CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The Nigerian Stock Exchange (NSE) was established in
September 15, 1960, as the Lagos Stock Exchange. In December 1977, it because the Nigerian stock Exchange with branches established in some of the major commercial cities of the country. At present, there are six branches of the Nigerian stock Exchange.
Each branch has a trading floor. The branch in Lagos was opened in 1961; Kaduna, 1978; Port Harcourt, 1980; Kano, 1989; Onitsha, February 1990; and Ibadan, August 1990; Abuja October, 1999 and
Yola, April 2012. Lagos is the head office of the exchange. An Office has just been opened in Abuja.
The Exchange started operations in 1961 with nine teen (19) securities listed for trading. Today there are 262 securities listed on the exchange, made up of eleven (11) government stock, forty nine (49) industrial loan (Debenture) preference stocks and one hundred and ninety four (194) Equity/ordinary shares of companies, all with a total market capitalization of approximately N287.0 billion, as at August 31, 1999.
The Exchange was incorporated under the company limited by guarantee and formed to promote commerce in Nigeria. The Lagos stock exchange was given initial financial backing by the Central Bank of Nigeria (CBN). It had authorized share capital of N10,000 of 500 share at N20 each.
In December 1997, the following recommendation of the government financial system review committee of 1976, headed by Pius Okigbo, the Lagos Stock Exchange was renounced and reconstructed into the Nigerian Stock Exchange (NSE).
The Stock Exchange is a vital economic institution. The height of development the world has attained make the stock Exchange Services indispensable. The security Exchange market (SEM) is seen as a vehicle of fund mobilization and the development of local capital in Nigeria. It provides the facilities that make it possible for buyers and sellers to meet perhaps, an example of a stock exchange
Market is the Lagos Stock Exchange through the act of parliament as a result of the need for a market for the selling and buying of securities. The stock exchange of capital in the capital market for the development of the West African sub-region.
Over the years, the stock exchange market has been on the downward swing and is characterized by loan growth. The market has defined all necessary changes made to strengthen of the security exchange market (SEM) is characterized by unstable market growth, low level of income saving, corruption, inflation of market prices and lack of interest. These and many more have made the security exchange market to lose focus, thereby causing a downward movement of the economy.
It is this, necessary to direct a searchlight of this activities of the security exchange market (SEM) as a body where in lies the hope of our economical development so as to access its achievement, problems and prospects in helping to actualize the noble objectives of acts that set it up.
1.2 STATEMENT OF THE PROBLEM
There is abundant evidence that most Nigerian business lack long term capital according to Donwa and Odia (2010) the paucity of long term capital has posed the greatest predicament to economic development in most African countries including Nigerian. The business sector has depended mainly on short term financing such as overdraft to finance even long term capital. Based on the maturity, matching concept such financing is risky. All such firms need to raise can appropriate mix of short and long term capital.
Although , most recent literatures on the Nigerian capital market have recognized the tremendous performance the market has recorded in recent times Ngerebo and Torbira, (2014) reveal that there are two divergent opinions on the role of capital market activities in Nigerian, the first view is the capital market activities synchronic the divergent preference of portfolio managers and financial institution and those of savers by mobilizing long term funds, the alternative view is that the capital market merely promote investment in consumer goods and not acquisition of new fixed assets that are invested rather than consumed. However, the vital role of the stock exchange in economic growth and development has not been comprehensively investigated thereby creating a research gap in this area. This study is undertaken to examine the contribution of the stock exchange in the Nigerian economic growth and development. Aside the social and institution factor inhibiting the process of economic development in Nigerian, the bottleneck created by the death of finance to economy constitutes a major setback to its development. As a result, it is necessary to evaluate the Nigerian stock exchange market.
1.3 OBJECTIVE OF THE STUDY
The main objective of the study is to look at the effect of Nigerian stock exchange in Nigerian economic growth and development. The specific objective includes.
1 To determine whether enlightenment and publication in the primary and secondary market affect Nigerian stock exchange.
2 To find out whether instability in Nigerian economic affect the market of stock exchange.
3 Find out extent in which Nigerian stock exchange has helped in the growth and development industrials sector.
4 Find out whether Nigerian stock exchange has
- Find out if Nigerian stock exchanges are facing the problem of delay in delivery and settlement in stock transaction.
1.4 RESEARCH QUESTION
This research shall be guided by the following research questions.
- Does insufficient information, enlightment and publication in the primary and secondary market affect Nigerian Stock Exchange?
- Does political instability affect economic growth in the Nigerian Stock Exchange Market?.
- To what extent has the Nigerian Stock Exchange helped in economic growth and development in industrial sectors?
- What stock Exchange rate has contributed to the industrial development of Nigeria sector?.
- How does the Nigerian Stock Exchange Market impact on the economic growth and development process in Nigeria?.
1.5 SIGNIFICANCE OF THE STUDY
This study will explore the impact or effectiveness of stock Exchange Market instruments on Nigerian Economic growth. Though the scope of study will be limited to the capital market, it is hoped that the exploration of the market will provide a broad view of the operations of the stock Exchange. It will contribute to the existing literature on the subject matter by investigating empirically the role which Nigerian stock exchange plays in economic growth and development of the country. The main importance of this study is that it will provide policy recommendations to policy markets on ways to improve operations and activities of the capital market.
It would also educate most uniformed people about the roles and responsibilities of the securities exchange market (SEM). This project would also provide insights to students of banking and finance who are not well informed about the prevailing situations in the Nigerian Stock Exchange Market.
Above all, the essence of the study is to point out a positive direction for vibrant and professionally efficient security exchange market (SEM).The resultant efficiency will be reflected in high ethical standard of workers and translate to a very high image for the Nigerian Stock Exchange (NSE) with obvious and positive economic implications.
1.6 SCOPE OF THE STUDY
The empirical investigation of the impact of the capital market on the economic growth in Nigeria was restricted to the period between 1981 and 2011 due to the non availability of some important data.
1.7 DEFINITION OF TERMS
STOCK:-A type of security that signifies ownership in a corporation and represents a claim on part of the corporations assets and earnings. It can also be seen as a unit of a share of a company that is traded on the floor of the Nigerian Stock Exchange (NSE). It is often referred to as a “SHARE’”.
NIGERIAN STOCK EXCHANGE: The Nigerian stock Exchange (NSE) was established in1960 and currently has some 283 listed companies with a total market capitalization as at March 09, 2007 of about N5.819 trillion (46.2 billion). The instrument traded in the market include government securities, corporate bonds and shares (stocks) and mortgage loans. The market consist of a inner capital market (market of the securities) and the outer capital market (not directly concerned with the issues of new securities but engaged in the business of long term borrowing and lending upon which the issued of new securities depends. The capital market embrace therefore, both the new issues (primary market and the secondary market.)
ECONOMIC GROWTH: This is an issue increase in the capacity of an economy to produce goods and services, compared, from one period of time to another Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation. For comparing one country’s economic growth to another, Gross domestic product (GDP) or gross net product (GNP) per capital should be used as these take into account population differences between countries.
ECONOMIC DEVELOPMENT: This is sustained, concerted actions of policy makers and communities that promote the standard of living and economic health of a specific area. Economic development can also be referred to as the quantitative and qualitative changes in the economy. Such actions can involve multiple areas including development of human capital, critical infrastructure, regional competition vanes, social inclusion, health, safety, literacy, and other initiatives.
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