INTRODUCTION
The capital
market is a media for the mobilization and utilization of long term funds for
development. The
instruments traded in the market include government securities, corporate bonds
and share s (stocks) and mortgage loans. The market consists of an inner capital market (Market for
new securities ) and the outer capital market (not directly
concerned with the issue of new
securities but engaged in the business
of long term borrowing and lending upon which the issued of new securities
depends . the capital market embraced
therefore both the new issues (primary ) market and the secondary
(Seasonal securities) market.
Participants
in the Nigerian capital market include the Nigerian stock exchange (NSE),
discount houses, development banks,
investment banks,
building societies, stock broking firms, insurance and pension organizations, quoted companies, the government,
individual and the Nigerian
securities and exchange commission
(NSEC).
The Nigerian
Stock Exchange Market (NSE): A stock exchange
is a highly organized market for dealing
in stocks and shares. Through the stock exchange, business concerns
can raise the massive financial capital by selling shares and debentures. The
memorandum of association of the stock exchange in Nigeria included the
following objective.
a.
To provide facilities for trading in securities
and supervise such trading activities.
b.
Facilitate the flow of
long term funds into commerce
and industry
c.
Maintain fair prices for
securities
However, the
Nigerian stock exchange (NSE) has branches in Kaduna, Abuja and Port harcourt
which are fully operational. business
transactions handled by the stock
exchange include those involving fixed
interest securities (Bonds ),
private debentures and
issues of shares. Also, the
members of the stock exchange include:
i.
Stock brokers agents, buying and selling stocks on
behalf of clients
ii.
Jobbers
- buying and selling on their own
account they use their money to buy shares and then sell some
to the members of the public.
Investment
Houses: They are also known as investment trusts.
They sell shares of smaller denominations and help small investors to
participate in share floating.
Issue
House:
These are institutions which
assist the entrepreneurs by providing
immediate resources by purchasing the shares of the issuing
authority en-bloc by the sale of shares
Underwriting
House: To underwrite a share means to
provide guarantee for its sales. So underwriting house, issue houses purchase
entire issue of shares of issuing authorities and guarantee their sales.
Also, like all
stock exchange, the NSE is made up of many market for new issues (primary
market), market for exiting securities (secondary market) and markets for debts
securities and equities. There are in
fact markets for each of the sectors of
the economy.
The
Primary Market: The
market is concerned with the
offering of new issues or the initial
insurance and sales of securities
in the NSE previously quoted companies
can seek expansion funds through
the insurance of supplementary securities in this market while “new’ companies (companies not hitherto quoted on the exchange) will have to go to public before they can issue (sell )
securities to the public through the
market.
The
secondary market: The existing issues or secondary market, in a
strict sense, constitute the stock exchange since it is the mechanism which
gives liquidity to the securities listed on the exchange.
The
Second –Tire Market (SSM): The second tire securities
market was establishment on the 30th April,
1985 to small and medium-sized companies
that were unable to met their requirement of the first
-tire market (NSE) in raising
long- term capital. To
encourage the development of the SSM, stringent conditions for enlistment in the first
–tire market were
relaxed for indigenous
enterprises seeking to
raise funds through the SSM.
The
Nigeria Securities and Exchange
Commission (NSEC): The history of the Nigerian
securities and exchange commission dates
back to 1962 following
the establishment of the capital
issues committee (an Adhoc committee
devoid of any legal status) whose primary
function was to see to the orderly development of the capital market by regulating share prices and determining the timing of issues, the committee functioned essentially as an
advisory body under the umbrella of the central bank
of Nigeria (CBN) , after the
civil war, however given the recognition
of the important role the committee had
played in the successful implementation of the
1972 Nigerian enterprises
promotion Act, the capital issue
Act was promulgated by the Federal Government in 1973, (CIC) vested with the power to determine:
a.
The price
at which shares or debentures of
a company are to be sold to the public either through offer for sale or indirect issues
b.
The timing and amount of sale
c.
In the case of a quoted
company, the prices, amount and time of
any subsequent or supplementary offer of shares or debentures are to be sold.
However, only
public companies (quoted or unquoted) fell within the sphere of the CIC. In
other words, private companies were not
obliged to seek the approval of the CIC
before raising funds through the security market.
In 1976, following
the realization of the need for an apex capital market regulatory body, the financial system
review committee recommended the establishment
of the Securities and Exchange Commission.
The commission was later established
by the securities and exchange
commission Act on 27th September,
1979 (effective retrospectively
from April, 1978) with an
autonomous and legal status.
In addition
to the various arms of capital market mentioned above, it is common knowledge that the country’s
development needs at the federal, state, and local government levels for outstrip her revenue generation
capabilities. However, the finance
and insurance sector is one that
has experienced about the
highest growth in the Nigerian economy especially since
after the introduction of the structural adjustment
programme (SAP) in 1986 . .Hence, this has had positive and far
reaching implications on the activities of the capital market in Nigeria.
AIMS AND OBJECTIVES OF STUDY
The aim of this
project is to enable the student have a practical field exposure to the
analysis and presentation involved in an actual corporate environment, and
various government organizations.
However, the
objectives of the study include among others the following:
a.
The depth of the market
b.
The role of the Nigeria
stock exchange
c.
The number of companies and stock
broking firms that operates(s)
on the Nigerian stock exchange
d.
The number of deals stuck
daily and consequently on annual
basis on
annual basis on the floor of the Nigerian stock exchanges
e.
Nigeria stock exchange as compared to
those outside the country in terms
of its performance(s)
SCOPE OF
THE STUDY
The scope of
the study is to determine the depth of the capital market as it affects
Nigerian economy development for the period of 1993-2002
In addition
to examine the effect of stock broking firms and other companies that
contributes to the Nigeria economy by comparing Nigeria stock exchange outside the
country in terms of performance.
STATEMENT OF THE PROBLEM
The fact about the capital market still remains
that it enable institutions in
the economy that are in need of medium
to long term funds for the acquisition of fixed assets and other long term projects to obtain such fund . Also,
capital market provides a mechanism through which long term loan and
investments can be liquidated. But,
how the
above affect and generate growth
in the developing and deregulated economy
like Nigeria pose a lot of question which include the following:
a.
What is the depth of the
Nigerian capital market?
b.
What is the role of the
Nigerian capital market as its affect economic development in Nigeria?
c.
How can the Nigerian capital
market be made to be more efficient and
effective?
d.
What are the problems of the
Nigerian capital market?
e.
Compare Nigeria capital market vis-Ã -vis other market outside the country in terms of its
performance
SIGNIFICANCE
OF THE STUDY
The study will help in suggesting ways the Nigerian capital market can equip itself to face l the
challenges of the future thereby taking
its rightful position
as a major wheel
in the Nigerian
economic prosperity and
stability
The study
could be great significance to the accountancy
students, capital market operations, non-banks, banks, public, state and
federal government respectively.
RESEARCH
HYPOTHESIS
The research
hypothesis adopted in this study is regression analysis among others, which is
in line with the economics theory that postulated that gross domestic product (GDP), is a positive function of the value of
transaction in the capital market hence,
we have:
Ho (null Hypothesis):
The Value of Transaction (VOT) has an impact on the Gross Domestic Product (GDP)
In addition,
efforts were made to examine the effect
of value of money supply as it affect the list l of quoted companies
This implies
Ho (null Hypothesis): the value of money
supply does not have any impact in the list of quoted companies
HI (Alternative hypothesis):
The value of money supply has an impact in the list of quoted companies.
METHODOLOGY OF THE STUDY
The
researcher generated date for the study form secondary sources. These are data
taken from administrative sources such
as journals, magazines, official
documents and so on.
It is
important to our reader that secondary sources are known as indirect sources of
data collection quick information, save
time and less expensive unlike personal
interview. But, the information is less accurate, less detailed and contain less
information.
Despite these short comings, efforts were
made for the information in this project to be more accurate by posing probing
and further question to the officer(s) in charge of the information during
collection respectively
In the
light of the above, this project makes use
of secondary data which was compiled
from the records, journal published by bank
and other institution like Nigerian
Stock Exchange (NSE), Central Bank of Nigeria (CBN),
federal office of statistic(FOS)
and Annals of Banks
DEFINITION OF TERMS
In order to put the message across all my
readers, some terms and concept use has to be defined. Stock market price: this
price represents the consensus view of stock brokers through bidding and offer.
Capital
market: It is the complex of institutions and
mechanisms through which intermediate term, grade and long term funds are
pooled and instruments already outstanding are
transferred. (Dargall and Gaumnitz (1975)
C.B.N:
Central Bank of Nigeria
C.I.C:
Capital Issue Commission
S.S.M:
The Second -Tier Securities Market
N.S.E: the Nigeria
stock exchange
N.S.E.C:
Nigerian Securities and Exchange
Commission
F.E.M: Foreign Exchange Market
E.C.S: Electronic Contributor System
GDP: Gross
Domestic Product
IFC’S:
International Finance Corporation
SMES: Nigeria Small and Medium Scale
Enterprise