The organization was established in 1992
to provide the capital market with an integrated clearing, depository and
settlement system. It commenced operation on Monday, 14th April,
1997. It was looked on-ling to the Routers Electronic Contributor System (ECS)
through which our market information are disseminated globally.
TYPES OF
SECURITIES `
Securities
are primarily of two types: Debt and Equity
(a)
Debt
instrument are financially claims with an obligation by the issuer to pay
interest at stated internals and to redeem the issue at a future date. The
types available on the Nigerian stock market are divided into two groups.
(a)
federal government development stocks, Bonds
or Gilt Edged
(b)
Industrial
loans, preference stacks and bonds federal government development stocks, bonds
or Gilt edged are usually issued annually. They are long term loans with
maturity ranging between 6-25 years. Industrial loans preferences stocks and
bonds are corporate loan stocks that are standard forms for financing long term
capital requirement. Sometimes there is no need to raise a charge on the assets
of the firms an unsecured loan stock, may be issued if the financial propite of
the firm is sound. At other times, the loan stock may be secured by a floating
charge, specific change or even a general lien. The stock may be specific as to redemption date,
thus the company has a definite number of years to plan the repayment,
usually, there is a sinwing fund made up
of specific periodic, amount set aside
from profits to meet the repayment at maturity, Okereke Onyinke (1984)
Another feature is the tax shield effect
of interest payment. Here, the interest that is paid on the loan stock is
charged against the operating profit and so the cost of interest payment. Her, the interest that
is played on the loan stocks is charged against the operating profit and so the
cost of obtaining the fund is effectively
reduced by the amount of tax sequel the cost of
loan capital is further reduced
when allowance is made for inflation
says Philip Toyin (1983)
Although a company can raise its
level of debts to the maximum of the
directors borrowing powers, Modigliani and Miller (MM) 1958
however suggested that “the
existence of tax advantage does not necessarily mean that corporation should at all times
seek to use the maximum possible amount of
debt in their capital
structure” the limitation of high leverage
are multi-dimensional coming form the
lenders and the exchange in the
process of preserving flexibility and a reduced risk impact .
Equity capital refers to the capital of
the owners of the firms i.e. ordinary shares or common stocks the ownership of a share confers on the holder some
rights including the right
receive notices of meetings. These and other things are stated in the memorandum
and articles of association of the modern company. The ordinary shareholders are entitled to any
surplus of income in the company after the prior rights of creditors have been
satisfied.
Odife
O (1985) noted that equity claims
are viewed as a source of permanent
capital with no contractual payment by
the firm for the company, the flexibility
offered by equity as far as dividend payments, earnings
and cash flows are uncertain, and
its other potentiating are
protection against the
vulnerability which can occur as a result of a rapidly rising
interest when the company’s debt
/equity ratio rises. However the
shareholders experts a specific after tax return from their investment and this is the
minimum return which a company must seek to earn in order to fulfill the
shareholders expectation. In respect of this, the exchange expects management
to run the company in the interest of
the shareholders and to enhance growth in Nigerian economy
In addition to the above, however, economic
development is not achieved in a vacuum, the policy environment must be
conducive and significant financial investment must be made in infrastructures
development, including his construction of access roads, boreholes and
provision of electricity
In line
with the above, government of Nigeria had taken a bold step
by abrogating the restrictive
exchange control act 1962 and the Nigerian enterprise
promotion decree 1989, and its
replacement in 1995 with
foreign exchange (monitoring and miscellaneous provision) decree 1995
and the Nigerian investment
promotion commission decree
1995 respectively, we are beginning to notice an increasingly
active foreign presence in our market
process
Conclusively, there are indications that this
trend will continue, all things being equal. Finally, many quoted companies
have raised money in recent years, through rights and public offers. The Nigerian
stock exchange has also been providing facilities for indigenous companies and
foreign to raise long term capital to finance their expansion and modernization.
Typical example is the recent pronouncement by the central bank of Nigeria to banks
to increase their capital base to the tone of N25 billion by December, 2004.