CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF
THE STUDY
Prior to 1977, there was no stock exchange inNigeriaapart
from theLagosstock exchange which was not centralized. Also, before
theLagosstock exchange cam into being (existence),Nigeriawas not having any
such market before independence in 1960. Rather, like many developing countries
in the 1950s and 1960s, the financial system comprised foreign owned commercial
banks which provided mainly short-term loans, commercial and trade credit.
As stated above, the Nigeriastock exchange did not just come
into existence, but with gradual process (development) of the Nigerian
financial system which has been one of the greatest achievements of the Central
Bank of Nigeria (CBN) since its establishment on July 2nd, 1959.
This system consists primarily of the money market (for
short-term loans) and the capital market (for long-term loans) and (medium-term
loans). The Nigerian stock exchange (previously known as theLagosstock
exchange) is the pivot or the fulcrum around which the entire capital market
operates or rotates. It is the market for the sale and purchase of securities
(that is stocks and shares). A market in which individuals and institutions
(firms) who have surplus funds to their immediate requirement cam employ them
profitably.
As this study is geared towards the Nigeria Stock Exchange
(NSE) market. The problems militating against it will be highlightened and
solution being sourced for, to curtain these problems. Mean by which this
market can prosper will be looked into as well and recommendations being made
to look at the various problems militating against the market.
As mentioned earlier that the study is geared towards the
problems and prospects ofNigeriastock exchange, the emphasis of the study will
be laid on Nigeria Capital Market (NCM). As advocated earlier on the
establishment of theNigeriastock exchange, it can then be said that the Nigeria
Capital Market (NCM) has been in existence before the establishment of the
Nigeria Stock Exchange (NSE). This is so because, prior to 1977, there was no
market of such rather, there wasLagosstock exchange that controls the money and
capital market.
Although, theLagosstock exchange was in operation, it was
not centralized as the stock exchange in any nation would be. Because of this,
a financial system review panel was setup in 1977 and with the recommendations
of this panel, the federal military government decided to change the name of
the stock exchange from Lagos stock exchange to its present name; the Nigeria
Stock Exchange and to decentralized its location and operations with branches
now in Port-Harcourt, Asaba, Kaduna, Ibadan etc. Its head office is still
situated inLagos.
It is worthy to note that since the establishment of
theLagosstock exchange in 1961 and the subsequent changing of its name
toNigeriastock exchange in 1977, it has provided a major local investment
out-let for Nigerian investors.
1.2 STATEMENT OF PROBLEMS
The problems of this study were to analyze the nooks and
cranny of theNigeriastock exchange. That is the areas in which Nigeria stock
exchange is erring in the location of securities and to explain whether firms
get needed attention in the quotation of their shares (either small or big
firms).
1.3 PURPOSE OF THE
STUDY
Nigeriaat independence in 1960 had no capital market as in
other countries. This is because, the financial system in Nigeria as at then
comprise of foreign owned commercial banks which provided mainly short-term
loans, commercial and trade credit. For this reason, there were many hindrances
for the economy which in one way or the other hinders the development of the
country in general and theNigeriastock exchange market in particular.
This study therefore, attempt to find out whether
decentralizing the stock exchange has brought about any meaningful impact in
the economic development of the country. Also, whether efficient allocation and
transfer of securities take place in the Nigerian stock exchange (that is the
Nigerian capital market). The circumstances surrounding the establishment of
the Second-tier Securities Market (SSM) will also be highlighted in the study.
The study will also be geared towards how improvement can be made to achieve
efficiency in theNigeriastock exchange (Nigeriacapital market). The study will
give an insight to the contributions and achievement of theNigeriastock
exchange since its inception.
1.4 RESEARCH
QUESTION
(i) What
growth,Nigeriastock exchange has contributed to industrial development depend
on capital market?
(ii) What is
the relationship betweenNigeriastock exchange (NSE) and industries?
(iii)
DoNigeriastock exchange (NSE) make assistant of long-term loans to
industrial development?
(iv)
WhyNigeriastock exchange (NSE) control the quotation of share and stock
of companies, government and their agencies?
1.5 SCOPE OF THE STUDY
This study will geared toward the effectiveness and
efficiency of capital market, stock exchange will stand as assistance for a
better position to benefit from this study as it tends to reveal over-fast
growing financing of firms. Therefore for this study will give enlightment to
the achievement ofNigeriastock exchange since its conception
1.6 SIGNIFICANCE OF
THE STUDY
This study is not being put in place for the consumption
purpose of the students alone, but to the generality of the entire citizen of
the country. That is, it is not only the students that will benefit from this
study but as many that has to do with the financial system of the country.
Therefore, it can rightly be stated that the servers
(private individuals), the industries (industrialists) as well as the
government will benefit from this study. The capital market, stock exchange
market will equally stand a better position to benefit from this study as it
tends to reveal areas where the efficient allocation of securities is not
measuring up with the ever fast growing financial requirement of firms.
1.7 LIMITATION OF
THE STUDY
The study is focused on public limited companies (Plcs) and
limited liabilities company (Ltd).
The study is geared toward the areas of the fact, control
the quotation of share and stock of public limited companies (Plcs) and limited
liabilities companies (Ltd)
1.8 DEFINITION OF
TERMS
Capital market: This is a financial market were medium and
long-term loans are source for.
Money market: Financial institutions were short-term loans
are obtained.
Stock exchange: An organised market where large and small
investors alike buy and sell through stockbrokers, the stock and share of
companies and government agencies.
Securities: These are stocks and shares traded in the
capital market.
Shares: These represent ownership interest in a business.
Stocks: These are shares of more than one unit; that is,
shares in bundle.
Plc: This means public limited companies
Ltd: This means limited liabilities companies
Second-tier securities market: Market for small scale and
medium sized industries.
Securities and Exchange Commission (SEC): This is the
highest organisation that regulates the nations stock exchange.