The Operations Of The Nigerian Stock Exchange And The Impact Of Global Financial Crisis

Project and Seminar material for Banking and Finance

Project and Seminar material for Banking and Finance


Abstract


Both the developed and underdeveloped countries operate a stock exchange market where securities of various categories are visited for trading. It is no doubt that the Nigerian stock exchange fared well in the past years until the current global financial crisis that hit adversely on the countries of the world, in carrying out this research work, attention was focused on some areas like, the history of the Nigerian stock exchange, the objectives and functions of stock exchange, the causes of global financial crisis, the operations of the Nigerian stock exchange and the impact of global financial crisis. Data from both primary and secondary sources were used.

The study location for the research work covered NSE Owerri and Port-Harcourt braches. The Chi-square statistics method was used, a total 30 questionnaires was retrieved from 35 administered to staff each. In my finding I observe that the current global financial crisis affect the operations of the Nigerian stock exchange.


Table Of Content


Preliminary Page(s)

  • Title page
  • Approval page
  • Dedication
  • Acknowledgment
  • Abstract
  • Table of contents

Chapter One

1.0 Introduction

  • 1.1 Background of the Problem
  • 1.2 Statement of the problem
  • 1.3 Objective of the study
  • 1.4 Statement of Hypothesis
  • 1.5 Research question
  • 1.6 Significance of the Study
  • 1.7 Limitation
  • 1.8 Scope of the study
  • 1.9 Definition of terms

Chapter Two

2.0 Review Of Literature

  • 2.1 Introduction
  • 2.2 History of Nigerian Stock Exchange
  • 2.3 What is stock and stock Exchange
  • 2.4 Classification of the Nigerian Stock Market
  • 2.5 Objectives and functions of Stock Exchange
  • 2.6 Methods of dealing in Nigeria Stock Exchange
  • 2.7 Operation of the Nigerian Stock Exchange and its impact on the economy.
  • 2.8 The Causes of the global financial crisis.
  • 2.9 The impact of Global financial crisis on the operations of the Nigerian Stock Exchange
  • 2.10 The Efforts made towards contending the global Financial crisis

Chapter Three

3.0 Research Methodology And Hypothesis

  • 3.1 Research methodology
  • 3.2 Population of the study
  • 3.3 Sample size and method
  • 3.4 Source of data collection
  • 3.5 Description of questionnaire
  • 3.6 Method of data analysis and statistical test
  • 3.7 Hypothesis Testing.

Chapter Four

4.0 Data Presentation And Analysis

  • 4.1 data presentation and analysis of data
  • 4.2 Summary of responses and interpretations
  • 4.3 Test of Hypothesis Based on findings

Chapter Five

5.0 Summary, Conclusion And Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • 5.4 Bibliography

Chapter One


1.0 Introduction

1.1 Background Of The Study

Both the developed and the underdeveloped countries of the world operate a stock exchange market where securities of various categories are visited for trading. These could be government stocks, industrial loans (debenture /preference stocks) or Equity/ordinary shares.

Nigeria, one of the undeveloped, sub-Saharan African economics, is not an exception. She owns and operates a stock exchange called the Nigerian Stock Exchange (NSE) the main focus of this research work. The hitherto, Lagos Stock Exchange (LSE) established in 1960 later became the Nigerian Stock Exchange (NSE) in December 1977, with branches in some of the major commercial cities of the country.

Most of the listed companies in the Nigerian Stock Exchange have foreign/multinational affiliations and represent a cross section of the economy, ranging from agriculture through manufacturing to services thus; the Nigerian stock Exchange is directly hinged to the Nigerian economy. To this end, this research work consolidates and brings to the open, the Nigerian Stock Exchanges in the following areas

  1. Meaning
  2. History,
  3. Objectives and function,
  4. Integrity,
  5. Trading and pricing,
  6. Clearing, delivery and settlement
  7. Stock Market Legislations and regulation
  8. Internationalization of the stock market,
  9. The All –share index and
  10. The Impact so far on the economy of the country.

It is no doubt that the Nigerian Stock Exchange fared well in the past decades until the recent global financial crisis hitting adversely on the countries of the world, especially the sub – Saharan African economies including Nigeria; the hitherto stable and smooth operations of the NSE have been slightly shaken, relative to other sub –Saharan African economies such as the democratic Republic of Congo, Angola, Botswana and others, by the worldwide financial crisis since late last year (March 11, 2009 Reuters).

Nigeria has been clouded by falling prices for energy exports on which the government relies for other 80 percent of revenue, the Naira has fallen about 20 percent since the start of the December Last year and the budget foresees, an increase in spending that will take the deficit to at least 3 percent of gross domestic product (GDP) Growth has been forecast at 8 to 9 percent (Reuters), but continued how oil prices through 2009 could reduce that rate. Efforts to defend the currency and capital markets, such as the reimposition of currency controls have raised concerns over where Nigeria is headed. Based on the foregoing global financial crisis, this research work also among other related matters, covered extensively the impact of the global financial crisis on the NSE and the Nigerian economy as well as efforts so far made to withstand and survive the tumbling world prices.


1.2 Statement Of Problem

The Nigerian Stock Exchange like other stock markets worldwide is expected to work in synergy for efficiency and reliability in achieving set goals mostly in times of economic challenges. Therefore, the extent to which the Nigerian stock market put in place a network of intermediating organizations that can effectively and creditably meet the challenges and growing needs of both local and foreign investors and subscribers, mostly in this period of global financial crisis and economic recession is a major problem that prompted this research work.


1.3 Objective Of The Study

The Objectives of this research work is to bring to the student community and the public at large reliable information on the Nigerian stock exchange and the impact of the recent global financial crisis on its operations.


1.4 Statement Of Hypothesis

  1. Ho: The recent global financial crisis affects the operations of the Nigerian Stock Exchange.
  2. HI: The recent global financial crisis did not affect the operations of the Nigerian Stock Exchange.

1.5 Research Questions

  1. Is the Nigerian Stock Exchange really affected by recent global financial crisis?
  2. Did the global financial crisis have impact on the operations of the Nigerian Stock Exchange?
  3. Should one have trust in the Nigeria Stock Exchange (NSE)?
  4. Has the internalization of the NSE been a welcomed development?

1.6 Significance Of The Study

This study is desirable because it will be a source of information to the student community, business organizations and various individuals who wish to have knowledge of what is happening in the Nigerian Stock Exchange (NSE) within the period covered by the study, and how NSE and Nigerian economy coped with the global financial crisis characterised by tumbling world prices which slashed oil revenues and reduced the value of the Naira.


1.7 Limitation Of The Study

The major limitations to this research work are inadequate finance, time factor, locations of the Nigerian Stock Exchange branches relative to my institution and others.


1.8 Scope Of The Study

The scope of this study is limited to the structure and operations of the Nigerian Stock Exchange (NSE), and the impact of the recent global financial crisis on the NSE and the economy as well as efforts made towards meeting up with the attendant challenges.

This research work covers a five year analysis of the operations of the Nigerian Stock Exchange (2004-2008).


1.9. Definition Of Terms

Stock:

These are shares in the capital of the company. The holders of these shares received dividends. It is also the bundle of shares.

Bond:

This is a credit instrument and the holder of it is a creditor who receives a specified amount of interest on the principal amount together with the principal.

Debenture:

This is a document which contains an acknowledgment of indebtedness

Stock Exchange:

– This is market where securities are bought and sold. It provides facilities for company’s and government to raise money from the citizens for business and project development.

Broker:

This is a person on firm authorized by law to deal with all bonds and stock quoted in the floor of Nigeria Stock Exchange.

Investor:

A person or institution that uses his savings or borrowings to buy securities.

Securities:

– These are written or printed documents by which the claims of holders in specified property are secured.

Issuing House:

As a member of stock exchange, it is a firm that help to prepare prospectus and to sell shares offered to the public by company’s and government.

Right Issues:

These are shares offered to the existing shareholders in proportion to the number of shares held and usually at below market prices to make the offer attractive.

Private Placing:

This is a system of raising funds from the market whereby the stocks of a company are placed with a stockbroker who then seeks out prospective purchasers.

Shares:

A share is a security evidencing part ownership in a company. It is a unit of ownership interest which a holder has in a business unit translated into financial terms.

Public placing:

– This is describes as where a firms shares are quoted on the stock exchanged.

Offer For Sale:

This is a system where by existing share holders offer their shareholding as part of them for public subscription.


Chapter Five


5.0 Summary, Conclusion And Recommendation

In the proceeding chapter, discussion of findings on the analysis of data collected was made. In this chapter, researcher would make a summary of finding discussed in the proceeding chapter, draw conclusion and make recommendations.


5.1 Summary

The operation of Nigerian Stock Exchange and the impact of the global financial crisis is the main focus of this project work.

My findings during the course of the research revealed that the operations of the Nigerian Stock Exchange are as updated as those of most sub-Saharan African Countries and the developed countries. As the Pivot on which the economy revolves, the stock exchange is making tremendous improvement in human capital Development, more effective synergy in the operating members and establishing more branches nationwide for proper functioning of both primary and secondary markets. Thus, from all findings relative to structure and instruments available, it can be seen that the NSE has been striving hard to provide the right atmosphere that will assist the economy to develop greater technological capability for raising investment fund. And serve as a foreign for the mobilization of funds to finance industrial growth. A measure which will help to stimulate public interest in stock market operation and create a more effective mobilization of capital.

The development and continuity of the Nigerian Stock Exchange is essential to the development of the Nigerian Economy. To this end, the exchanges in recent times have evolved so many strategies to enhance its services to the members of public. One of such is the introduction of the central securities clearing system (CSCS) which facilitates the delivery and settlement of security transacted in an organised stock market. All shares traded in the Nigerian stock Exchange must thus be deposited with the central securities clearing System.

The Nigerian Stock Exchange also opened its internet facility (CAPNET) with a view to helping investors; operators and the international communities have direct access to information on the nation’s stock Market and those of other countries. Also, Stock Market Legislation and regulations have been adequate. The NSE has been internationalized and the clearing, delivery and settlement of transactions have been efficient. The exchange has also been able to introduce a second tie security market (SSM) which is meant to encourage indigenous enterprises and modernise their business.

In practice, however, there are many problems bedevilling its speedy progress. Some of these set backs include the recent global financial crisis which affected the stock exchange to a measurable level, inefficient infrastructures, high transaction cost, paucity of securities, Macro –economies instabilities, Limited number of branches, the buy and hold attitude of the investors harsh government policies and the like of them. Amidst in contributing to the growth and development of the Nigerian economy, as we as maintaining its global recognition.


5.2 Conclusion

Based on the research findings and their analysis, it is the wish of the researcher to conclude that the operations of the Nigerian Stock Exchange has advanced to world class and has played a tremendous role in the development of the Nigerian economy respective of the momentary set back due to the global finance crisis


5.3 Recommendation

Based on the findings of this research, the following recommendations were made.

  1. More branches of Nigerian Stock Exchange should be opened in almost every state of the federation so that the public government agencies state and local government can easily finance their project through the Nigerian Stock Exchange with ease.
  2. The Nigerian Stock Exchange should also find ways of improving upon its operations through seminars, symposium and public enlightenment about the market for the investing public. This will broaden the general awareness of the stock market to the investing public.
  3. The NSE should in addition sponsor a research on the “buy and hold securities attitude for many Nigerians” to find out all the causes and how best they can be tackled.
  4. And as well organize a seminar in this direction for all shareholders educating them on how to transact the business of securities. This will go a long way eliminating or reducing their ignorance which has created this attitude on them.
  5. Finally government should come out with policies that will enhance the activities of Nigeria Stock Exchange and also if possible deregulate or liberalize the capital market so that market forces should be allowed to determine the prices of securities and exchange commissions.

The Operations Of The Nigerian Stock Exchange And The Impact Of Global Financial Crisis


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