The Impact Of Stock Exchange In The Development Of Capital Market (A Case Study Of Nigeria Stock Exchange)

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The Impact Of Stock Exchange In The Development Of Capital Market (A Case Study Of Nigeria Stock Exchange)


Abstract


A case study of Nigeria, the contribution of stock exchange in the banking sector and in economic well being of the general public.

In a nutshell, the stock exchange aims to provide an atmosphere where buyer and sellers of securities meet to buy and sells shares (securities)

The importance of stock exchange cannot be over emphasized in the banking sector and even it performs prominent roles in Nigeria economy at large. In developing our economy in Nigeria in Banking sector, with stock exchange had came into being so as to perform this active part in banking and Nigeria as well, in view of the above, the stock exchange market aimed at motivating and encourage the Investor, Brokers as well as the general public to have improvement in their aims of buying and selling securities, through proper usage of the instrument used in the stock exchange market.


Table of Contents


  • Title page
  • Certification
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of content

Chapter One

1.0 Introduction

  • 1.1 Background of the Study
  • 1.2 Objective of the Study
  • 1.3 Scope of the Study
  • 1.4 Statement of the Problem
  • 1.5 Research Hypothesis
  • 1.6 Limitation of the Study
  • 1.7 Delimitation of the Study
  • 1.8 Significant of the Study
  • 1.9 Definition of Terms

Chapter Two

2.0 Literature Review

  • 2.1 The Capital Market
  • 2.2 Reasons for Establishment of the Nigeria Capital Market
  • 2.3 Function of the Nigeria capital market
  • 2.4 Composition of capital market
  • 2.5 Nigeria stock exchange
  • 2.6 Development of stock exchange in Nigeria
  • 2.7 Function of the Nigeria stock exchange
  • 2.8 Instrument Used in Stock Exchange

Chapter Three

3.0 Research Methodology

  • 3.1 Introduction
  • 3.2 Research Design
  • 3.3 Method of Data Collection
  • 3.4 Sampling Population
  • 3.5 Research instrument
  • 3.6 Questionnaire Design

Chapter Four

4.0 Data Analysis and Presentation

  • 4.1 Introduction
  • 4.2 Data Analysis and Presentation
  • 4.3 Interpretation of Data and Analysis
  • 4.4 General Comments

Chapter Five

5.0 Summary Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • Appendix
  • References

Chapter One


1.0 Introduction

1.1 Background of the Study

The Nigeria stock exchange provide a market where holding of existing “ quoted” shares wishing for sell; such share be sold by making contact with individual and institution which are interested in buying and selling of shares, stocks bonds and security. Also any one who has surplus fund after current living expenses and a reserve for an emergency might decide to invest such surplus fund in security.

The stock exchange is otherwise known as “ security market” the stock exchange play on important roe in the economy in mobilizing resources for development of capital market, the stock exchange provides facilities for bringing together suppliers and users of capital
Security Market:

A stock exchange therefore, is a market where large / small shares of companies and government securities are traded.

Former director general of the Nigeria stock exchange apostle H.I Alike describe the stock exchange as the corner stone in the nations capital formation and the achieving of the engine of the financial institution resolve for example.

Nigeria security and exchange commission (N.S.E.C) of public enterprise, savers, underwrite issuing houses, fund user, stock brokers, security registers.

The establishment of the exchange in 1960 market the informal birth of Nigeria capital market which serves as a range of purpose including the following.

  1. Mobilization of savings from numerous economics units of economic growth and development.
  2. Provision of adequate liquidity to investor.
  3. Broad of the ownership base of Assets as well as the creation of private sector.
  4. Provision of alternative source of fund for government other than taxation.
  5. Encouragement of more efficient allocation of new investment through price mechanism
  6. Encouragement of more efficient of given amount of tangible wealth through changes in the composition and ownership wealth
  7. Promotion of rapid changes that exist to link together sellers and buyer of quoted investment. They help to widen there base of ownership of public companies. Stock liquidity also provides especially for making it easy for government and industries to raise fund (s) for development of their programmes.

1.2 Objective of the Study

The main aims of the research work are as follows:

  1. To focus on the examination of the role of stock exchange in Nigeria in the development of capital market.
  2. To show the history of stock exchange and review of their operation in the past
  3. To bring into limelight the effect and importance of stock exchange as a unit of capital market on industrial development
  4. To show significant impact on the investor and issues of the securities
  5. To know the nature and participant of the capital and exchange in the capital market operation
  6. To know the nature of participant in the capital market.
  7. To bring out limitation of problems of Nigeria stock exchange in the capital market operation.

1.3 Scope of the Study

With available data on the Nigeria stock exchange system the case study will focuses its attention on the management and role of the stock exchange system.

This research work was not carried out without difficulties, many of the limitation which is considered very important are listed below:

Financial Problem:

Considering the global economic melt down and devastating economic problems confronted by non- political aligns in the country, the researcher is confronted with financial inadequacy due to other academic commitment which involves money, to say categorically that the cost used in caring out this research work involves thousand (s) of naira. It is not an over statement

Time Factor:

Another prominent obstacle faces by the researcher is that of time factor. Talk about the time took to travel, planning organizing and collecting of materials to be used for the write-up

Transportation Problem:

During the period of carrying out this research work in collection of data the researcher spent a lot of money on the cost of transport fare (s) and on some occasion the researcher will have to “trek”


1.4 Statement of the Problem

The presentation is mainly concerned with the role of stock exchange in the development of capital market in Nigeria stock exchange.

In this research work, the role of stock exchange in Nigeria stock exchange shall be thoroughly examined with particular emphasis on the following

– Exchange rate problem the unstable nature of the exchange rate is a major headache to the Nigeria stock exchange prior to march 1992, exchange rates were still easy and investors could be able to invest their money
– The number of companies trading on the floors is alarmingly affected by the operation of the exchange


1.5 Research Hypothesis

The following hypothesis is considered as the basis of the question to be answered for the purpose of the study

  1. Ho: The role of stock exchange has not developed the capital market
    Hi: The role of stock exchange has developed the capital market.
  2. Ho: The stock exchange marker perform no function to the country
    Hi: The stock exchange market perform function to thee country

1.6 Limitation of the Study

It is normal for human being to be face with certain problems in the achievement of a particular objectives which should be considered challenges, therefore there are numerous difficulties confronted with in carrying out this research work which can be trained to lack of finance to various companies for adequate information gathering which might have enriched the research work.


1.7 Delimitation of the Study

The research work covers the evolution and historical background as well as role of stock exchange in the development of capital market focuses on Nigeria stock exchange as case study


1.8 Significant of the Study

The importance of a well developed stock market and its role in the banks recapitalization cannot be over emphasized, hence, this study is aimed at examining and analyzing the roles or impact of Nigeria stock exchange on the assets base of banks it aimed at assisting prospective researcher into the factors that led to the mergers and acquisition of the consolidation of banks.


1.9 Definition of Term

The Capital Market:

This is the market which deals with long term funds. The most important role play in this market is the stock exchange, while the regulatory institution is the Nigeria securities and exchange commission it is a market place where listed securities such as bond, debentures stocks and shares of varying type are bought and sold

Stock Exchange:

A stock exchange is established to act as catalyst of business expansion or growth.

Stock Market Operators:

The stock market operator involves the following:

  • Jobbers
  • Stock Brokers
  • Investment Advisers
  • Issuing Houses
Jobbers:

The jobbers otherwise known as market makers are independent dealers i.e. they trade on their account and bear the risk of price fluctuation. They do no receive commission the jobbers returns depend on the spread between bid and offer prices.

The function of the jobber includes maintaining a continuous and orderly market with the aim of ensuring that securities are readily available and trade and prevailing market prices.

Stock Brokers:

These are member of the exchange who buy and sell securities on behalf of the investment public

They also sponsor issues to the stock exchange for listing an also underwrite and handle primary distribution of securities.

Investment Advisers:

These are non- registered members of the exchange who perform functions similar to stock brokers. Not being members of the exchange, they cannot sponsor issues to the stock exchange for listing

Issuing House:

These are agent who arrange the issues of securities on behalf of the governments or firms intending to raise money from the investing public. Merchant banks or stock broker do this job.

Prime Market:

Is regarded as the original or the main market deals in fully listed share or quoted on the stock exchange

Second Tier Securities Market:

This is a segment of capital market where small companies operates

The Bull and the Bear Market:

Bulls is an investor who believes that the market price are certain to go up. Bull means upward trend. In the context of the stock market, it means the market is going up and doing well as reflected in share prices.

Bears (s) is an investor who believes that the market prices are certain to go down. Bear trend means that the market is going down and not doing well

Stag (s) is a male deer, In the context of shares, it refers to equities. with potentials of upward movement in price.

Therefore on investor desirous of making profit form now issues of shares buys the shares before they are listed and sells them at a higher price.

Investment:

Simple means of giving up cash now is exchange for the promise of more cash in the future.

Shares (s):

It represent evidence of investment interest of a person in a company and government establishment

Ordinary and Preference Share:

The UK term for a share in the equity of a company. The US equivalent term is common stock. The holder of an ordinary share is entitle to share in any distribution of dividend in proportion to number of share hold. Ordinary shares usually but not invariably entitles their holders to vote at company meetings. They are contrasted with debentures and preference shares. Debenture holder normally have a fixed entitlement to interest but no vote provided the interest is paid and any other conditions are compiled with preference share holders have not vote but must be paid heir dividend before any distribution to ordinary shareholder is allows. In the event of winding up a company, ordinary shareholder is rank last in any claim to company assets, but get in unlimited part of any residual there is after paying off the others .


Chapter Five


5.0 Summary, Conclusion and Recommendation

5.1 Summary

the research work examined the role of Nigeria stock exchange in relation to the economic bearing in mind the significance and position change that have taken place in capital market and to regulatory of the capital market.
From the researcher perspective it is deduced that the institution as a unit capital market , has been instrumented in the efficient management of the economy because it contributes immensely to the growth of the economy through their intimidating activities of channeling fund to the economy and proper allocation of resources among the most completing ends

Apart from significant development in the industrial growth the Nigeria stock exchange (NSE) through 1985 second tier securities market has attracted small business to facilitate of the market to such viable companies to raise fund for expansion and modernization, also the level of job creation by the company has been rising


5.2 Conclusion

by and large, if stock exchange operation would improved at all in Nigeria due to past performance in relation to the economy activities of the country . the stock exchange together with order regulatory authorities of capital market such as securities and exchange commission should be examined above recommendation


5.1 Recommendation

The Nigeria government and market operators most demonstrate great commitment in the promotion of stock exchange market in the country through the following:

Relaxation of existing rigid exchange countries regulation to allow foreign portfolio investors to invest in their stock market.

Proper definition of the role of the private sector and the stock market within the economy.

Adoption of sound micro economic policies namely: realistic exchange rate, realistic interest rate and effective de-regulation of the economy

Increase in public awareness about the security market this could be done through market operation and other regulatory authorities cooperation among capita market especially in Nigeria capital market participants
Privatization and commercialization of government enterprises privatization has proved to the real force of growth many emerging stock exchange , as it quickly increase the size and liquidity of small market, twenty-three privatized enterprises have been listed on the Nigeria stock exchange in the 1st three years of the securities on behalf of “investor” they are mainly members of stock exchange who engaged in this operations and paid on commission basis called “brokages”

The position of Nigeria stock exchange in the capital market and its impact to improve capital market is unique as a unit of Nigeria capital market.


The Impact Of Stock Exchange In The Development Of Capital Market (A Case Study Of Nigeria Stock Exchange)


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The Impact Of Stock Exchange In The Development Of Capital Market (A Case Study Of Nigeria Stock Exchange)


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