An Evaluation Of Shares And Securities Dealing In The Nigeria Capital Market (A Case Study Of Nigeria Stock Exchange From 2002-2006)

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An Evaluation Of Shares And Securities Dealing In The Nigeria Capital Market (A Case Study Of Nigeria Stock Exchange From 2002-2006)


Chapter One


Introduction

1.1 Background of the Study

The importance of a capital market as a catalyst to economic growth and development through its ability to mobilize surplus funds for investment purpose has long been realized. It is not surprising, therefore that countries all over the world strive to build a solid market with a variety of financial instrument and dynamic institutions capable of enhancing the “national wealth”.

A capital market exists to assist in the transfer of funds the excess units savers of the “deficit” units investment decision marker. Various types of institutions traditionally play one role or another in the process of transfer of funds. These include the stock exchange, issuing houses, stock brokers, share registrars, share distribution agent (e.g. merchant banks, issue companies, pension funds etc.) the Nigeria enterprises. Promotion bounds and the Nigeria security and exchange commission. Although all of these institutions perform one function or over in the transfer process, they are not located in one place. the capital market may therefore be defined as! The complex of institutions and mechanizing through which intermediate term funds are pooled and made available to business, government and individual instruments already outstanding are transferred (Dougall/Guramnitz 1975).

As distinct from the many market, the money market provides intermediate and long-term funds for individuals, business organizations, government (federal and state) most capital markets are well regulated and facilitators are so vital that efficiently and effectively. Referred to as market operations are issuing houses stock brokers, registrar’s investment advisers.

Financial intermediaries particularly banks and units trust also aid the movement of funds on the market.
Regulation is vital for the orderly functioning of any market. Lack of regulation could lead to general disorder, confusion, Loss of financial wealth and confidence, which will in turn have for reaching implication in the overall economy. It is for this among other reasons that regulatory agencies are setup to over see the market. The two regulatory bodies in Nigeria are the securities exchange commission (SEC) and the Nigeria stock exchange (NSE) it is important to distinguish the two at this point. While the security exchange commission (SEC) is a statutory body at 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 is to ensure smooth operation of the market. The exchange provides facilities for trained in secondary securities thus creating liquidity and ensuring easy transfer of securities in the market it also makes rules and regulations to guide the professional conduct of its member.


1.2 Statement Of the Problem

Over the years, since the inception of the Nigeria capital market, there has been a lot of changes, growth and problem still facing the market. This study will focus on the changes and effects on the capital market.


1.3 Objectives of the Study

The aim of this research work is to:

  1. Comparism will be made between the Nigeria capital market and it foreign counter parts.
  2. The distinct role of the securities exchange commission (SEC) and the Nigeria stock exchange (NSE) could be assessed. Commission prior to the deregulation of the capital market and what is obtained at present. Also, since the capital market is a dynamic market of the economic, social and political environment of the country.
  3. The study will assess the effect of deregulation on the market. This is been of any use?
  4. To recommend based on the findings various method to improve the performance of Nigeria capital market.

1.4 Research Questions

  1. What are the roles of capital market.
  2. What is capitals market
  3. What are the function of capital market
  4. What are the problem facing in stock exchange on evaluation of share and securities in Nigeria stock exchange.

1.5 Research Hypothesis (Ho/Hi)

  • Ho: H2 the capital market have an effect on share and securities in Nigeria stock exchange
  • Hi: H1the capital markets have no effect on share and securities in Nigeria stock exchange.

1.6 Significance of the Study

The study will provide explanations and reasons why most enterprises are still not quested on the stock exchange. also , the study will unified the situation of the capital market, it will identify how the governments, societies, public sectors and academics can benefits from it through the following points:-

  1. To create wealth
  2. An alternative source of income for government especially.
  3. It secure retirement of old aged.
  4. Deduction in income tax
  5. Capital appreciation.
  6. Rights to vote during annual general meetings.

Also, The study will offer suggestions on improvement the end of the research study based on my conclusion.


1.7 Scope and Limitations of the Study

The study will make a fairs representation of Nigeria capital market especially Nigeria stock exchange (NSE) and security exchange commission (SEC) moreso, these are various formulated government policies that support growth and development of Nigeria capital market, but the study will in detail deal with those that concern and evaluation of share and securities dealing in Nigeria stock exchange.

An evaluation of share and securities dealing capital market for the purpose of the study and within the content of Nigeria stock exchange will include.

Criteria for prancing determination (stock princing), stock exchange market security exchange commission and deresalar the data analysis.

Time as in all human endure or placed the most serve limitation on the collection of data. Hardly is there any endeavor its dose of the challenging. Problem, there has so much difficulty in choosing the topic for this research. Also difficus was encountered in data collection.

Nigeria is notorious for lack of data bank and any effort to obtained data is very excruciating you are virtually forced to move from one source to the over in endless search for data sources. It commanded so much resources on many hours.


1.8 Organization Plan / Characterization

  • Chapter one is introduction
  • Chapter two is literature review
  • Chapter three is research methodology
  • Chapter four is data presentation and data analysis
  • Chapter five is finding, summary, conclusion and recommendation and reference

1.9 Definition of Term

Share:

A share is a fixed part of all company’s share capital the issue of a share certificate is prime farces evidence that the person named there on is the owner of the share set out in the certificate.

Securities:

This is a document or certificate that is showing ownership of property especially bonds, stock and shares.

Stock:

These could be referred to as shares in the capital of business company.


Chapter Five


Summary, Conclusion and Recommendation

5.1 Summary

Since the inception of the Nigeria capital market in 1960, there has been a lot of growth and changes. The number of securities traded has increased and lot of companies are now quoted on the stock exchange. The Nigeria capital market has also witnessed the advent of the structural adjustment programmed in the eighteen (1986) and the deregulation process in 1992.

The issue of pricing of shares, that the price determination role was formerly handled by the securities exchange commission SEC but a lot of investors, and markets operations were advantageous and were advocating for a change of this role from see due to a lot of quote line and regulation which had to be adhered to by intending company that wanted to go public. A lot of this problem had been discussed earlier. The long awaited deregulations is now at hand so as lot of abnormalities the market been corrected. Also more investor could come to the market now and more securities will be available for trading since pricing new issue by SEC had been transferred to issuing house but subject to the approval of SEC.

The Nigeria stock exchange commenced operation on June, 5,1961, which about 9 securities. By the end of 1998, there was 186 securities listed on the exchanged and 226 dealing members while market capitalization rose to 263.36 billion and by 2006, it had also increased to 550 billion. The growth of the market has been possible by various governmental measures. I.e. there has been possible by various governmental measures. i.e. there are statutory provision making it mandatory for some savings surplus units to interest part of their funds in government securities. Thus, the trustee investment act require the National provident and person funds to invest a minimum proportion of their funds in government stocks, while the insurance companies has to invest a portion of their premium in this securities. Also the Nigeria enterprises promotion decree of 1970s required foreing companies to relinquish a sizable position of their shares to member of the Nigeria public. thus the members of equities which was just 14 in 1971 had by the end of 1980 risen to 92. Recent development in the financial system have contributed to the increase in activities in the capital market. In particular, rishts issues fracture prominently in the market due to its attractiveness following the security of fund. Also, the ongoing privatization programme has given the market a boost as more share have become available for training. As at December 1993, the share of 69 public enterprises had been sold to members of the Nigeria public and at 2006 share of 389 public enterprises had also been sold out. Government are not divesting their holding for their enhance success of a deregulated under the new 1999 privatization and commercialization dispensation.


5.2 Conclusion

Although the market has been deregulated there are number of likely abuses that may occur.

Since issuing house frees in independent on the value of issues, there is a tendency to cover value, this is seen as internationalization of the capital market in a deregulated environment. Also the cost of fund become the determinant of the method of fund raising. These development will no doubt stimulate the supply of securities and consequently reduce the syndrome of a buy and hold attitude to Nigeria under a more effective as watchdog of capital market. It should be seen as a challenge by market operators to put in their best and also educate themselves more.


5.3 Recommendations

The assignment that occupies the researcher in this study as been determination of the factors that determine prices of shares and securities.

  1. Avoid or minimize the manipulation of issuing house like their counter parts in the capital markets
  2. Where foreign investment is involved, the finance company may dictate the offer price in order to maximize the amount that can be transferred especially in the exchange rate may be resorted as the main determinants of offer-price of such securities and taking Nigeria factor in consideration.
  3. The issue of under subscription may create problems in a deregulated capital market. Since the issue are expected to be under writer. It’s ht responsibilities of the underwriter to dispose off the unsubscribe portion in the secondary market.

Deregulation as brought about innovation in a competitive atmosphere. also stock broking firms are not open to foreign participation, skilled in valuation techniques with high sense of honesty.

Also enough publicity and adverts should be done so as to encourage uniformed investors to come to the market. A lot of people both literate and illiterate still do not know the wealth investing in the Nigeria securities.

It goes without saying but it is never the less important to emphasize that deregulation does not mean regulation.
Financial Market everywhere in the world have to be strictly policed. In the area of pricing, the uttermost concern must be to protect the unsophisticated investor, by ensuring that it is given a fair price. This has to be done by setting standards for dealers to adhere to such as maximum dealing spreads.

Furthermore, investors need to be given a forum for allowing complaints and obtaining redress were appropriate. In general issuing house and stock brokes, institutional investors, fund manages and other investment advisers will need staff who can undertake such analysis and interpret the data. As we move more into an environment or less restriction of price making, the one will be on market professionals to do their home work enviously in order to make credible prices. The rewards of success will be much higher and the cost of failure are liking to be commensurably higher.


An Evaluation Of Shares And Securities Dealing In The Nigeria Capital Market (A Case Study Of Nigeria Stock Exchange From 2002-2006)


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An Evaluation Of Shares And Securities Dealing In The Nigeria Capital Market (A Case Study Of Nigeria Stock Exchange From 2002-2006)


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