inside information
Inside Information is a big company secret, like an unannounced profit or merger, that can move a share price once the public finds out.
In plain English
Is it wrong to buy shares because your cousin who works at the bank told you something the rest of us do not know yet? That is the exact question inside information forces you to sit with.
Inside information is any fact about a company that has not been told to the public yet, but would change how people value that company's shares if they knew it. Maybe a Lagos listed telecoms firm is about to announce a huge new contract, or a bank is calmly about to report a loss nobody expected. The staff who know this before the rest of Nigeria knows it are sitting on inside information.
The trouble starts when someone uses that secret to trade before everyone else can. Say an employee at a company on the Nigerian Exchange finds out, three days before the public announcement, that the company just won a ₦12 billion government contract. If that employee calmly buys shares before the news breaks, then sells once the price jumps after the announcement, that is trading on inside information. It is illegal almost everywhere, including Nigeria under SEC rules and in the United Kingdom under the Financial Conduct Authority.
It matters to ordinary investors because the whole stock market only works if everyone is playing with the same information at roughly the same time. If insiders can always trade ahead of the news, the small investor buying ₦50,000 worth of shares from their salary, or the Nigerian in London sending money home to invest in a family portfolio, is always going to lose to people who know things first. That is why exchanges and regulators watch for unusual trading patterns right before big announcements.
So the honest answer to that opening question is yes, it is wrong, and it is also risky for you personally. Regulators can trace trades, freeze accounts, and prosecute people, even years later.
A director at a Nigerian bank learns two weeks early that the bank will report record profits. She buys ₦2,000,000 worth of shares before the announcement, then sells after the price rises 30 percent once the news is public. That gain came from inside information, and it is a criminal offence, not clever investing.
Questions people ask
Is it illegal to just listen to inside information without trading on it?
Listening is not the crime, acting on it is. But once you know it, you are expected to stay away from trading that share until the information becomes public. Passing the tip to someone else who trades on it can also make you liable.
How do regulators actually catch people trading on inside information?
They watch for unusual spikes in volume or price just before major announcements, then trace the trades back to accounts, phone records, and relationships with company insiders. Nigeria's SEC and the Nigerian Exchange both run surveillance systems built for exactly this.
Can family members of company staff get in trouble too?
Yes. If a director tells their spouse or a friend, and that person trades on it, both the source and the trader can be prosecuted. The law calls this tipping, and it carries the same penalties as trading yourself.
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