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.

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.

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.

Pump-and-dump stocks often share common traits that investors can watch for to avoid falling into it and losing money.

Low trading liquidity

Low liquidity is a significant red flag typical for pump-and-dump stocks.

Example: Chellarams Plc has posted an impressive 339% share price YtD gain, ranking 5th on the NGX.

Companies that fail to comply with the NGX’s free float rules; their stocks are more vulnerable to manipulation. Free float refers to the portion of shares available for trading on the market.

According to NGX rules (Rule 12.2.b.4.a & b), for a company to be listed on the Premium Board, it must have a minimum free float of 20% of its issued share capital, or the value of its free float must be equal to or above N40 billion.

Stocks that don’t meet these requirements tend to have low liquidity and greater price manipulation risks, making them pump-and-dump stocks.

An abnormal spike in trading volume with no fundamental news to justify it is a key sign of a pump-and-dump stock.

Stocks with low liquidity are particularly vulnerable, as a few large trades can dramatically move the price.

Example: NCR Nigeria has experienced a 519% YtD gain in 2025, compared to 26% YtD in 2024. However, it has also seen significant spikes in trading volume:

Despite NCR Nigeria’s compliance with the free float requirement and a financial turnaround, reporting N238 million profit for 9M 2025 (up from a N2.7 billion loss in 2024), these volume surges raise concerns about potential price manipulation.

To detect pump-and-dump stocks, investors should also evaluate whether the company’s market capitalization aligns with its fundamentals.

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.

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

While these stocks may seem appealing due to their low price, they are often more volatile and prone to manipulation.