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Educational Disclaimer: This site is for education only. We do not give investment advice. Shares are volatile — prices go up and down and you may lose money. Always do your own research and speak to a professional adviser.

Glossary

Plain-English definitions for every term you'll come across in halal NGX investing.

Shariah & Islamic Finance

AAOIFI stands for Accounting and Auditing Organisation for Islamic Financial Institutions. It is a Bahrain-based international body that sets global standards for Islamic finance. Its Shariah Standard No. 21 is widely used as the basis for stock screening methodology.

Example: Many Islamic funds worldwide use AAOIFI ratio thresholds — such as keeping interest income below 5% of total revenue — as the benchmark for Shariah-compliant investing.

Gharar means excessive uncertainty or ambiguity in a transaction. Contracts with too much uncertainty about what is being bought, when it will be delivered, or at what price are not permitted in Islamic finance. Minor uncertainty in everyday transactions is acceptable.

Example: Short-selling stocks involves elements of gharar because you are selling something you do not yet own. Regular stock purchasing on the NGX does not involve significant gharar.

Halal is an Arabic word meaning permissible or lawful. In investing, a halal investment is one that is allowed under Islamic law. This means the company's business is permissible and its financial structure does not involve excessive interest-based debt.

Example: Buying shares in a cement company that passes Shariah screening is considered a halal investment. Buying shares in a brewery is not.

Haram means prohibited or unlawful in Arabic. In investing, a haram investment involves a company whose core business or financial structure violates Islamic law. Common examples include alcohol companies, conventional banks, and tobacco producers.

Example: Nigerian Breweries is haram to invest in because its core business is manufacturing and selling alcohol.

Maysir means gambling or speculation. Any transaction where one party gains at the direct expense of another through chance is prohibited. Pure speculation — buying an asset solely to profit from short-term price movements with no underlying economic activity — has elements of maysir.

Example: Options trading and highly leveraged speculative positions have significant maysir elements. Long-term halal stock investing is considered different from gambling because you are owning a share in a real business.

Riba means interest or usury in Arabic. In Islamic finance, it refers to any guaranteed, predetermined return on a loan or deposit — regardless of whether the underlying investment makes a profit. Riba is strictly prohibited in Islam.

Example: A conventional bank charging 18% interest on a loan is earning riba. Buying a bond that pays a fixed 10% per year also involves riba.

Shariah screening is the process of checking whether a stock is permissible to invest in according to Islamic law. It has two stages: (1) checking what the company does, and (2) checking its financial ratios (debt levels, interest income, etc.).

Example: A brewery automatically fails the first stage of Shariah screening because its business is selling alcohol, which is prohibited. A cement company passes the first stage, then its debt and interest income ratios are checked.

Financial Terms

A blue chip stock is a share in a large, well-established, financially stable company with a long track record. Blue chip stocks are generally considered less risky than smaller company stocks, but they are not risk-free.

Example: Dangote Cement, MTN Nigeria, and BUA Foods are considered blue chip stocks on the NGX because of their large size, market leadership, and consistent financial performance.

A capital gain is the profit you make when you sell a share for more than you paid for it. Capital gains from investing in halal businesses are generally considered permissible. They are distinct from interest income (riba).

Example: If you buy 100 shares of MTN Nigeria at ₦150 each and sell them later at ₦195 each, your capital gain is (₦195 - ₦150) × 100 = ₦4,500.

The debt-to-assets ratio measures how much of a company's total assets are funded by debt. In Shariah screening, interest-bearing debt must be below 33% of total assets to pass. A lower ratio is better.

Example: If Dangote Cement has ₦2 trillion in total assets and ₦370 billion in interest-bearing debt, its debt-to-assets ratio is 18.5% — well below the 33% limit.

A dividend is a share of a company's profit paid to shareholders. When a company makes money, it can distribute some of that profit to the people who own shares. Dividends are generally considered halal because they come from real business profit, not from interest.

Example: If you own 1,000 shares of Dangote Cement and the company declares a dividend of ₦5 per share, you would receive ₦5,000. This income is from the company's cement business profits.

Dividend yield is the dividend per share expressed as a percentage of the share price. It tells you how much income (as a percentage) you would earn from dividends if you bought the stock at today's price.

Example: If CAP Plc pays a dividend of ₦2 per share and the share price is ₦33.50, the dividend yield is 2 ÷ 33.50 = 5.97%. A higher dividend yield means more income per naira invested.

An ETF (Exchange Traded Fund) is an investment fund that trades on a stock exchange like a regular share. Instead of buying one company's shares, you buy into a fund that holds many companies at once. The Lotus Halal Equity ETF (LOTUSHAL15) is a Shariah-compliant ETF on the NGX.

Example: Buying the LOTUSHAL15 ETF gives you exposure to all the stocks in the NGX Lotus Islamic Index in one purchase, rather than buying each stock individually.

Market capitalisation (market cap) is the total value of all a company's shares at the current price. It is calculated by multiplying the share price by the total number of shares. It shows how big a company is.

Example: If Dangote Cement has 17.04 billion shares and each share costs ₦525, the market cap is about ₦8.95 trillion. This makes it one of Nigeria's largest companies.

NGX & Market Structure

A lot is the minimum number of shares you can buy in one transaction on the NGX. The standard lot size on the NGX is 100 shares. You can buy multiples of 100 shares (100, 200, 500, etc.) in a single order.

Example: If you want to buy DANGCEM shares and the price is ₦525, the minimum purchase would be 100 shares × ₦525 = ₦52,500.

NGX stands for Nigerian Exchange. It is the main stock exchange in Nigeria where shares of Nigerian companies are bought and sold. Formerly called the Nigerian Stock Exchange (NSE), it was rebranded as NGX in 2021.

Example: When you buy shares of MTN Nigeria, the transaction happens on the NGX. The price you see quoted on HalalStock is the price on the NGX.

The NGX Lotus Islamic Index (NGXLII) is an index of Shariah-compliant stocks on the Nigerian Exchange. It is compiled by the NGX Group in partnership with Lotus Capital Limited and reviewed every six months by a qualified Shariah Advisory Board.

Example: Dangote Cement, MTN Nigeria, and Jaiz Bank are among the stocks included in the NGX Lotus Islamic Index.

A rights issue is when a company offers existing shareholders the right to buy additional new shares, usually at a discount to the current market price. It is a way for companies to raise new money from their existing shareholders.

Example: Jaiz Bank may conduct a rights issue to raise capital for expansion. If you own shares, you would be offered the chance to buy more shares at a lower price before the offer is made to the public.

The Securities and Exchange Commission (SEC) is Nigeria's main regulator of the capital markets. All stockbrokers and investment advisers must be registered with SEC to operate legally in Nigeria.

Example: Before opening a brokerage account, verify that the broker is registered with SEC Nigeria at sec.gov.ng. This protects you from fraudulent operators.

Portfolio & Risk

Diversification means spreading your investments across different companies, sectors, and asset types. The idea is that if one investment falls in value, others may not fall at the same time — reducing your overall risk.

Example: Instead of putting all your money into Dangote Cement, you could spread it across Dangote Cement, MTN Nigeria, Okomu Oil Palm, and Jaiz Bank — covering different sectors (industrial, telecom, agriculture, banking).