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CAPITAL MARKET STRUCTURE AND
DEVELOPMENT (A
CASE STUDY OF NIGERIA STOCK EXCHANGE NSE)
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The
Nigerian capital market is a long term end of the Nigeria financial system just as
the money market is its short-termed in other words, the capital market
performs for the economy, at the long-term end, the functions which the money
market performs at the short-term end of the spectrum. Thus, while those who
are short of funds and need to borrow for short-term propose borrow from the
money market, those who are short of fund and are desirous of borrowing for the
long-term go to the capital market, those who are short of fund and are desirous of borrowing for the long-term go
to the capital market.
Similarly while those who have funds surplus to their
immediate requirements and wish to lend or invest these funds for short-term
periods do so in the money market, those who have such funds and to lend there
for long periods invest or lend these funds to capital market.
The
regulation of financial markets and the liberation of economies capital flows
in sere veal African countries raise a number of challenging issues. Policy
makers and practitioners are concerned and involved with these issues. A vast
set of issues concerns the setting up and designs of capital market operation
(trading structures). This employs the philosophy of capital market building,
the role of capital market (stock) market in achieving the overall financial
objectives (auctions and dealership) choice for the relative competitiveness of
emerging stock markets, connections between innovative in trading and
regulations world market.
1.2 STATEMENT
OF THE PROBLEM
The Nigerian
stock exchange has undergone a tremendous revolution over the years. After
about 38 years of establishment, the Nigerian stock exchange can be said to
have existed long enough to permit a capital look at its structure and
development. The stock exchange long enough to permit a capital look at its
structure and development. The stock exchange or its establishment was expected
to provide appropriate machinery to facilitate further offering to stock and
shares to the general public in the private sector of the economy, encourage
the investment of savings so soon as it is clear that stocks and shares are
readily available.
However,
any doubt the importance of domestic capital market in ensuring a balanced economic growth should
have been dispelled following the experience of most countries since 1980’s. The
chronic problems of national and corporate indebted have driven the futility of combining too much short term with too little long term equity.
Things have
not been that “smooth” for the Nigerian
capital market as intended as at the time of establishment. There are some
constrains in this sector. It is believed in some quarters of the economy that
the Nigeria
capital market is underdeveloped and has
not shown substantial growth since independence.
And that shares are rarely traded and
prices do not reflect trading features of the listed companies.
Also it is
feared that the Nigeria
capital market has “too many” things
to do that it will be unable to develop it’s market structure effectively and
efficiently.
1.3 OBJECTIVES
OF THE STUDY
This
research project has the objective of
highlighting the Nigeria capital market structure
and development. It looks at the capital market operations, the key participants in the Nigeria capital market and to
analyze the capital market structure in
aiding the development of the Nigerian economy.
In view of
this, capital market operations, the need for stock exhcnage and the Nigerian
capital make and capital structure and development thoroughly dealt with for
analytic purpose.
1.4 SIGNIFICANCE
OF THE STUDY
This study
will educate and expose ignorant business men and student to understand the
operations of the NSE thus, widening the horizon of knowledge of the general
public, especially the operations and policy makers of the capital market
recommendations will in no small measure serve as guide towards improved
performance.
1.5 STATEMENT
OF HYPOTHESIS
Hypothesis
is a conjectural statement of the relationship between two or more variables.
They are always declarative sentence
from and they relate to either generally or specifically variable to variables.
Therefore,
the following invalid and alternative hypothesis could help us to reach a more
reasonable and unbiased end:
Ho: The NSE has not been performing a
significant role in the Nigerian economy development.
Hi: The NSE has been performing a
significant role in the Nigeria
economic development.
1.6 SCOPE
OF THE STUDY
This
project is restricted to the study of Nigerian stock exchange, Lagos as a case study. And covered the period
2005 to 2007.
1.7 DEFINITION
OF KEY TERMS
NSE
– Nigeria
stock exchange
SEC – Securities and exchange
commission
SECURITIES – These
are written on printed financial documents by which the claims of holders in
specialized properly are secured. They could be stock, shares, bonds and debenture
traded on a stock exchange.
STOCK
EXCHANGE – An organized market for securities.
SHARE
HOLDING – The shares owned by specific payer.
ISSUING HOUSE – This is a dealing member that
helps to prepare prospectus to sell new securities offered to the public by
company and government.
EQUITY – Ordinary shares of a company
residual right of ownership over the assets of a firm.
DIVIDEND – part of the profits of a company
appropriated to shareholders.
DEBENTURE – A document, which contains an acknowledgement
of your indebtedness.
JOBBERS – Those who help map up all surplus
stock and release them to the market as
demand permits.
STOCK BROKERS - A firm or person who buys and
sells securities on behalf of investors for a commission called brokerage.
INVESTORS – A person or an institution who
uses his savings or borrowing to buy securities.
BROKERAGE – This is a commission that stock
broker charge for service rendered.
RIGHT ISSUE – these are funds obtained by
issue of share for cash ordinary share holders in proportion to their existing
holdings unless shareholders in general meeting agreed otherwise.
PRICE EARING: - this is the current market
price of share of ratio (PIE) dividend by it’s earning per share. The ratio
indicates investor’s confidence in the stock as well as pay back period of the
stock.
BONUS SHARES SCRIPT – These are
new share made fully paid by the capitalization of reserves and allotted three
of charge to ordinary shareholders in
proportion to their existing holdings.
NSEC – Nigeria Stock Exchange
commission
IPO’s – The pricing of securities
BOND – Securities that has a nominal
value and which entitles it’s holder to the payment of interest by the issuer
at regular intervals until the user
redeems the bond.
BOND HOLDER – the on who owns a bond.
CAPITAL MARKET – A market for the supply of
capital to firms.
ECONOMIC DEVELOPMENT – This is a sustained improvement
in material well development being which we may consider to be reflected in an
increasing flow of goods and services
OFFER FOR SALE - A public
offer of shares in a company which is made by an issuing house and in which the
shares being sold are not new shares but have been sold by the existing share
holders.
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