THE ROLE OF CAPITAL MARKET IN THE DEVELOPMENT OF SMALL SCALE BUSINESSES IN NIGERIA
TABLE OF CONTENTS
1.1 Background to the Study
1.2 Significance of the Study
1.3 Statement of the Problems
1.4 Objectives of the Study
1.5 Research Hypotheses
1.6 Research Questions
1.7 Method of Data Collections
1.8 Method of Data Analysis
1.9 Scope and Limitation of the Study
1.10 Definition of Terms
1.11 Brief History Of Cadbury Nigeria Plc (Case Study)
2.2 History of the Nigerian Capital Market
2.3 Structure of the Nigeria Capital Market
2.4 Meaning of Capital Market:
2.5 Importance and Functions of Capital Market
2.6 Classification of Capital Market
2.7 Securities and Exchange Commission
2.8 The Control over the Nigeria Stock Exchange by the Commission
2.9 Functions of the Nigeria Securities and Exchange Commission
2.10 The Nigerian Stock Exchange (Nse)
2.10.1Clearing, Delivering and Settlement:
2.11 Function of the Nigerian Stock Exchange
2.11.1Membership of Nigerian Stock Exchange
2.11.2The Market Levels of Nigeria Stock Exchange
2.11.3Techniques of Going Public or Bringing Securities to the Stock Exchange (SSM)
2.11.4Benefits of Public Quotation
2.12 Definitions of Small Scale Businesses
2.13 Small Scale Businesses in Nigeria
2.14 Operational Definition of Small Scale Businesses
2.15 Social Desirable Effects of Small Scale Businesses
2.15.1 Socio – Economic Contribution of Small Business Firms to Development Process
2.16 Problems of Small Scale Business
2.17 Involvement of Small Scale Business In Nigerian Stock Exchange (NSE)
2.18 Relevance of Nigerian Stock Exchange to Small Scale Businesses
3.2 Research Design
3.3 Population of the Study
3.4 Sample and Sampling Techniques
3.5 Method of Data Collection
3.6 Method of Data Analysis
3.7 Scope and Limitation to the Study
3.8 Validity and Reliability of Data Collection Instruments.
DATA ANALYSIS AND INTERPRETATION
4.2 Bio – Statistical Data of Cadbury Nigeria Plc
4.3 Test of Hypotheses
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 Summary of Findings
5.4 Suggestion for Further Studies
1.1 BACKGROUND TO THE STUDY
For any economy to remain afloat in its
bid for survival in today’s globalization, deregulation and
liberalization of markets, it needs to have an efficient business
financial to direct the allocation of its resources, capital markets and
institutions, of which the development is an integral part of paramount
importance in a dynamic economy as Nigeria.
Capital market is a market for
securities (Equity or debt), where business enterprises and government
can raise long-term funds. It is also defined as a market in which money
is provided for period of longer than a year, as the raising of short
term funds take place on market e.g. Money market. The capital market
includes stock market (equity securities and bond market, debt).
Securities and Exchange Commission (SEC) oversees the capital market in
their designated jurisdiction to ensure the investors are protected
against fraud among other duties.
Nigeria is still grapping with the
problems of low earnings with its attendant balance of payment problems,
weak technological industries base resulting in massive importation of
machinery and raw material, high rate of unemployment.
Actually, the economic turn down which started in 1978 is very much with us. The decline in Gross Domestic Product (GDP) from
N26.9 billion in 1984 to N3.6
billion in 1985 marked the beginning of importation of the world’s cast
away goods into our country making Nigeria a dumping ground.
Small scale business is the only way to boost export and redress the gloomy of balance of payment deficit.
Nigeria government recognized this fact
in 1971; small scale industries credited scheme was introduced and
followed up with the establishment of Nigeria Bank for commerce and
industry in 1978. The Central Bank of Nigeria also introduced its small
Despite all these measure, it is still
obvious that small scale business problem is funding. And the actual
fact, the growth of the small scale business still centre on proper
funding which is missing today.
Capital market is seems as an
alternative way of raising funds. The enhancement of an advance and
vibrant capital market can lead to utilization of financial resources.
The developed capital market also provides access to the foreign capital
for domestic industry. In this way, capital market plays a constructive
role in the over-all development of an economy generally.
1.2 SIGNIFICANCE OF THE STUDY
Capital market has a great interest to
the researcher which will help in increasing g my knowledge and skills.
Also, this sector of the economy is one of the important factors and
also plays a significant role in the natural economy.
A developed, dynamic and vibrant capital market can immensely contribute for speedy and economic growth and development.
1.3 STATEMENT OF THE PROBLEMS
The Nigeria small scale business is
faced with the problems of inadequate and low working capital. This
aspect of small has really slowly down their growth and development of
small scale business to be at a small-pace consequently.
Mostly they depend mainly on self
finance (saving and borrowing from friends and family) and loan from
willing providers (bank) who are always reluctant of providing loans for
them due to weak financial background or history. Small scale
businesses in Nigeria also face the challenges of concentrating risk in
the hand of the owner. Thus, such risk can be spread by bringing their
business to the stock exchange.
The capital market is also having a fair
share of the problems because of the in adequate supply of securities
and fall in stock exchange market. Most companies especially the
indigenous ones are still reluctant in raising funds through the capital
1.4 OBJECTIVES OF THE STUDY
- To inquire the development of the Nigeria Capital Market in the small scale businesses
- To determine the trend/development of Capital Market
- To inquire the factors that solely determines the Capital Market.
- To make appropriate recommendation on the development of the Nigerian Capital Market.
1.5 RESEARCH HYPOTHESES
The following will be formulated and tested for the study.
Ho: Small Scale businesses methods are not used in the Nigerian Capital Market for the development of the firm
Hi: Small Scale businesses methods are used in the Nigerian Capital Market for the development of the firm?
Ho: Shareholders do not place reliance on small scale business in the Capital Market
Hi: Shareholders do place reliance on small scale business in the Capital Market
Note: H0 = NULL HYPOTHESIS
Hi = ALTERNATIVE HYPOTHESIS
1.6 RESEARCH QUESTIONS
This research work will attempt to answer the following questions:
- How does the development of small scale business related to Capital Market?
- How relevant are the method of small scale business used in the Nigeria Capital Market?
- To what extent do shareholders place reliance on small scale business in the Capital Market?
- To what level the role of the capital market motivate the growth and development of the small scale business has been met?
1.7 METHOD OF DATA COLLECTIONS
Both primary and secondary source of data collection will be applicable for this study.
This data will be obtained through interview investigation and questionnaires and face to face discussion
This data will be obtained mainly from
the literature review or the ready made materials like written down
documents which includes textbooks, bulletins and write-up by experts in
this field and also from the internet.
1.8 METHOD OF DATA ANALYSIS
This chapter aim at breaking down fully
how the data collection are used in the research work gathered, the
data gathered is not an end itself rather it stands to be analyzed into
meaningful and use information. The purpose of this chapter is to
analyze an evaluation.
The statistical tool to be used is the chi square (x2)
technique. This will enable the following to be formed and its validity
verified by presentation of findings to test the two hypotheses, stated
above will be explained better in chapter four.
1.9 SCOPE AND LIMITATION OF THE STUDY
The scope of the study will be limited
the role of capital market in the development of small scale business in
Nigeria on the capital market and how the efficient utilization of
available domestic capital resources could evolve positive changes in
As the topic suggest, this study focuses on capital market in the development of small scale business in Nigeria.
1.12 DEFINITION OF TERMS
This is the market for long term capital
i.e. long term financing assets. It is a market where long term
financing assets are traded including preference and common stock
debentures and bonds.
This refers to the new issues market
when a firm issues new security either bonds or common stock, the
securities are sold in primary market since they are new issues. Once
the securities have been sold, any future sales occur in the secondary
market. The primary market also exists in the money market.
This is the market which exists as a
result of future sale of securities which had initially been traded upon
in the primary market.
The Securities Market
This refers to the market where, the
purchase and sale of securities takes place. It has three dimensions
i.e. the capital market, money market, and secondary market.
This is the raising of more funds by
quoted companies through special issues of shares to existing
shareholders of the issuing company. It is typified by the on going
Is a part of stock issued, appointed or
assigned by an in vestment company to purchase or subscriber of its
shares, stock or securities.
A portion of the net profit that has
been officially declared by the board of directors of a company for
distribution to the ordinary shareholders of the company and approved by
them at the company’s general meeting.
This is used to describe the ordinary share capital of a company.
Is a regulated professional broker who
buys and sells share and other securities through market sells shares
and other securities through market make or agency only firms on behalf
This is a stock or bond’s admission to
trading right on the stock exchange based on its size, profitability and
number of shareholders.
The highest bid to buy and the lowest offer to sell a security in a given market and at a particular time.
Is a financial institution such as a
merchant bank which provides its services to launch the shares of new
companies on a stock exchange? It also ensures that the listing of such
issues complies with exchange regulation.
A unit of equity ownership in a company.
Is the price of a single share of a number of a saleable stock of a company.
Is a person who buys share/shares of any
company and by acquiring share or shares in the company becomes one of
the owners of the company.
Representing part of the capital issued
by a company and entitling their holders to a dividend that varies
according to the prosperity of the company to vote at all meeting of
members and to a claim on the assets of the company after the holders to
Is a written document signed on behalf of a company and serves as a legal proof of ownership of the number of shares indicated.
1.13 BRIEF HISTORY OF CADBURY NIGERIA PLC (CASE STUDY)
Cadbury Nigeria commenced operations in
the 1950’s as an enterprise established to source cocoa beans whilst
simultaneously prospecting for opportunities to serve local consumer
markets with their famous Cadbury products. An initial packing operation
established in the early 1960’s grew rapidly into a full-fledged
manufacturing operation. The Company was incorporated as a limited
liability company in January 1965, when the Company’s current 42-hectare
factory was also opened. Its shares were listed on The Exchange on 26
The core business of the Company is in
two categories, namely confectionery and food drinks, which are
manufactured in a dedicated facility within the factory site in Lagos.
The Company has grown to become one of
the leaders in the confectionery and food drinks markets within Nigeria,
with a portfolio of branded offers that are targeted to meet real needs
of consumers. The Company’s quality brands are enjoyed throughout
Nigeria as well as in the Company’s export markets in West Africa. This
rich heritage has been carefully nurtured over the years.
The Company’s lead brand in the food
drinks business is BOURNVITA, which holds a strong market share in the
Nigerian market. In addition, the brand offers nutritional benefits that
help to supplement the dietary intake of consumers. The main brands in
the Company’s confectionery business include TOM TOM and BUTTERMINT, for
sale in Nigeria, and HACKS and AHOMKA GINGER, which are exported to
neighbouring countries. Each brand has grown to become a household name
and each holds a strong market share in their respective segments.
Cadbury Nigeria has a 93% shareholding
in SCPCL, a company located in Ondo State which processes cocoa beans
into cocoa butter and liquor aimed at international markets, as well as
cocoa powder for domestic consumption. The Company’s entire cocoa powder
requirement is sourced from SCPCL.
Following a major strategic review in
2008, the Company has commenced an extensive restructuring exercise to
restore its path to profitable growth. The Company has also identified
significant growth potentials from its core brands, BOURNVITA and
TOMTOM, as they appeal to a very wide spectrum of Nigerian consumers
having been available in the market place for almost years. A review of
the Company’s route to market commenced in 2008, with a thorough
re-appraisal of its existing distributor partnerships and operational
procedures. This has resulted in a strong and rejuvenated distribution
channel with additional partners, a new key account structure and a
growing retail sales team building distribution and display.
Research on Nigerian consumers
consistently endorses the popularity of the Company’s famous brands. In
this regard, the Company is committed to a programme of continuous
improvement and modernisation that has already seen a number of popular
innovations over the last year. This commitment to innovation and
renovation will also be maintained in the future.
The strategy review also focused on
opportunities to improve efficiency and quality of products through a
disciplined approach to international benchmarking and investing in
infrastructure projects. This approach is expected to yield both
productivity benefits as well as provide opportunities to streamline
production processes and align the factory for future growth.