In April 2022, social media was agog with the terrible details and news of a man who bought Access Bank shares 15 years ago for 22,000 naira, and sold it at 20,000 naira. Access Bank is even among top three most profitable banks in Nigeria. People began to raise questions and query the profitability of buying shares in Nigerian companies. How profitable are Nigerian companies’ shares? Is it a good or terrible idea?
Unlike in the past when buying shares was advised and the idea in vogue, to us here, it has been a terrible idea even at that time when it was in vogue. The only profitability in buying shares in Nigerian companies lies in the respect of the title you’re given, “shareholder.” Aside from that, there’s nothing spectacular about owning shares of Nigerian companies.
There are many reasons why buying shares of Nigerian companies is a very bad idea. The money you would have used in buying such shares should be channeled to other ventures or investment. There are many places you can invest your money which is not buying shares. We’ll let you know of the reasons why you shouldn’t buy shares of Nigerian companies.
The Reasons Why You Shouldn’t Buy the Shares of Nigerian Companies
The first question that should be in your mind as you set out to buy the shares of Nigerian companies is how profitable are Nigerian companies’ shares? Is buying the shares of these Nigerian companies a business decision you would get money from? You’ve to to read the reasons listed below and understand why you shouldn’t buy the shares of these Nigerian companies.
- Unprofitable: The shares of Nigeria are unprofitable a whole lot. I’ve seen many people who bought First Bank shares for 50,000 naira when 50,000 naira was worth like 500,000 naira, and the dividends is a paltry 600 – 1500 naira annually. The fact is that your shares doesn’t add value as the naira is devaluing, it remains as it is, putting your business decision at a great loss. Therefore, buying shares from Nigerian companies is very unprofitable.
- Inflation: Even if you want to buy shares as safe investments you can always sell, it is still a terrible idea. Inflation would make the amount of money you bought the shares lose value. You can use the money to secure other investments which are far better and won’t be affected by inflation. If you buy shares now for 50,000 naira, bet you with the way Nigerian currency is devaluing, it won’t remain the same in 3 years time.
- Time Wastage: Imagine buying shares, thinking you’re making long term investments for yourself and children, not knowing you’re losing and wasting your time. A young lady shared something on social media about her father telling her he is making investment for her by buying shares, meanwhile the shares amount depreciated, lost value and never yielded any good dividend. In fact, buying shares of Nigerian companies is a total waste of time.
- Volatility of Nigerian Stock Exchange Market: This volatility makes it a terrible idea to buy the shares of Nigerian companies. The market is very volatile and stocks can quickly lose value at a very fast rate. Even if stocks and shares of companies don’t lose value, they don’t gain in value as easy and fast as that of developed countries’ companies. So, the value of your shares remain the same every year.
- Better Alternative Investments: Why invest in shares when there are other better alternative investments? For instance, you can get land in a developing area where you know the value of the land will double in 5 years or buy a property which yields far more dividend than shares. Imagine buying a bungalow of two flats for 15 million naira in a developing area as compared to buying shares for 15 million naira. The difference in return on investment is very wide.
Furthermore, there are many other alternative investments like running a little risky business or even investing in the business of a successful relative or a friend. Buying shares is safe, though, but very very unprofitable and time wasting.
However, there are cases where buying shares is the one of the sure way to a long term investment with peace of mind. The prominent of these cases is in a case where you’ve a large sum of money, let’s say 500 million naira and above, buying shares is a great investment. It will make you one of the major stakeholders of the company and your dividend would be in millions annually depending on the profit declared by the company.
This way it is a safe long term investment with money getting paid to you periodically. Nevertheless, even at that, buying lands and properties or running your own business is still better.
How profitable are Nigerian companies’ shares should be a great source of worry for you if you’d love to buy shares. You should be concerned about where you put your money as an investment. If it doesn’t pay as it should, then you shouldn’t be investing in it.