THE CAPITAL MARKET AS IT AFFECTS NIGERIAN ECONOMY DEVELOPMENT FOR THE PERIOD OF 1993-2002



CHAPTER ONE
The capital market is a market 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 Portharcourt 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 .
1.2   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 sock 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) 
1.3  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 contribute  to the Nigeria economy by comparing Nigeria  stock  exchange outside the  country in terms of performance
1.4 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-à-vis other  market outside the country in terms of its performance
1.5 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.
1.6  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.
1.7   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
1.8 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   


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