Impact Of Information And Communication On Operation Of Nigerian Foreign Stock Exchange

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Impact Of Information And Communication On Operation Of Nigerian Foreign Stock Exchange


Abstract


The paper seeks to ascertain how the adoption of information technology has impacted on stock market operation indicators and the way business is conducted on the Nigerian Stock Exchange. The main objective of the study is to assess the impact of information and communication in the operation of Nigerian stock exchange. The study covers the identification of the extent of usage of ICT in the Nigeria Stock Exchange as well as the examination of Automated Trading System (ATS). The findings show that ICT enhances ICT has a positive impact on the operations of stock brokers in Nigeria stock exchange, facilitates accuracy as well and reduces fraud in the activities of stockbrokers and enhances efficiency in their operations. ICT equally gives investor the opportunity to transact directly with stock broker electronically through online-real-time and facilitates automated trading which increases the volume of sales. The findings also show that growth in the stock market is affected by the level of interaction brought about by ICT.


Chapter One


Introduction

1.1 Background of the Study

The effect of information and communication technology (ICT) on the operation of stock markets has been a subject of debate in recent times. A school of thought led by authors like Shiller (1989),Summers (1988), Porteba and Summers (1988) would argue that stock markets have become excessively volatile since the adoption of computer assisted trading strategies as the latter increase short-term price volatility and risks. They also argue that very few investors have access to online trading systems. Few actually own computers and have easy access to the Central Securities Clearing System. Many investor, they claimed, do not have access to a system that sends orders to stockbrokers for automated execution.

They also contend that ICT driven stock market operations are fraught with fraud and manipulation, which mostly affect individual investors. A case in point relates to the sale of shares without authorization of the stockholders, a practice that is given impetus by greed and dishonesty of some market participants.

They further argued that surveillance problems and the lack of proper enforcement of penalties by the legal system make the adoption of a fast-paced ICT system dangerous to investors.

The second school of thought, which includes authors Fama and French (1988), on the other hand, argued that information technology have made stock markets more efficient as attendant stock prices now reflect important information and investors perception of stocks more swiftly. In their contention, ICT has made the capital market more efficient by providing all participants with faster and more effective means of exchanging information. They maintained that new products and instruments have been made readily available as a result of the advent of sophisticated ICT. Evidently, stock markets can be more resilient, possess greater depth and breadth with the intervention of ICT.

It must be observed that the premises of the above theorizing are capital markets in developed countries. Would their arguments hold true for the less Developed Countries (LDC)? Which school of thought would appropriately explain the experiences of the LDCs? Perhaps the critical questions that need to be addressed would include: Has the adoption of information technology had a positive or negative impact on the operation of Nigerian stock exchange? Has ICT transformed the way business is conducted on the Exchange? Has ICT benefited the Nigeria investor? The plethora of research questions can go on and on. However, this paper seeks to ascertain how the adoption of information technology has impacted on stock market operation indicators and the way business is conducted on the Nigerian Stock Exchange. A possible area of future research would relate to the benefits of ICT adoption by the stock market to the Nigeria (individual) investor, which is not covered in previous studies.


1.2 Statement of Problem

Information and Communication technology has made a tremendous impact on the Nigerian Stock Exchange in recent time. This has increased investors confidence due to the speed and accuracy at which information is disseminated to stakeholders.

But inspite of this laudable impact of ICT in the operation of Nigeria Stock Exchange, individual in Nigeria do not still have access to stock market trading online other than by going through the brokerage station, as against global trend where investors in other part of the world browse the internet and go for stock market information available on the webpage in order to have an instant informed decision about investment i.e., either to buy or sell the share of a particular firm. These gap dramatically nudged up the overall volume and volatility of stock market in recent time. As such doubt is expressed to a large extent about the extent of usage of information and communication technology in the Nigerian Stock Exchange with particular reference to automated trading system (ATS).

It is against this background that the subject matter of this research is seen as an empirical problem worthy of investigation.


1.3 Research Question

In order to evaluate the impact of ICT in the operation of Nigeria Stock Exchange, the following research questions were generated:

  1. Has the adoption of information technology had a positive or negative impact on the operational performance of stock brokers Nigerian stock exchange?
  2. How does ICT affect service delivery in Nigerian Stock Exchange?
  3. Has ICT transformed the way business is conducted in Nigeria stock Exchange?

1.4 Objectives of the Study

The main objective of the study is to assess the impact of information and communication in the operation of Nigeria Stock Exchange.

The specific objectives are to:

  1. Examine whether the adoption of information technology had a positive or negative impact on the operational performance of stock brokers in Nigerian stock exchange.
  2. Evaluate the extent of service delivery in relation to the use of ICT in Nigerian Stock Exchange.
  3. Find out whether ICT has transformed the way business is conducted on the Nigerian Stock Exchange.

1.5 Statement of Hypothesis

The following hypotheses were formulated for the study:

  1. H1: ICT does not enhance the Operational performance of stock Brokers in Nigeria stock exchange.
    H2: ICT enhances the Operational performance stock brokers in Nigeria stock.
  2. H1: ICT does not significantly enhance efficient service delivery in Nigeria stock exchange.
    H2: ICT significantly enhance efficient service delivery in Nigeria stock exchange.
  3. H1: There is no significant relationship between ICT and the way business is conducted in Nigerian Stock exchange.
    H2: There is a significant relationship between ICT and the way business is conducted in Nigerian Stock exchange.

1.6 Scope of the Study

The study covers an empirical investigation on the impact of ICT on the operations of the Nigeria Stock Exchange. The study cover the identification of the extent of usage of ICT in the Nigeria Stock Exchange as well as the examination of Automated Trading System (ATS). The period of the study covers a time from 2002 to 2012.


1.7 Significance of the Study

The study will be beneficial to individual, corporate organization and students especially as they may utilize its findings in their different endeavors:

  1. To the individual, the research will unveil the benefit that could be derived from utilizing the automated trading system to direct transactions.
  2. To the general public, it will enhance deep understanding of the electronic operations of the Nigerian stock exchange via information and communication.
  3. To students and scholars the study will equally add to the existing knowledge on the impact of ICT on the operations of Nigeria stock exchange. The study will also be a springboard to undertake further studies on the subject matter.

Chapter Five


Summary, Conclusion and Recommendation

5.1 Summary

The study examines the impact of ICT on the operations of Nigerian stock exchange . To this end the following research questions guided the study: i. Has the adoption of information technology had a positive or negative impact on the operational performance of stock brokers Nigerian stock exchange? ii. How does ICT affect service delivery in Nigerian Stock Exchange? iii. Has ICT transformed the way business is conducted in Nigeria stock Exchange?

The survey study design was utilize and the questionnaire constitute the instrument of data collection. The data obtained from the field were analyzed with the statistical mean scores and presented in a five likert table. The finding of the research indicates that ICT enhances ICT has a positive impact on the operation of stock brokers in Nigeria stock exchange. In this regard the analysis indicates that the adoption of ICT in Nigerian stock exchange facilitates accuracy as well as reduces fraud in the activities of stock brokers and enhances efficiency in the operations of stock brokers in Nigerian stock exchange. ICT enhances speed of operation thus saves time and operational cost of Nigerian stock exchange.ICT equally gives investor the opportunity to transact directly with stock broker electronically through online-real-time as well as facilitates automated trading which increases the volume of sales in Nigerian stock exchange. ICT has transformed the way in which business is conducted in Nigerian stock exchange.In this regard the findig shows that ICT is maximally utilized in the operation of Nigerian stock exchange as it facilitates accuracy in their operations as well as speed and efficiency which enhances their business operation.


5.2 Conclusion

The results reveal the following important findings: Growth in the stock market is affected by the level of interaction between stockbrokers and investors brought about by ICT in the form of internet access, telephone (mainlines and mobile) as well as access to the websites of stockbrokers. Growth in the total value of shares traded is significantly affected by communication technology (telephones).Growth in the volume of shares traded arises from the interaction between stockbrokers and investors mainly via mobile telephony. The number of securities listed on the Stock Exchange does not appear to have any significant relationship with the adoption of information and communication technology. Similarly, growth in federal and state government bonds has not been significantly affected by information and communications technology. Private debt stock appears to have been significantly affected by information and communications technology especially the increase in the number of stockbrokers and access to telephone lines. Lastly, turnover in the market seem to be affected significantly and positively by access to mobile phone technology. Information Technology has contributed to growth in the Nigerian stock Market. The effect is mostly seen in the availability of information to investors and the improvements in the trading patterns of the Exchange. The results call for further advances in information technology that could help to broaden and deepen the market thus improving its effectiveness and efficiency. In spite of the phenomenal growth recorded in the Nigeria stock Market as reflected in aggregates such as market capitalization and value of transactions, the market is still relatively thin compared to other more developed markets. This reveals that there is great potential for further growth. The finding reveal that:

  1. ICT has a positive impact on the operation of stock brokers in Nigeria stock exchange. In this regard the analysis indicates that the adoption of ICT in Nigerian stock exchange facilitates accuracy as well as reduces fraud in the activities of stock brokers and enhances efficiency in the operations of stock brokers in Nigerian stock exchange.
  2. ICT enhances speed of operation thus saves time and operational cost of Nigerian stock exchange.ICT equally gives investor the opportunity to transact directly with stock broker electronically through online-real-time as well as facilitates automated trading which increases the volume of sales in Nigerian stock exchange.
  3. ICT has transformed the way in which business is conducted in Nigerian stock exchange. In this regard the finding shows that ICT is maximally utilized in the operation of Nigerian stock exchange as it facilitates accuracy in their operations as well as speed and efficiency which enhances their business operation.

5.3 Limitations of the Study

In view of the technicalities involved, it would be unrealistic to assume that all necessary facts have been gathered in the process of the study. Information gathered is limited to those accesses and made available by the respondents and also those gathered from end users. However, the impact of this limitation will be reduced to the barest minimum.


5.3 Recommendations

The following recommendations are made base on the research findings so as to facilitate the possibility of improving the operation and the use of ICT in order increase service delivery and customer satisfaction and consequently retention:

  1. Stock exchange needs to promote a sharing of knowledge about the use and the role of ICT in service delivery and customer satisfaction by experiments and diffusing best practices that meets international standard.
  2. Policy makers need to keep up with rapid development of ICT used by the private entities and develop a stable communications framework that is conducive to stock exchange service delivery and to support the research and development in the private sector.
  3. Adopt analysis method, performance measure, and evaluation criteria in monitoring the developments of ICT in the private side. This could identify and propose mitigating measures to prevent the negative impacts of the technology in environment and social aspect.
  4. Strengthen public participation in the policy formulation for ICT use in stock market through conducting public hearing and consultation. Governments, regional organizations, and the private sector need to cooperate to set the right frameworks for investments and services.
  5. In addition, online trading by investors directly through the internet or mobile phones should be explored rather than the present system of passing all trades through stockbrokers creating unnecessary delays and inappropriate pricing of securities.
  6. The continued expansion of the internet creates opportunities for innovation in financial services, thus the regulators of the Nigerian Capital Market should seek to expand and deepen the market by introducing new products such as derivatives like option and futures trading.
  7. Expand innovative public and private financing methods in generating finance and building skills for the development of ICT capacities. Human and financial capital building should be fundamental elements of the strategies of the public and private sectors in the development of e-logistics. Training and education policies, together with adequate financing are also important for e-banking to play its full role in the process of regional economic combination.

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