It’s 10:00 am on a Monday morning. Grace is at her desk at work when she receives an alert: “SHWU has commenced trading on the Nigerian Exchange.” She applied for shares in Oga Seun’s Shawarma Shack three weeks earlier, back when the company was just a prospectus and a queue of investors who believed in his shawarma empire.
Now the shares are hers, sitting in her account, and for the first time, nobody — not even Oga Seun or his bankers — gets to decide what they’re worth. The market does.
In this article, we will walk you through everything that happens before and after a company’s shares are publicly traded. How company stock is born the day a company decides to sell pieces of itself to strangers, and how that stock stops trading for good.
But first, what is a stock?
A stock is a slice of ownership in a company, sold off in units called shares. It could also mean inventory, i.e., the amount of goods a business has to sell to customers. But in this article, we’ll focus on the first definition, and the terms stock and shares will be used interchangeably.
When Grace buys 200 units of SHWU, Oga Seun’s Shawarma Shack, she is not lending the business money in the same way a bank would. Instead, she now owns a real, tiny portion of the actual company — its shawarma grills, lease agreements and future profits.
Owning shares gives you certain rights: a claim on future profits if the board ever declares a dividend, a vote at the company’s annual general meeting, and a claim on whatever remains from the sale of company assets in the event of shutting down, after lenders, bondholders, and staff owed salaries have been paid.
A stock isn’t always one uniform thing, either. Two people who own shares in the same company can hold entirely different bundles of rights.
Types of shares
Under Section 143 of the Companies and Allied Matters Act 2020 (the law guiding companies in Nigeria), a company can issue different types of shares, provided its constitution allows for it.
Here are the three main types of shares found in the law:
- Ordinary shares: the kind Grace owns; these are the real risk capital of the company. People with these shares can vote, get paid whatever dividend the board declares that year, and claim what is left of the company’s assets if it shuts down, after everyone else has been paid. If a company only issues one class of shares, it has to be this kind.
- Preference shares: people holding these shares get paid dividends before ordinary shareholders and are prioritised if the company shuts down (hence, the name). However, their dividend rate is fixed (unlike that of ordinary shareholders, who depend on how well or poorly the company performs). Preference shareholders generally don’t have voting rights, but Nigerian law carves out a list of decisions where they can. Decisions like changing the rights attached to their own shares, replacing the company’s auditor, or voting to wind the company up.
- Deferred or Founder shares: These belong to whoever started the company. Holders of founder shares typically only get dividends once ordinary shareholders have gotten theirs. In practice, hardly anybody uses these anymore because they are quite difficult to implement.
A brief overview
Now that you know the different types of shares, here’s an overview of the lifecycle of a stock:
- Going public: The company sells shares to the public for the first time, through an Initial Public Offering (IPO).
- The opening bell: The stock trades for the first time on the exchange, and the price stops being the company’s decision.
- Life in the secondary market: The price changes on its own, cycling between calm stretches and real momentum.
- Getting paid: The company may reward shareholders with a dividend if it has the profit to spare.
- Raising money again: The company can go back to existing shareholders for more capital through a rights issue.
- How it ends: A buyout, a regulatory delisting, or no ending at all, for decades.
1. How a company lists stock in the first place
The journey begins with qualification. Only certain companies are allowed to list on the stock exchange. To qualify for listing on the NGX’s Main Board, a business generally needs to have at least three years of audited financial results, a minimum market capitalisation, and must promise to put at least 20% of its shares in public hands, spread across at least 300 different shareholders.
A newer or smaller company that can’t meet this criteria, has a second option: the NGX’s Growth Board, which asks for a shorter track record in exchange for its own set of conditions. Oga Seun’s Shawarma Shack, six years in and profitable, meets the Main Board’s requirements without much trouble.
After qualifying, the company starts a process known as underwriting by hiring an investment bank like Stanbic IBTC Capital or Chapel Hill Denham (underwriters) to manage the sale. The bank buys the entire allotment of shares the company intends to sell publicly at an agreed price. Later, they’d resell them to investors, which is why underwriters usually charge a fee and are picky about which companies they’ll put their name behind.
Next comes paperwork: a registration process filed with Nigeria’s Securities and Exchange Commission (SEC), out of which comes a public document that shares what the business does, how it makes money, owners, risk, etc., known as a prospectus. This is the one document anyone looking to invest should read.
With the prospectus in hand, the company and its bankers go on a roadshow, pitching to institutional investors. Those investors respond with the number of shares they want and roughly how much they would pay — a process called book-building. Underwriters use this process to gauge real demand before going public. From these negotiations, a price gets fixed before trading opens.
Then comes allocation: deciding who gets shares, and how many. Big institutions typically get the lion’s share, and retail investors like Grace get whatever’s left — unless the offer is oversubscribed, meaning more people applied for shares than there were shares to go around, in which case everyone’s allotment gets reduced and refunds are granted. That’s exactly what happened to Grace.
Some companies skip parts of this process. A few raise money privately first, from a small handpicked group of large investors, before ever going near the public — a process known as a private placement. Others do a direct listing instead of a traditional IPO, skipping underwriters entirely and letting the stock exchange set a price based on private trading history.
Oga Seun’s Shawarma Shack went the traditional route: underwriters, prospectus, roadshow, fixed price and listing.
2. The opening bell: a stock’s first trade
At 10:00 a.m. on listing day, NGX runs what’s called a call auction. In plain terms: everyone who wants to buy or sell submits their price and how many shares they want, all at once. NGX’s system puts every order on a line and finds the one price where the largest number of buyers and sellers match.
When people think of “the stock market”, they picture a number moving on a screen. This number is an agreement between two sides — someone willing to sell at a specific price, and someone willing to buy. From this point onwards, the company no longer has a say in what its shares are worth. That job now belongs entirely to whoever’s willing to trade. This is known as the secondary market.
Many people would sell on day one, at wherever the price sits an hour after the bell. It’s a common instinct and there’s no rule against it. But a stock’s first price says nothing about the worth of the business years from now, so holding shares is usually a good way to make money from investments.
3. Life in the secondary market
For the first few months, not much happens. The price of SHWU stock drifts between ₦44 and ₦49, never exceeding that median in either direction. This is what analysts sometimes call the accumulation stage — a period where big institutional buyers who missed the IPO start picking up shares a little at a time, careful not to move the price too much while they build a position.
Then, six months in, a video of the Abuja branch’s grand opening does rounds, a couple of people make viral tweets, delivery numbers jump, and so does potential revenue. This positive momentum piques the interest of potential investors and the price breaks past ₦50 because demand for the company’s shares now exceeds supply and people are willing to pay more per share. This stage is known as the markup. More buyers pile in because the stock is now visibly moving, and for weeks it climbs steadily: ₦55, then ₦61, then a ₦68 that feels, to anyone watching closely, unstoppable.
Of course, it rarely stays unstoppable. There’s a version of this stage — sometimes called distribution — where the people who bought early start selling into the enthusiasm of everyone buying late, and the price stalls even though volume stays high.
It’s hard to spot this stage from the inside, because the mood still feels bullish (positive): group chats are still excited, and the price is still looking fine on a weekly chart. The tell usually is that the stock stops making new highs even as more people pile in to buy it. Eventually, the price falls. This is the fourth stage, the markdown, and is the one many retail investors remember longest.
One detail that makes NGX stocks behave a bit differently from what you’d read in a US market explainer is that shares here are not allowed to move more than 10% in either direction in a single trading day. If a stock hits the limit, then it simply stops trading until the next morning. There’s also a floor on how many units have to change hands before the price is allowed to move at all, tiered by how expensive the stock is. So a swing that might happen one afternoon on the Nasdaq, can take Oga Seun’s Shawarma Shack the better part of a week to play out on the NGX, one 10% step at a time.
None of this guarantees a stock will ever go through all four stages, in that order. Plenty of stocks spend years just meandering. Some genuinely don’t come back after a markdown. The stages simply describe what tends to happen in the market.
4. Dividends: getting paid without selling
A year and a half after listing, Oga Seun’s Shawarma Shack posts its first full set of annual results as a public company, and the board declares a dividend — ₦1.50 a share, paid into the accounts of everyone who owned stock as of a specific date the company announced in advance, called the record date.
Grace owns 200 units. She gets ₦300, minus withholding tax, deposited into her bank account. It’s not enough to change her month, but it’s the first time the stock has paid her anything for simply holding it, rather than for selling it at a higher price than what she bought.
This is similar to what happened to GTCO shareholders some months ago. Earlier in the year, GTCO posted its strongest year yet and declared the highest dividend payout in Nigeria’s banking sector: an interim dividend of ₦1 a share, followed by a final dividend of ₦11.76, for a total of ₦12.76 per share for the 2025 financial year, approved at the company’s AGM in April 2026. Some shareholders went home with millions of naira from this dividend payout alone.
If you’re wondering how this differs from selling your shares, look at the table below.
| Getting dividends | Selling your shares | |
| What it is | A cut of the company’s profit, paid to you for holding the stock. | Making money from the gap between what you paid for the shares and what someone else will pay you to buy them. |
| Do you keep your shares? | Yes! Ownership stays exactly as it was. | No, that slice of ownership is gone once the trade is made. |
| When it happens | Whenever the board declares; in some years, none at all. | Whenever you place a sell order and someone is willing to buy at your price. |
| How much you get | Whatever the board sets per share, usually a small fraction of the stock’s price. | Whatever the market will pay at that moment, could be far more, or far less, than what you paid. |
| Is it guaranteed | No. Depends on whether the company made a profit and what the board decides to do with it. | No. Depends on demand existing at a price you’re willing to accept. |
| Tax, in Nigeria | 10% withholding tax deducted at source (7.5% under some double-tax treaties) | Gains are taxed at your personal income tax rate (up to 25%), with gains under ₦10 million, or total disposals under ₦150 million in any 12 months, exempt. |
| Effect on the company | The company sends out cash it already has on hand | None directly — you’re trading with another investor, not the company itself. |
Remember: If you’re not a preferential shareholder, dividends aren’t fixed the way interest on a savings account is. A company can post a record payout one year and skip the next two entirely, depending on what it actually earned and what its board decides to do with it. No dividend, however reliable it has been historically, is guaranteed.
5. The rights issue: raising money again
Let’s say three years after the company has gone public, Oga Seun wants to open six branches in Abuja and Kano at once, faster than the company’s cash flow allows. Rather than repeat the entire IPO process from scratch, the company can do something cheaper and quicker: a rights issue, offering existing shareholders like Grace the chance to buy new shares directly from the company, at a discount to the current market price, in proportion to what they already own.
This is essentially what some Nigerian banks did through 2024 and 2025, when the Central Bank of Nigeria pushed lenders to raise their minimum capital or risk losing their licenses. Access Bank did a rights issue that lifted its capital past ₦595 billion. Zenith Bank combined a rights issue with a public share offer to raise about ₦350 billion. GTCO ran a rights issue in Nigeria and did a listing in London. Across the sector, banks pulled in more than ₦2 trillion this way rather than starting with the IPO process from zero.
The mechanics are simple on paper. The company offers, say, one new share for every four Grace already holds, priced at ₦40 against a market price of ₦58. This is a real discount, meant to make the offer worth taking even though it means writing a fresh cheque. Grace has 200 shares, so she’s entitled to 50 more, at a total cost of ₦2,000, with a few weeks to decide.
This is an important decision to make. If Grace takes up her rights, her percentage ownership of the company stays roughly where it was. If she chooses not to, the company will probably get money from other shareholders, but her existing shares will become a smaller slice of a bigger pie — a dilution. Not buying into the rights issue will cost her something, even if nothing about her original shares have changed.
6. How a stock’s story ends
Some stocks trade for decades without any dramatic final chapter. Others don’t. Three years after the rights issue, a larger, Lagos-based restaurant conglomerate makes an offer to buy out Oga Seun’s Shawarma Shack entirely, at ₦95 a share.
The board recommends it, a majority of shareholders vote yes at a court-ordered scheme of arrangement meeting, and NGX approves the delisting once the paperwork clears. Grace never has to decide anything here beyond voting yes. Once enough of the company agrees, the buyout applies to everyone, including shareholders who voted against it. She gets ₦19,000 for her 200 units, wired straight to her bank account, and SHWU stops trading for good.
This is close to what happened to Notore Chemical Industries in 2025, when its controlling shareholders bought out minority investors at ₦62.60 a share through a court-approved scheme, taking roughly ₦252 billion in market value off the exchange in the process, the single largest of eight companies that delisted from the NGX that year.
Not every exit looks like a payday, though. Tourist Company of Nigeria, which ran the Federal Palace Hotel and traded on the exchange since 2004, was delisted after it had failed to meet regulatory requirements and got pushed out rather than bought out. A buyout and a regulatory delisting can look identical on a chart, but only one of them ends with money in your account.
A company can also simply stay listed, indefinitely, paying dividends some years and not others, drifting through its own accumulation and markdown stages for decades. Delisting isn’t the default ending. It’s just one of the ways the story can close.
This has been the lifecycle of a stock. Every stage described in this article — the swings, the dividends, the rights issues, the buyouts — carries real risk in both directions. If you’d like to learn more about how stocks work, check out our blog for more informative money pieces. If you’re looking to start your investment journey, you can begin exploring investment opportunities on Piggyvest at whatever pace makes the most sense for you.
