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The Nigerian Exchange (NGX) has seen a surge in retail participation, especially this year.
However, with the increase in retail investors comes the rise of pump-and-dump stocks, which are manipulated to attract investor interest for quick gains.
What are pump-and-dump stocks?
Pump-and-dump stocks are those that experience a rapid, artificial rise in price, driven by hype or coordinated trading rather than genuine business growth or strong fundamentals.
For example, in 2024, Juli Plc ranked first on the NGX in terms of share price valuation, with a staggering 1,646% year-to-date gain.
- In the 9-month 2024, Juli Plc reported a turnover of just N349 million.
- 67% (134 million) of the 200 million shares outstanding were held by just three entities.
This concentration of ownership means that a small number of shareholders can significantly influence the stock price.
In a pump-and-dump stock, insiders can quickly inflate the price by buying large volumes, then dump their shares once the price is inflated, leaving unsuspecting investors holding shares that rapidly lose value when the price corrects.
What to look out for
Pump-and-dump stocks often share common traits that investors can watch for to avoid falling into it and losing money.
- overvalued and susceptible to speculative behavior.
Let us look at SCOA Nigeria. The company has a market capitalization of N4.61 billion and has seen a 245% YtD gain in 2025, ranking 11th on the NGX.
Despite this price movement, SCOA Nigeria reported a loss of N36 million in 9M of 2025, though it posted a profit of N56 million in 9M 2024.
With revenue hovering around N1.5 billion and net assets of N1.2 billion, the 245% YtD gain and market cap seem out of sync with the company’s earnings and asset base.
This could indicate that the stock is overvalued or driven by speculative trading rather than strong fundamentals.
What investors should do
Above are typical characteristics of pump and dumb stocks, investors should watch out for, to avoid buying these pump-and-dump stocks:
That said, it is important for investors to
- Spread investments across multiple stocks and sectors to reduce risk and avoid getting caught in speculative bubbles.
- Do thorough Research: Never rely solely on share price movement.
- Always verify the fundamentals of a stock, check its earnings, revenue growth, and market position before making any investment decision.
- Avoid penny stocks with low volume penny stocks with low trading volume. Penny stocks here mean those trading below N5 per share.
While these stocks may seem appealing due to their low price, they are often more volatile and prone to manipulation.
- Stick to well-established companies with higher trading volumes and liquidity; banking stocks are good here
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