparison to the overall market.

• Bond

  A fixed-income investment representing a loan made by an investor to a borrower, typically a corporation or government.

• Book Value

  The value of a company as shown on its balance sheet, calculated as total assets minus liabilities.

• Buyback

  When a company purchases its own shares from the market to reduce the number of outstanding shares.

• Call Option

  A financial contract giving the buyer the right to purchase a stock or asset at a specified price before a set date.

• Capital

  Wealth in the form of money or assets used to produce more wealth or invest in a business.

• Compound Interest

  Interest calculated on the initial principal and also on the accumulated interest of previous periods.

• Coupon Rate

  The annual interest rate paid on a bond, expressed as a percentage of the face value.

• Debt-to-Equity Ratio

  A measure of a company’s financial leverage, calculated by dividing total liabilities by shareholder equity.

• Derivatives

  Financial instruments whose value is derived from an underlying asset, such as stocks, bonds, or commodities.

• Discount Rate

  The interest rate used to determine the present value of future cash flows.

• Dow Jones Industrial Average

  An index tracking 30 major publicly traded companies in the United States.

• Exchange-Traded Fund (ETF)

  A type of investment fund that is traded on stock exchanges, similar to individual stocks.

• Expense Ratio

  The annual fee expressed as a percentage of total assets that mutual funds or ETFs charge investors.

• Fundamental Analysis

  The process of evaluating a stock by analyzing financial statements, industry trends, and economic conditions.

• Gross Domestic Product (GDP)

  The total monetary value of all goods and services produced within a country’s borders in a given period.

• Hedge

  An investment made to reduce the risk of adverse price movements in an asset.

• Initial Public Offering (IPO)

  The process of a company offering its shares to the public for the first time.

• Intrinsic Value

  The true value of an asset, determined through fundamental analysis.

• Leverage

  The use of borrowed capital to increase the potential return of an investment.

• Liquidity

  The ease with which an asset can be converted into cash without significantly affecting its value.

• Market Order

  An order to buy or sell a security at the best available price.

• Mutual Fund

  An investment vehicle pooling money from many investors to buy securities like stocks and bonds.

• Option

  A financial contract giving the buyer the right, but not the obligation, to buy or sell an asset at a specified price.

• Over-the-Counter (OTC)

  Securities traded directly between parties, rather than on an organized exchange.

• Par Value

  The face value of a bond or stock, as stated in its certificate.

• Price-to-Earnings (P/E) Ratio

  A valuation metric comparing a company’s current share price to its per-share earnings.

• Risk Tolerance

  The degree of variability in investment returns an individual is willing to withstand.

• Return on Investment (ROI)

  A measure of profitability calculated by dividing net profit by the initial investment cost.

• Securities

  Tradable financial instruments, including stocks, bonds, and options.

• Short Selling

  A trading strategy where an investor sells borrowed shares, hoping to buy them back at a lower price.

• Speculation

  Investing in high-risk securities with the expectation of significant returns.

• Spread

  The difference between the bid price and the ask price of a security.

• Stock Split

  A corporate action that increases the number of shares while proportionally reducing the share price.

• Technical Analysis

  The study of past market data, primarily price and volume, to predict future price movements.

• Volatility Index (VIX)

  A measure of market expectations for volatility over the coming 30 days.

• Yield

  The income return on an investment, expressed as a percentage of the investment’s cost or market value.

• Zero-Coupon Bond

  A bond that does not pay periodic interest, sold at a discount and redeemed at face value at maturity.

• Asset Allocation

  The process of dividing your investments among different asset classes like stocks, bonds, and cash to manage risk.

• Bear Market

  A market condition where prices are falling, typically by 20% or more from recent highs.

• Blue Chip Stocks

  Stocks of large, well-established, and financially sound companies with a history of reliable performance.

• Capital Gains

  The profit earned from selling an asset, such as stocks or real estate, for more than its purchase price.

• Dividend

  A portion of a company’s earnings distributed to shareholders, typically on a regular basis.

• Index Fund

  A type of mutual fund or ETF designed to replicate the performance of a specific market index, such as the S&P 500.

• Market Capitalization

  The total market value of a company’s outstanding shares, calculated by multiplying the stock price by the number of shares.

• Portfolio Diversification

  A strategy of spreading investments across various assets to reduce risk.

• Volatility

  A measure of the frequency and extent of price movements in a market or an asset.

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