Yes. This is one of the most misunderstood concepts in investing, especially in Nigeria because many investors see things like:
“50 kobo nominal value”
“₦1 ordinary share”
“market price ₦48”
and assume they are directly related.
They are actually very different things.
1. Nominal Value (Par Value / Face Value)
Nominal value is the original legal value assigned to a share when the company created it.
Think of it as:
the “birth certificate value” of the share.
It is mostly:
an accounting/legal concept,
used in company formation and share capital structure.
Example:
A company may say:
Authorized shares: 10 billion shares
Nominal value: ₦1 each
This means the legal share capital is:
The nominal value does NOT tell you:
whether the company is profitable,
whether investors like it,
whether the stock is expensive or cheap.
Example Using Nigerian Stocks
Suppose:
Zenith Bank Plc has a nominal value of ₦0.50,
but the stock trades in the market at ₦48.
That ₦0.50 is just the legal face value.
Investors are willing to pay ₦48 because of:
profits,
dividends,
growth,
trust,
future expectations.
2. Market Value (Market Price)
This is the actual current price investors are willing to buy or sell the share for on the exchange.
This is what you see daily on:
brokerage apps,
NGX market reports,
CNBC/Bloomberg.
It changes every day based on:
demand and supply,
company earnings,
dividend expectations,
economic conditions,
investor sentiment.
Simple Village Market Analogy
Imagine Mama Ngozi sells tomatoes.
Nominal Value:
The original cost price of the basket years ago:
maybe ₦500.
Market Value:
What buyers are willing to pay today:
maybe ₦15,000 because tomatoes are scarce.
The market does not care much about the original cost anymore.
Same with shares.
Why Market Value Matters More to Investors
Because market value determines:
your profit/loss,
company valuation,
investor wealth,
market capitalization.
If you bought:
Zenith at ₦35,
and market price rises to ₦48,
your investment gained value.
The nominal value stayed ₦0.50 the whole time.
How It Affects Companies
A. Nominal Value Affects:
Mostly:
legal share capital,
accounting records,
regulatory structure.
It rarely affects everyday investing decisions.
B. Market Value Affects:
Very important things like:
company valuation,
investor confidence,
ability to raise capital,
attractiveness to institutional investors.
Market Capitalization
This is where market value becomes powerful.
Formula:
For example:
If:
a company has 40 billion shares,
market price is ₦50,
then:
That becomes the company’s approximate market valuation.
Important Insight
A company can have:
very low nominal value,
but huge market value.
Example globally:
Apple Inc.
Microsoft Corporation
Their nominal values are tiny compared to their market valuations.
Why?
Because investors value:
earnings,
data,
dominance,
future cash flow,
innovation.
Not face value.
Does Low Nominal Value Mean Cheap Stock?
No.
This is a common beginner mistake.
A ₦1 nominal value stock trading at ₦100 may still be cheaper fundamentally than:
another ₦1 nominal value stock trading at ₦10.
Because valuation depends on:
profits,
debt,
growth,
cash flow,
dividend quality,
management quality.
Not nominal value.
Bonus Concept: Premium
If a company issues shares above nominal value:
Example:
nominal value = ₦1,
issued to investors at ₦20,
then:
₦1 goes to share capital,
₦19 becomes share premium.
That premium strengthens the company’s equity base.
The Main Thing to Remember
Nominal Value
= legal/accounting face value.
Market Value
= what investors believe the company is worth right now.
And in investing, market value is usually the one that matters most.