What Is a Stock?

Stocks — ownership sliced up

Imagine Alhaji Musa owns a profitable rice milling business worth ₦10 million. He wants to expand but needs more capital. So he divides the business into 10 million equal pieces called shares. Each share is worth ₦1. He sells 4 million of them to the public, keeping 6 million himself.

If you buy 100,000 shares at ₦1 each, you spend ₦100,000 and own 1% of the entire business. You are now a shareholder.

How shareholders earn money

• Dividends: When the company makes a profit, it may pay a portion to shareholders. If the company earns ₦5 per share and pays ₦2 as dividend, you receive ₦200,000 on your 100,000 shares.
• Capital appreciation: If the business grows and becomes more valuable, the share price rises. Your 100,000 shares at ₦1 may now be worth ₦1.50 each — a ₦50,000 gain without selling.

How shareholders can lose

• If the business struggles or fails, the share price falls. Your ₦100,000 investment could be worth ₦60,000.
• In a worst case (company bankruptcy), shareholders are last in line — you may get nothing.

This is why research and screening matter — both for financial health and for halal compliance.