Written by: Finance

Quick Guide Into The Nairobi Securities Exchange

What can you do with Sh383.4 million? A lot. Billionaire businessman and Equity Bank boss, Dr. James Mwangi received Sh 383.4 million as a dividend payout for his 3.4 % stake in the same bank, he serves. Equity Bank is one of the 65 companies listed on the Nairobi Securities Exchange.

For you to make money from the NSE, you don’t need to be a billionaire but have a firm understanding of how the market works. And this is a good starting point. Read on and learn how you can make your first forays in the securities market.

A close up of a Nairobi Securities Exchange banner
The NSE banner

Demystifying the NSE

Congrats on making your very first investment, and gaining practical know-how of the NSE. 

 As Ben Franklin once said, “An investment in knowledge always pays the best interest.”

What is the Nairobi Securities Exchange?

The NSE is a market platform where you can trade in shares and bonds. You can buy shares in the 65 listed companies and invest in Treasury and corporate bonds.

A Treasury bond is issued by the Government of Kenya, while a corporate bond is by a company, such as Safaricom PLC. The NSE is open from 9 am to 3 pm every weekday save for public holidays. 

NSE is regulated by the Capital Markets Authority (CMA).

Is Nairobi Stock Exchange the same as the Nairobi Securities Exchange?

Yes. NSE was the Nairobi Stock Exchange before changing to Nairobi Securities Exchange in 2011. The new name reflects its growth from only offering shares to other products. 

Besides shares and bonds, you can invest in derivatives. You can also invest in exchange-traded funds (ETFs) and Real Estate Investment Trusts (REITs). Also, you can choose to day trade, where your shares are settled on the same trading day. Usually,  your shares are settled three days after the transaction.

You don’t need to visit NSE’s offices to trade in securities but your stock broker, who serves as a bridge between you and the exchange.

A graphical history of the Nairobi Securites Exchange
A chronological history of the NSE

What are shares?

A share is partial ownership of a company. As a shareholder, you share the firm’s profit in the form of a dividend payment. You also have the right to attend the annual general meeting (AGM), where the board presents the firm’s performance report. 

As a shareholder, you also have voting power to elect directors and vote on other decisions. The more shares you have, the more your voting power.

 The Nairobi Securities Exchange market watch board
The market watch board at the Nairobi Securities Exchange

What’s the difference between a listed and an unlisted company?

A listed company means that the firm’s shares are available at the NSE, and you can buy or sell them as you wish. But, an unlisted company is under private ownership, which means you can’t trade its shares at the NSE.

How do you list a company on the NSE?

You list your company on the NSE by floating its shares through an initial public offering (IPO). An IPO allows the original shareholders to sell their shares to the public. An example is Safaricom which had its IPO in 2008.

Do you know that Kenya’s first privatization IPO was in 1998 as the government sold its 20% shareholding in KCB Bank?

A privatization IPO is where the government disposes of its stake in a company through the NSE. This moves the ownership from public hands, through the government, to private hands through the exchange.

What are the requirements before an IPO?

If you’re interested, your firm needs to pass the strict conditions set by NSE and CMA. They’re put in place to protect your investor’s money. They include:

  1. Your firm’s prospectus
  2. Your reporting accountants report
  3. Legal opinion
  4. Your firm’s audited financial statements and annual reports for the past three years.
  5. IPO price valuation reports
  6. The draft agreement between transaction team members and the issuer.
  7. Where applicable, the Underwriters agreement
  8. Certified copy of your company’s: 

  • Shareholders’ resolution endorsing IPO
  • Board of directors’ resolution proposing IPO
  • Certificate of Incorporation
  • Memorandum and articles of association

Why list your companies on the NSE?

To raise capital.

Your company may sell some of its shares to the public to raise capital and extend its operations. This is better than a loan that may have high-interest rates and tight deadlines.


Your NSE-listed company has a lot of visibility which has many benefits. It can attract a diverse pool of investors from across the world.

Some are institutional investors with better technological capacity that they share with the firm.

Also, if your company is listed, many customers may become shareholders to have a piece of a homegrown brand.

 Agricultural firms listed on Nairobi Securities Exchange
Agricultural companies on the NSE

Expand your talent pool

Your Nairobi Securities Exchange-listed firm has better name recognition as compared to unlisted firms. It enables you to attract talented people into your workforce.

Besides working at a reputable firm, you can attract employees with stock options if they stick long enough. For instance, employees can be gifted shares in the company if they perform well and stick with the firm for five years or more.

It also boosts their morale as they’re not only employees but also shareholders.

Buying Shares

Before you buy shares, you need to open a Central Depository and Settlement Corporation (CDSC) account. A CDSC account is like a bank account that holds your shares when you trade in them.

You can open a CDSC account at any licensed stockbroker at no charge.

 Banks listed on the NSE
Banks listed on the bourse

CDSC Account

The requirements before opening a CDSC account are:

  • National Identity Card
  • Passport Photo
  • Utility Bill
  • Kenya Revenue Authority (KRA) PIN
  • Signature

You can have several stockbroking accounts across different firms but only one CDSC account.

Your stockbroker can advise you on what stocks to buy. He can give you a range of the shares available and at what price.

Depending on your preference, your stockbroker will advise you on acquiring the best shares at that particular period. All this depends on your investment budget.

A share is how you acquire part ownership of a listed company. The least number of shares you can buy is 100 under standard lots. Under odd lot, you can even buy one share.

There are two types of approaches when it comes to the stock market:

1. Short-term approach. Short-term investors want to trade stocks and enjoy the price change. Some are day traders, while others wait for weeks or months.

2. Long-term approach. These are people who are okay with the dividends paid out by the listed firm. They can also enjoy the capital gains in the long run, should they dispose of their shares.

 Energy companies on the NSE
Energy firms available on the Nairobi Securities Exchange

 Companies that are listed on the NSE’s energy and petroleum section.

Signing Up With a Stockbroker:

To buy shares listed on the NSE, you need to sign up with a licensed stockbroker. Your stockbroker executes your trade orders when you sign manual forms authorizing them. Or, you can trade yourself by using your stockbroker’s trading app on your phone or desktop.

You can register either as an individual or as a company. While you can register in person, many stockbrokers have online platforms for convenience. You need to submit a utility bill, a copy of your ID, a passport photo, KRA PIN, and signature. These are the exact requirements for a CDSC account.

Each of the 65 listed companies has a ticker symbol. For instance, Safaricom will appear as SCOM when looking at the NSE’s market watch board.

Risk Profile

Before your broker advises you on what to invest in, they’ll create a risk profile by asking questions about your income and expenditure. They’ll also ask you how long you intend to invest the money.

Your stockbroker then guides you in creating a portfolio that matches your risk profile. You can either have a conservative or an aggressive portfolio.

Crosslisting shares

You can trade shares of firms listed on other participating securities exchanges. Cross-listing allows listed firms to have shareholders across different markets.

Currently, NSE has some cross-listed shares of firms listed on the Rwandan Stock Exchange, the Tanzanian Stock Exchange, and the Ugandan Stock exchange.

Decoding the NSE Jargon

You may come across some terms in the NSE and wonder what they mean. Here are the common ones and their meaning.

Bourse- the exchange market

NSE Index- An index is used to indicate the health of the securities market. It can only cover the entire market or sector, such as the manufacturing index. There are three indices on the NSE: NSE All-Share Index, NSE 20 index, and NSE 25 index.

NSE All Index-This has all the 65 listed firms of the Nairobi Securities Exchange.

NSE 20 Index-It’s the weighted average of the top 20 firms on the NSE by market capitalization.

NSE 25 Index: This is the weighted average of the top 25 firms on the bourse.

A nominee account-It’s an account used by owners who want to be anonymous in the shareholders’ registry. But their real names will appear on the stockbroker’s client list.

Bid price: This is what you’re willing to pay as you buy shares.

Ask price: This is the selling price you’re asking for as you sell your shares.

Bid quantity-This is the number of shares that you want to buy.

Ask quantity-This is the number of shares that you want to sell.

 Manufacturing and allied firms on the bourse
NSE listed companies in manufacturing and allied sectors

The previous close: This is a stock’s market price in the last trading session. It shows you the stock’s trajectory on whether it’s rising or falling.

Net Change: The difference between the previous closing price and the current trading price.

Total traded volume- this is the total number of shares traded that day at the current time.

Odd lots sections- this is where you can buy even one share.

Normal lots section- you can only buy at least 100 shares in this section. There’s no cap on what you can buy.

Bullish – means the stock price or market is going up.

Bearish- means the stock price market is going down.

Primary market -The primary market is where a firm floats its shares during the IPO.

Secondary market: After the IPO, shares are traded in the secondary market.

What Is GEMS?

You may also come across GEMS. But what is it?

GEMS is the Growth Enterprise Market Segment. It’s a place where NSE incubates firms that want to list on the NSE but don’t meet all the main market requirements. NSE guides them on meeting the listing requirements as they stay in the GEMS segment.

 Commercial and services companies on the NSE
Commercial and services firms available on the Nairobi Securities Exchange

Besides GEMS, what are the other market segments?

  • Fixed Income Market Segment (FIMS) -this is where you can trade in government (Treasury) and corporate bonds.
  • Main Investment Market Segment (MIMS) is the dominant segment where you can trade in shares of the 64 listed firms.
  • Alternative Investment Market Segment (AIMS) serves moderately sized firms below the MIMS scope.


Why invest in the NSE?

 Reasons to invest in the NSE
Reasons to invest in the Nairobi Securities Exchange

There are many reasons for investing your money in the NSE. Here are a few:

  • Collateral.

You can use your shares portfolio as collateral that allows you to borrow a loan. This enables you to pursue your goals without disposing of your shares.

  • Liquidity

Shares are very liquid as you can buy or sell them within a short time compared to other asset classes such as land. You can get your money at most, within three days.

  • Investment

Securities are an investment like any other that brings in money to you. Rather than have your money lying idle at the bank, you can buy shares and get a return on your investment.

  • Dividends

You can own a piece of some of the iconic brands whose products you use. Why settle for being a customer when you can be a shareholder? 

  • Capital gains

This occurs when your share’s market price is higher than your buying price. You can decide to sell your shares at this point and make a profit.

Now that you have a better idea of how the Nairobi Securities Exchange works, share our blog with your friends. There’s more content coming up.

Are you ready to buy your first shares at the Nairobi Securities Exchange?

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Tags: , , , Last modified: May 30, 2022