In any economy there is a financial system that is responsible
for regulating the financial environment of the society determining
the types and use of funds to be issued, source of funds to be put.
The financial system is really made up of two major markets, namely
money and capital stock market. The many market is the market for short
term funds and securities including treasury bills, treasury
certificate negligence of deposits, commercial paper and other funds
of which are less than a year duration.
Thus the aim of the regulating bodies composed of Nigerian
stock exchange commission (SEC) is to promote development of orderly
capital market to have authority over its members (stock broking
firms) to whom it set rules of ethics are made to guide their
professional behaviour in the course of carrying out its functions and
create awareness of the general public. Stocks exist to enable
companies in need of long term financing to sell pieces of the business
stock equity securities in exchange for cash. This is the principal
method of raising business capital other than issuing bonds. When the
stocks of these corporations, which all which corporations must issue,
are owned by the public at large, including both private investors and
institutions, they are said to be publicly held. These publicly held
shares can be easily traded (sold) to other investors in the stock
market and are thus said to be liquid, or readily conversed to
cash. Stock breakage firms usually, serve as intermediaries in the
transactions, buying the new securities at wholesale prices from the
issuer and then reselling them to the investing public at retail
1.1 HISTORICAL DEVELOPMENT OF CASE STUDY IN NIGERIA STOCK EXCHANGE
The dealing members of the Nigeria stock exchange are
institutions who are licensed by the exchange as stockbrokers to buy
and sell securities quoted on the exchange on behalf of the investing
In 1960, Nigeria stock Exchange was established with branch in
Kaduna in 1978. Prior to the establishment of the Nigeria stock
exchange the were not equipped enough with the information of stock
broking and its importance to an individual, groups, organizations and
global economic development.
In essence the awareness was low but from 1936 to date a
considerable number of stock broking firms sprang up in Nigeria and in
Kaduna particularly the first stock broking firm served as an eye
opener to investors and the potential ones, with a highly experienced
board and a crop of seasoned and dedicated professionals positioned
to tackle the challenges of this new millennium. The branch is
situated in Kaduna to exploit the immense untapped natural resources
and economic potentials of the country in general.
There are today 226 dealing members of the Nigeria stock
exchange. Many of them are affiliates of bank and other reportable
financials institutions. Dealing members of Nigeria stock exchange
can now accommodate foreign shareholders in their equity capital or go
into any form of partnership with foreign stock brokerage firms.
Application from foreign stock brokers as members of the
nigeran stock exchange can now be enter anted within the rules and
regulations of the inorganic stock exhcnage, as well as registration
with securities and exchange commission and corporate afiars
commission following the abrogation of the exchange control Act 1962 and
Nigeria promotion Decree of 1982 as stated in the Nigerian stock
exchange fact exchange book 2004 page 334.
Finally, the existence of stock broking firms as members of
Nigeria stock exchange has helped to create a wealthy tomorrow for
clients and increase the wealth of shareholders and job creation for
1.2 STATEMENT OF PROBLEM.
Capital market are generally expected to produce the institutional
arrangement through which funds from the surplus sector of the
economy. The allocation of funds are mainly for industrial, commercial
and agricultural development. The capital market growth rate is very
slow and not developing to meet the international standard. There is
lack of awareness on the part of the public and potential investors.
Poor management for the operation and affairs of a business is
one the major factors leading to incompetence, inefficiency and
dishonesty in managing organization in Nigeria and in the global which
has not been in the best interest of the shareholders and the
general public. However, the need in that over-centralization of the
stock exchange which might not bring the benefit of market operation
nearer to a greater section of the country’s citizenry and this will
not enhance the particularly of the market function.
Dishonesty from both the stock broking firms and the investors
are among the general problems facing stock shares investment in the
country and the world at large. However, the need in that of over
centralization of stock exchange which might not bring the benefit of
market operation nearer to a greater section of the country
citizenry and this will not enhance the performance of the market
1.3 HYPOTHESIS TESTED
Hypothesis is a tentative proposition suggested as a solution to a
problem or an explanation of phenomenon. It is also a set of
generalized statement concerning the problem under study.
The formulation of which led to the structuring of
questionnaires to assess the validity of the hypothesis by sampling
various of stock brokers and customers of firms in Kaduna stock
The hypothesis is given below (1) Ho that there are inefficient
stock marketing services from stock broking firms to the development
of a meaningful economy (2) Hi that there are efficient stock
marketing services from stock broking firms to the development of a
1.4 AIMS AND OBJECTIVES OF THE STUDY
The aim of this research is to undertake incentive investigation
and to highlight the role stock broking firms have played in the
development of Nigerian economy. To determine whether or not there are
lapses in their contributions to the economy growth, however, in the
event of any lapses suggestion which be made. The primary objectives of
the research are to a basis for contribution to the development of
Nigerian economy. And to provide a material for further studies.
1.5 SIGNIFICANCE OF THE STUDY
The significance of this study less in the benefit that the
findings would provide to any individual group and organizations.
Considering the importance of capital markets in the development of
the Nigerian economy and the role of stock broking firms and both the
Nigerian stock exchange commission in regulation the operational
activities in the market, this research, this research work is intended
to bring to line light the contribution of the bodies to assist the
capital markets for it to achieve the desire optimum results. Also this
study is in practical fulfillment for the award of diploma in
1.6 SCOPE AND LIMITATIONS OF THE STUDY
Due to financial constraints and limited time at the researchers
disposal, the researcher should limit this study in the following
- Buying and selling of shares
- Portfolio management
- The regulatory bodies i.e. Nigerian stock exchange and securities and exchange commission.
- The functions of stock broking firms
1.7 DEFINITIONS OF TERMS
Securities: these are stock and share that are traded in stock exhcnage market.
Portfolio: The adimixture of shares and bonds laid by an individual or institutions.
Regulation: Transaction on the exchange
are regulated by the Nigerian stock exchange as a self regulatory
organization (SRO), and the securities and exchange commission (SEC)
which administers the investment and securities Act 1999.
Pricing: prices of new issues are
determines by issuing houses/stock brokers which on the secondary
market prices are made stock broker only.
Intermediaries: the intermediaries are
the financial institutions and dealers that facilitates the borrowing
and lending of short term money.
Bond: Government stick/bonds are long
dated loans stocks, issued by the federal government of Nigeria and
state governments, the federal government e.g. treasury bill are
usually regarded as gilt-edge securities with no attendant risks.
Because of the superior risk rating, their yields are usually lower
than other similar securities.
Preference Stock: Stock on which dividend payment must be made before profits are distributed to holders of ordinary stock.
Dividend: Payment of share of profit,
to shareholders in a business company, or assets to creditors (e.g. of
an investment company) or to a policy holder in a mutual
insurance company, to pa a dividend of 10 percent, dividend warrant,
order on a bank to pay a dividend.
Bonus: An extra dividend to stock holders of a shareholders.
Brokerage: Brokers commission for services.
Equity stock: ordinary stocks and shares not bearing fixed interest.
Capital gains: when a stock is
purchased at a given price. Then subsequently at a higher price, the
resultant profit is known as a capital gain.
Speculative activity: trying for such “buy low, Sell high” profits over a short time span known as short term trading.
: When stocks that have been held for more than a year are sold at a profit.