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How to Buy REITs in Nigeria
Real Estate Investment Trusts (REITs) have become an increasingly popular investment vehicle in Nigeria over the past few years. With the potential to generate high returns and provide diversification to an investment portfolio, many investors are eager to buy REITs. However, the process of buying REITs can be confusing for those who are new to the investment world. In this article, we will guide you through the steps to successfully buy REITs in Nigeria.
What are REITs?
Before getting into the process of buying REITs, it is important to understand what they are. A REIT is a type of investment fund that owns and operates income-generating real estate properties. Investors can buy shares in the REIT, which entitles them to a share of the income generated by the properties owned by the REIT. REITs are required by law to distribute at least 90% of their taxable income to shareholders, which makes them an attractive investment option for those seeking regular income.
Step 1: Choose a Brokerage Firm
The first step to buying REITs in Nigeria is to choose a brokerage firm. A brokerage firm is a company that acts as an intermediary between buyers and sellers of securities. It is important to choose a reputable brokerage firm that is registered with the Securities and Exchange Commission (SEC) in Nigeria. Some popular brokerage firms in Nigeria include Meristem Securities, Stanbic IBTC Stockbrokers, and United Capital Securities.
Step 2: Open a Brokerage Account
Once you have chosen a brokerage firm, the next step is to open a brokerage account. This involves filling out an application form and providing the required documentation, such as a valid ID card and proof of address. The brokerage firm will also ask for your bank account details, as this is where your dividends and other payments will be deposited.
Step 3: Fund Your Brokerage Account
After opening a brokerage account, you will need to fund it in order to buy REITs. You can do this by transferring funds from your bank account to your brokerage account. Most brokerage firms in Nigeria accept bank transfers, but some also accept debit card payments.
Step 4: Search for REITs
Once your brokerage account is funded, you can start searching for REITs to invest in. Most brokerage firms in Nigeria have online trading platforms that allow you to search for and buy REITs. You can also contact your broker for advice on which REITs to invest in.
Step 5: Place Your Order
After choosing the REIT you want to invest in, the next step is to place your order. This involves specifying the number of shares you want to buy and the price you are willing to pay. There are two types of orders you can place: a market order and a limit order. A market order is an order to buy or sell a security at the current market price. A limit order is an order to buy or sell a security at a specified price or better.
Step 6: Monitor Your Investment
After placing your order, it is important to monitor your investment. This involves keeping track of the performance of the REIT and any news or events that may affect its value. You should also keep track of any dividends or other payments you receive from the REIT.
Buying REITs in Nigeria can be a rewarding investment strategy for those looking for regular income and diversification in their investment portfolio. By following the steps outlined in this article, you can successfully invest in REITs and reap the benefits of this investment vehicle. As with any investment, it is important to do your research and consult with a financial advisor before making any investment decisions.
What is the minimum investment amount required to buy REITs in Nigeria?
- The minimum investment amount varies depending on the REIT and the brokerage firm. Some REITs may have minimum investment amounts as low as ₦5,000, while others may require a minimum investment of ₦100,000 or more.
What is the tax implication of investing in REITs in Nigeria?
- REITs in Nigeria are exempt from corporate income tax, but investors are required to pay withholding tax on the income they receive from the REIT. The withholding tax rate is currently 10%.
How often do REITs pay dividends?
- REITs in Nigeria are required by law to distribute at least 90% of their taxable income to shareholders. Dividends are typically paid quarterly or annually, depending on the REIT.
Can I sell my REIT shares at any time?
- Yes, you can sell your REIT shares at any time through your brokerage firm.
Are REITs a safe investment?
- Like any investment, there is always a risk involved with investing in REITs. However, REITs are generally considered to be a relatively safe investment option, as they provide diversification and regular income. It is important to do your research and consult with a financial advisor before investing in REITs.