Understanding Money, Investing, and the Capital Market – Brenxa
Understanding Money, Investing, and How the Capital Market Works
What is money, and how can you use it to build wealth? Learn the fundamentals of saving, investing, capital allocation, and how investors earn returns.
Chris Awoke · 30 October 2026 · 10-minute read
I'm starting a series to share what I'm learning about the capital market and building wealth through investing.
In each article, I'll share key lessons, action points, and practical examples that help you understand the concepts and see how they apply to your own life.
The goal is to help you build a solid understanding of money: how to make it, keep it, grow it, and use it to make an impact.
Let's get started.
1. What Is Money?
When you hear the word money, what comes to mind?
For most people, it's the cash in their pockets or the balance in their bank accounts.
But money serves three important functions:
Medium of exchange: Money allows us to pay for goods and services without having to exchange one product directly for another.
Unit of account: Money provides a common way to measure and compare the value of goods and services.
Store of value: Money allows us to preserve purchasing power for future use, although inflation can reduce how much our money buys over time.
Think about it this way. If you keep ₦100,000 in your bank account today, you may still have ₦100,000 next year. However, if prices increase, that same amount may buy you less than it does today.
Your money hasn't necessarily reduced in amount, but its purchasing power may have declined.
This is one reason understanding how to manage and grow money matters.
2. How Do People Make Money?
At its simplest, people make money by providing value that others are willing to pay for.
Written by
Chris Awoke
Chris Awoke is the co-founder and CEO of Wikrena Limited, a data education and AI company that builds the skills and systems African professionals and organisations need to make better decisions. Brenxa is his personal decision intelligence project, built to help him think through important decisions with the structured rigour of the world’s best thinkers.
You could offer a service, sell a product, work for an employer, or build a business.
For example, a graphic designer earns money by helping a business communicate visually. A farmer earns money by producing food that people need. A software company earns money by building products that solve problems.
In each case, money is exchanged for something of value.
But making money is only one part of the equation. What you do with the money you earn also matters.
This brings us to investing.
3. The Fundamental Problem Investing Helps Solve
Let's say you earn ₦300,000 every month.
You spend some of it on food, transportation, housing, family responsibilities, and other expenses. After everything, you have ₦50,000 left.
What do you do with that money?
You could:
Keep it in a savings account.
Hold it as cash.
Buy shares in a company.
Invest in a government security.
Put it into a diversified investment fund.
Use it to expand a business.
Each option has different benefits, risks, and potential outcomes.
The question is this:
How do you decide where to put the money you have today to meet your needs, protect your future, and potentially build more wealth?
This is a capital allocation problem.
What is capital allocation?
Capital allocation is the process of deciding how to use available money to achieve the best possible outcome relative to your goals, risks, and alternatives.
Let's bring it closer to home.
If you have ₦50,000 left after your monthly expenses, putting it into an investment may seem like the obvious choice. But what if you have no emergency savings and might need that money next month?
Investing all of it in shares may not be the best decision because share prices can fall, and you may need to sell at a loss to access your money.
On the other hand, if you already have adequate emergency savings and can afford to leave some money invested for several years, investing may be worth considering.
The point is that good capital allocation isn't simply about finding somewhere to put your money. It's about choosing where the money should go based on what you need it to achieve.
Businesses face the same problem. They must decide whether to hire more employees, buy equipment, launch a new product, or invest in technology.
Individuals and businesses both have limited resources. The challenge is deciding how to use those resources wisely.
4. Saving vs. Investing
Saving and investing are related, but they serve different purposes.
Saving means setting money aside for future use, generally prioritizing the preservation of your money and easy access to it.
For example, you might save towards your rent, an emergency, or a purchase you plan to make in the next few months.
Investing means committing money to an asset with the expectation of earning a return over time, while accepting the possibility of losing some or all of the money invested.
For example, you might buy shares in a company because you expect the business to grow and the value of your shares to increase over time.
The key difference is their primary purpose.
Saving helps you preserve money for future needs. Investing gives your money an opportunity to grow, but that opportunity comes with risk.
Neither is automatically better than the other. What matters is understanding what you need the money for and choosing accordingly.
5. Why Does the Capital Market Exist?
Let's look at investing from another angle.
Imagine a Nigerian company wants to build a new factory. The factory will cost ₦10 billion, but the company doesn't have all that money available.
Where can it get the money?
It could borrow from a bank, issue bonds, or sell shares to investors.
Each option provides a way to raise capital, although the terms and obligations differ.
Now imagine you have ₦100,000 that you don't need immediately. You want to put it to work rather than leave it sitting in your bank account.
The company needs capital. You have capital that you may be willing to invest.
The capital market helps connect businesses and governments that need long-term funding with investors who have money to invest.
It does this through financial instruments such as shares and bonds.
Shares represent ownership in a company, while bonds are debt instruments through which an issuer borrows money and agrees to repay it under specified terms.
Why does it matter where you buy shares?
There is an important distinction to understand.
When a company issues new shares, the money raised generally goes to the company, subject to the terms of the offering.
However, when you buy existing shares from another investor on the stock exchange, your money generally goes to that investor, not directly to the company.
Why does this second transaction matter?
Imagine you buy shares today but later need your money for another purpose. You may be able to sell those shares to another investor.
This ability to buy and sell existing securities is called liquidity.
A functioning secondary market makes it easier for investors to exit their investments. This can make them more willing to invest in the first place, helping companies raise capital when they issue new securities.
This is one reason capital markets play an important role in the economy.
6. Three Ways an Investment in Shares Can Make You Money
Let's use a hypothetical listed company called ABC Plc.
Suppose you buy 100 shares at ₦100 each.
Your initial investment is:
100 shares × ₦100 = ₦10,000
There are three important concepts to understand.
A. Capital appreciation
Capital appreciation occurs when the value of an investment increases.
Suppose six months later, ABC Plc's share price rises from ₦100 to ₦130.
Your 100 shares are now worth:
100 shares × ₦130 = ₦13,000
Your gain is:
₦13,000 − ₦10,000 = ₦3,000
That's a 30% increase in the value of your investment, before costs and taxes.
However, there's something important to note.
If you haven't sold your shares, the ₦3,000 gain is an unrealised gain. It reflects the increase in the market value of your shares, but you haven't converted that gain into cash through a sale.
If the share price falls before you sell, your gain could reduce or disappear.
B. Dividends
A dividend is a distribution of a company's profits or other distributable reserves to its shareholders.
Companies may pay dividends to share part of their earnings with investors. However, they are not obliged to pay dividends every year simply because you own their shares.
Let's return to ABC Plc.
Suppose the company declares a dividend of ₦5 per share, and you qualify to receive it.
Your dividend would be:
100 shares × ₦5 = ₦500
You would receive ₦500 in dividends, subject to any applicable withholding tax.
This is one way investors can earn money from shares without selling them.
However, dividends are not guaranteed. A company may reduce, suspend, or decide not to pay dividends, depending on its circumstances and decisions.
C. Total return
Total return measures the overall gain or loss on an investment over a period, including changes in its value and any income received from it.
Let's assume you eventually sell all 100 shares of ABC Plc at ₦130 each and have received the ₦500 dividend.
This example assumes the dividend was received in addition to the sale proceeds and that there were no transaction costs or taxes.
Notice that the share price increased by 30%, but the total return was 35% because the dividend added another ₦500 to the proceeds.
This is why looking at share price movements alone doesn't tell you the full story of an investment's performance.
At the same time, a company paying a high dividend doesn't automatically make its shares a good investment. You also need to consider the company's financial health, the price you're paying, its prospects, and the risks involved.
Key Lessons
Here are the main things to take away from this article:
Money serves as a medium of exchange, a unit of account, and a store of value. However, inflation can reduce its purchasing power over time.
Making money is important, but deciding how to use it is equally important.
Capital allocation is about deciding where to put available money based on your goals, risks, and alternatives.
Saving and investing serve different purposes. Saving generally prioritizes preservation and accessibility, while investing involves taking risks in pursuit of returns.
Capital markets connect businesses and governments seeking funding with investors willing to provide capital.
Investors can earn returns from shares through capital appreciation and dividends. Total return accounts for both, along with other relevant components of investment performance.
Action Points
Before moving on to the next article, take a moment to apply what you've learnt.
Review your income and expenses. How much do you earn, how much do you spend, and how much do you have left?
Identify your financial priorities. Do you need to build emergency savings, meet an upcoming expense, or invest for a longer-term goal?
Think about capital allocation. If you had ₦50,000 available today, where would you put it, and why? What alternatives would you be giving up by making that choice?
Practice calculating returns. If you invest ₦20,000 in shares and later sell them for ₦24,000, how much is your gain, and what is your percentage return? What happens to your total return if you also receive a dividend of ₦1,000?
Don't just read these concepts. Work through the examples and relate them to your own financial decisions.
The more you understand how money works, the better equipped you'll be to make informed decisions about earning, saving, investing, and building wealth.
I'll see you in the next one.
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