Have you ever wondered what people mean when they say they ‘own equity in a company’? If you’ve nodded along without truly understanding what they meant, it’s perfectly understandable.

You see, equity is one of those financial buzzwords that gets thrown around a lot – especially these days where conversations around building wealth, investing smartly, and owning businesses are becoming more common. So, what does it really mean, and how does it actually work?

Let’s break it down.

Equity in Simple Terms

In its simplest form, equity represents ownership. It’s the difference between what you own and what you owe. Think of it as your actual stake in an asset once all debts tied to that asset are subtracted. 

Let’s say you start a small fashion business and you put in ₦1,000,000 of your own money. That money gives you 100% equity in the business. You don’t owe anyone, and you own the whole thing. Now, if a friend invests ₦500,000 in the business, and you agree to give them 33% of the business in return, your equity drops to 67%, and your friend’s equity becomes 33%.

Equity = Ownership. 

But equity doesn’t just apply to businesses. It shows up in multiple areas of finance—stocks, businesses, personal net worth, homes, and more.

Types of Equity

Here are the main types of equity you’ll come across:

1. Equity in a Company (Shares)

This is the most common place people encounter the term. 

If you own shares or stocks in a company—whether it’s GTBank, Dangote Cement, or a startup—you own a portion of that company. The more shares you own, the more equity you have.

In Nigeria, you can buy shares of publicly listed companies on the Nigerian Stock Exchange (NGX). When these companies do well, you benefit through dividends or an increase in share price.

Like we touched on earlier, startups often give equity in exchange for early investment or work. In some cases, if you join a startup as one of the first employees, you might receive equity compensation, meaning you get a percentage of ownership in the business. If the startup becomes successful, that small equity could be worth millions.

Let’s bring it home with an example.

Tunde, a software developer in Lagos, decides to invest ₦2 million in a friend’s agritech startup. The startup is valued at ₦10 million, and in return for his money, Tunde receives 20% equity.

If the startup grows and is later valued at ₦100 million, Tunde’s 20% equity is now worth ₦20 million— a 10x return on his original investment. Understanding how to spot good investments can help you make better equity decisions like Tunde.

But if the business fails, that same equity becomes worthless. That’s the risk and reward of equity ownership.

3. Home Equity

This is another area where equity works. Let’s say you own a house in Lekki or GRA, and it’s worth ₦50 million, but you still owe ₦20 million on the mortgage; your equity in the home becomes ₦30 million. It’s the value of what you truly own after debts are removed.

Home equity grows when:

• You pay down your mortgage.

• Your property increases in value.

Final Thoughts

Equity might sound like one of those financial terms, but it’s actually a powerful concept that touches nearly every part of your financial life. Whether you’re buying a home, investing in stocks, or building a business, understanding equity helps you make smarter decisions with your money. Here’s a blueprint to start building wealth using concepts like equity.

And here’s the amazing part: equity can be a great wealth-building engine. It’s how regular people grow from “getting by” to building real, long-term financial security.

So the next time someone says, “I’ve got equity in this or that,” you won’t just nod—you’ll know exactly what they mean.

And who knows? You might even be the one dropping the equity wisdom next time.

Bravewood provides Nigerian professionals with low-risk, high-return investment products, licensed by the Central Bank of Nigeria.