Find out how to establish a Pump-and-Dump inventory on the NGX

The Nigerian Trade (NGX) has seen a surge in retail participation, particularly this 12 months.

Nonetheless, with the rise in retail traders comes the rise of pump-and-dump shares, that are manipulated to draw investor curiosity for fast positive factors.

What are pump-and-dump shares?

Pump-and-dump shares are those who expertise a fast, synthetic rise in worth, pushed by hype or coordinated buying and selling moderately than real enterprise progress or robust fundamentals.

For instance, in 2024, Juli Plc ranked first on the NGX when it comes to share worth valuation, with a staggering 1,646% year-to-date acquire.

Within the 9-month 2024, Juli Plc reported a turnover of simply N349 million.
67% (134 million) of the 200 million shares excellent have been held by simply three entities.

This focus of possession implies that a small variety of shareholders can considerably affect the inventory worth.

In a pump-and-dump inventory, insiders can rapidly inflate the worth by shopping for massive volumes, then dump their shares as soon as the worth is inflated, leaving unsuspecting traders holding shares that quickly lose worth when the worth corrects.

What to look out for

Pump-and-dump shares usually share frequent traits that traders can look ahead to to keep away from falling into it and shedding cash.

Low buying and selling liquidity

Low liquidity is a big crimson flag typical for pump-and-dump shares.

Shares with low liquidity are notably weak as a result of it takes much less cash to maneuver their costs. Even small trades can lead to dramatic worth adjustments.

Instance: Chellarams Plc has posted a powerful 339% share worth YtD acquire, rating fifth on the NGX.

Nonetheless, between August 20 – November 18, 2025, it ranked because the 113th most traded inventory, with a mean of simply 103,504 shares traded per session, far decrease in comparison with bigger shares.
Including to the priority, 14 shareholders maintain 92% of the corporate’s shares, making it simpler for a number of entities to artificially inflate the worth and dump at a revenue.
This focus of possession, coupled with low liquidity, makes the inventory extremely inclined to manipulation.

Free float requirement

Corporations that fail to adjust to the NGX’s free float guidelines; their shares are extra weak to manipulation. Free float refers back to the portion of shares out there for buying and selling available on the market.

In accordance with NGX guidelines (Rule 12.2.b.4.a & b), for a corporation to be listed on the Premium Board, it will need to have a minimal free float of 20% of its issued share capital, or the worth of its free float should be equal to or above N40 billion.

Shares that don’t meet these necessities are likely to have low liquidity and better worth manipulation dangers, making them pump-and-dump shares.

Watch buying and selling quantity for irregular spikes

An irregular spike in buying and selling quantity with no elementary information to justify it’s a key signal of a pump-and-dump inventory.

Shares with low liquidity are notably weak, as a number of massive trades can dramatically transfer the worth.

Instance: NCR Nigeria has skilled a 519% YtD acquire in 2025, in comparison with 26% YtD in 2024. Nonetheless, it has additionally seen important spikes in buying and selling quantity:

1,031,905 shares traded on November 14, 2025.
66,772,359 shares traded on September 30, 2025—a rare improve from its typical day by day quantity.

Regardless of NCR Nigeria’s compliance with the free float requirement and a monetary turnaround, reporting N238 million revenue for 9M 2025 (up from a N2.7 billion loss in 2024), these quantity surges increase issues about potential worth manipulation.

Market cap vs efficiency

To detect pump-and-dump shares, traders must also consider whether or not the corporate’s market capitalization aligns with its fundamentals.

A inventory market cap displays the full worth of its excellent shares, however a excessive market cap doesn’t at all times correlate with robust enterprise efficiency.
If a inventory with a big market cap has minimal progress, declining earnings, or stagnant operations, it might be overvalued and inclined to speculative habits.

Allow us to have a look at SCOA Nigeria. The corporate has a market capitalization of N4.61 billion and has seen a 245% YtD acquire in 2025, rating eleventh on the NGX.

Regardless of this worth motion, SCOA Nigeria reported a lack of N36 million in 9M of 2025, although it posted a revenue of N56 million in 9M 2024.

With income hovering round N1.5 billion and web belongings of N1.2 billion, the 245% YtD acquire and market cap appear out of sync with the corporate’s earnings and asset base.

This might point out that the inventory is overvalued or pushed by speculative buying and selling moderately than robust fundamentals.

What traders ought to do

Above are typical traits of pump and dumb shares, traders ought to be careful for, to keep away from shopping for these pump-and-dump shares:

That mentioned, it is necessary for traders to

Unfold investments throughout a number of shares and sectors to scale back danger and keep away from getting caught in speculative bubbles.
Do thorough Analysis: By no means rely solely on share worth motion.
All the time confirm the basics of a inventory, verify its earnings, income progress, and market place earlier than making any funding choice.
Keep away from penny shares with low quantity penny shares with low buying and selling quantity. Penny shares right here imply these buying and selling under N5 per share.

Whereas these shares could appear interesting resulting from their low worth, they’re usually extra unstable and liable to manipulation.