An Evaluation Of Share And Security Dealing In The Nigeria Capital Market (A Case Study Of Nigeria Stock Exchange Lagos)
1.1 Background of the Study
The important of a capital market of a catalyst of economic growth and development through its ability to mobilize surplus funds for investment purpose has long been realized. It is not surprising. Therefore those countries all over the world strive to build a solid capital market with a verity of financial instruments and dynamic instrument capable of enhancing the “National wealth”.
A capital market exists to assist in the transfer of found from the “excess” units (saver) to the deficit units (investment decision makers) various types of institution traditionally play one role or another in the process of transfer of found. These include the stock exchange, issuing house, stock brokers share registers, share distribution agent (e.g. merchant banks, insurance companies pension found e.t.c.). The Nigeria enterprise promotion boards and the Nigeria security and exchange commission (SFC) although of these institution perform one function on the other in the transferring process; they are not locate in one place. The capital market may therefore be defined as the complex of institutions and mechanizing through which intermediate term funds and long term fund are posted out standing are transferred (Doug all / Governments 1975).
The two regulatory bodies in Nigeria are the securities exchange (NSE). It is important to distinguish the two at this point. While the security exchange commission (NSC) is a statutory body of the apex of the capital market, the Nigeria stock exchange (NSE) is a self regulatory organization (SRO) under the supervision of the security exchange commission but with delegated power to ensure smooth operation of the market. The exchange provides facilities for trading on secondary securities thus creating liquidity and ensuring easy transfer of securities in the market. It also makes rules and regulation to guide the professional conduct of its member.
1.2 Statement of Problem
The experience of our capital market will not be complete without recording its challenges and problem which are historical institution and structure. Perhaps, the most important single challenge the face all those interested in the emergence of an achieve capital market is the problem of importing dept and breath to the market. By breath is meant that the volume and value of such securities. These are a market, opportunity cost’ of borrowed funds which a company must expect to pay for new loans. If a capital market can not make a big enough profit, shareholder will be dissatisfied.
1.3 Aims and Objective of Study
Over the year since the inception of the Nigeria market. There has been a lot of changes growth and problem still facing the market. This study will focus on the changes and their effects in the capital market. The district role of the securities exchange commission prior to deregulation of the capital market and what is obtained of present.
Also since the capital market is a dynamic market due to the economic, social and political environment of the country. The study wills asses the effect of deregulation on the market. Has is been of any use?
1.4 Scope and Limitation of the Study
The study will make a far representation of Nigeria capital market especially Nigeria stock exchange (NSE) and security and exchange commission (NEC) move so, there various formulated government policies that support growth and development of Nigeria policies that support growth and development of Nigeria capital market, but the study will in detail deal with those that concern in education of share and securities dealing in Nigeria stock exchange.
1.5 Signification of the Study
The study will provide explanation and reason why most enterprises are still not quoted on the stock exchange. Also the study will unfold the situation of the capital market; it will identify the problem facing the capital market, and will also offer suggestion on improvement at the research study based on any conclusion. This will be useful to intending investor, public, shareholder, investment adviser.
1.6 Organization and Plan of Study
This project of five chapters; the first chapter enable the introduction background of the study, statement of the problem, Aim and objective of the study.
Scope and limitation of the study, significance of the study, definition of term; the second chapter deals with the literature review. Historical background of the study. Criteria for priced determined (stock pricing), problem of Nigeria capital market, survey of the present regulatory environment. Objectives of deregulatory SEC guideline to issuing house, what is under writing the role of under writing organization in the capital market, objective of the Nigeria stock exchange, reference, the third chapter consists of the research instruments, source of published and unpublished data chapter four deals with data presentation analysis and interpretation of hypothesis, Hypothesis to be tested. The last which is chapter five deals with the summary of findings, conclusion and recommendation, bibliography, appendix
1.7 Definition of Terms
A share is fixed part of all company’s share capital. The issue of a share certificate is prim faced evidence that the person named that is the owner of the share set out in the certificate.
This is the document or certificate that showing ownership or property especially bands stock and shares.
This could be refers to as share in the capital of a business company.
Summary of Findings, Conclusion and Recommendations
5.1 Summary of Findings
Since the inception of the Nigeria capital market in 1960, there has been a lot of growth and changes. The number of securities trade has increased and lots of companies are now quoted on the advent of the stock exchange.
The Nigeria capital market has also witnessed the advent of the structure adjustment programmer (SAP)in the mid eighties(1986)and the deregulation process in 1992.
The issues of shares, that the price determination role was formally handle by the securities exchange commit ion see but a lot of investor and market operations were advantages and were advocating for a change of this role sec due to lot of guide lines and regulation which led be added to by intending company that wanted to go public. A lot of this problem had go a lot of abnormalities have been corrected. Also move investor could come to the market now and move. Securities will be available for trading house but subject to the approved of SEC
The Nigeria stock exchange commenced operations on June 5, 1961 with about 95 securities. By the end of 1998, there were 186 equities listed on the exchange and 225 decline member while market capitalization raise to 263.3 billion the growth of the market has made possible by various government measures. For example there is statuary provision making if mandatory for some saving –surplus unit to invest part o their funds in government securities. Thus the trustee investment acquires the national provident and person funds to incest a minimum proportion of their funds in government stock.
While the insurance companies to invest apportion of their premium in the securities. Also the Nigeria enterprise promotion decree of 1990s required foreign companies to relinquish a sizeable position of their share member of the Nigeria public. Thus the member of equities which was just 14 in 1971 had by the aid of 190 rise to 92 recent development in the financial system have contributed to the increase in activities in the capital market in particular, right issues feature prominently in the market due to its attractiveness following the securities of funds.
Also the on going privatization programmed has given the market a boost as more shares become available for trading .as at December 1993, the share of 69 public enterprises had sold to the member of Nigeria public, government are now divesting their holding for there 199 privatization and commercialization dispensation.
Although, the market has been deregulated there are a number of likely abused that might occur. Since issuing house free in independent on the value of issues there is tender to over value, this is seen as internationalization of the capital market in deregulated environment (180) the cost of find becomes the determinant of the method of raising fund.
With the deregulation of price determination of perceived under pricing of securities especially equities will be removed with possible increase company is seeking quotation on stock exchange. The development will not doubt stimulate the supply of securities and securities and (in squinty reduce the syndromes of a buy and hold attitude of Nigeria investors) under free market operations which are operating now sec becomes more effective is a watch dog of capital market. It should be seen as changes by market operation to put in their best and educate themselves more.
The assignment that has occurred in this study has been the determination of the factors that determine price of share and securities like their counter parts in other capital market could be made to under write fully or as a syndicate or other wise issues which the sponsor.
- The introduction of under writer in a deregulated environment. There fore, become very important in pricing of primary issues there by sustaining confidence in the market promoting stability industrial and economic growth. they have to be well staffed with professional securities.
- The under writer as currently being purchase d in Nigeria where no rise born what so ever by underwriter leaves much to be desire in a deregulated environment in fact, lack of underwritten capitally has been identified as one of the short coming of the Nigeria capital market.
- Where foreign investment is involved the finance company may dictate the offer price in other to maximize the amount that can be transferred especially in the light of depreciating exchange rater in other words the exchange rate may be restored as the main determinants of offer price of such securities and Nigeria factor into consideration the issuing house would be susceptible to manipulation by the issues.
- This issues of under subscription may create in a deregulated capital market since issues are expected to be underwriters it is the responsibilities of the underwriter to dispose off unsubscribe portion in the secondary market. There cloud be a deliberate with holding of securities in order to manipulate market price thereby underlying the stability of t he market in a deregulated environment tendency would increase the coupon rate on debt securities (debentures and bonds closer to interstate in the money market)
Deregulation has brought about innovation, innovativeness in a competitive atmosphere, also stock broking firm are now open to foreign participation ,s killed in valuation techniques with a high scope of honesty.
One major constraint that is still being faced in the area of deregulated pricing is the lack of detailed information and analysis of companies day today operation and prospective, the financial press although much improved compares to a few years ago it still not able to devoted the resources to talking the fortune of companies that its counterpart are able to do in order countries. In addition, there is an urgent need to encourage the establishment formed recognition of a firm that specialized in rating companies securities ( equity and debt)
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