AN ANALYSIS OF THE OPERATION OF THE NIGERIAN CAPITAL MARKET (A CASE STUDY OF THE NIGERIAN STOCK EXCHANGE KADUNA BRANCH
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AN ANALYSIS OF THE OPERATION OF THE NIGERIAN
CAPITAL MARKET
(A CASE STUDY OF THE NIGERIAN STOCK EXCHANGE KADUNA BRANCH
ABSTRACT
The capital market has an important contribution make in terms of
mobilization of savings to profitable self liquidating investment. An analysis
of the Nigeria
capital market is the subject of this research because effective capital market
can offer several advantages to governments and private sector. This project is
designed to analyze the problems and prospects of the capital market, this is
because it is from the capital market that funds were raised to finance most of
the investment in premises, buildings productions, plant and machinery of the
private sector in Nigeria.
Nevertheless the result of this project shows that the Nigeria capital
market has contributed immensely towards providing short–term and long capital
for government and private companies for the economic growth of Nigeria. It
also assist investors, to have great confidence in funding big project.
Finally, for the capital market to enable operational efficiency and attract
more investors, it depend largely on the extent to which the capital market
adapts fast hanging world information through the use of internet, E-mail, E-Commerce
and effective telecommunication like the telephone, locally and (internationally)
GSM and etc.
TABLE OF CONTENTS
Title page- - - - - - - --- - - i
Declaration - - - - - - - - - ii
Approval - - - - - - - - - - iii
Dedication - - - - - - - - - iv
Acknowledgement - - - - - - - - v
Abstract - - - - - - - - - - vii
Table of contents- - - - - - - - - viii
CHAPTER
ONE – Introduction
1.1 Background
of the study - - - - - - 1
1.2 History
background of Nigerian Stock Exchanged
Market
in Nigeria - - - - - - - 3
1.3 Objective
of the study - - - - - - - 8
1.4 Statement
of General Problems- - - - - 9
1.5 Background
of the Subject Matter - - - - 10
1.6 Rational
for the study- -- - - - - - 11
1.7 Scope
of the study - - - - - - - 12
1.8 Statement
of hypothesis-- - - - - - - 12
1.9 Definition
of terms - - - - - - - 13
CHAPTER
TWO- Review
related literature
2.0
Introduction
- - - - - - - - 14
2.1
The
Nigerian securities and Exchange Commission - 17
2.2
Evaluation
Stock Exchange Commission Activities in
Nigeria - - - - - - - - - 19
2.3
The role
of the capital market - - - - - 21
2.4
Ideal
environment for efficient capital market - - 22
2.5
The
Nigerian Stock Exchange Operation - - - 23
2.6
Trading
procedure in Nigeria Stock Exchange - - 26
2.7
The
Issuing Houses practice - - - - - 29
2.8
The Unit
Trust - - - - - - - - 34
2.9
The
Problems of the Nigerian Capital Market - - 35
CHAPTER
THREE – Research Methodology
3.0 Introduction
- - - - -- - - - 43
3.1 Research
approaches used - - - - - 43
3.2 Justification
for approach used- - - - - 43
33 Instrument
used- - - - - - - - 44
3.4 Research
population and sample size- - - - 45
3.5 Sampling
procedure employed - - - - - 45
3.6 Justification
for sample procedure and sample size- - 46
3.7 Statistical
techniques used in Analysis the data. - 46
CHAPTER
FOUR – Presentation and analysis of Data
4.0 Introduction
- - - - - - - - - 48
CHAPTER
FIVE - Summary, Conclusion and Recommendations
5.0
Introduction
- - - - - - - - - 55
5.1
Summary of
finding - - - - - - 55
5.2
Conclusion - - - - - - - - 55
5.3
Recommendations - - - - - - - 56
References - - - - - - - - 58
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The capital market as a subsection of financial
market, deals in long term and short term, as well as operating stock. It may not involve the issue of negotiation
instrument but, cash flow from operators and direct negotiation or
re-capitalization. These are done
through organization such as:
i.
Development
Bank, NIDB, NBC
ii.
THE
Nigerian Stock Exchange
iii.
The Issues
Houses
iv.
The Unit
Trust which are largely the government owned and therefore, have their capital
subscribed by government. It also
involves Insurance Company which also have their capital issued subscribed
direct also have owner i.e. government or private owned. They Rightly be called the market for direct
negotiation long term (NDLF) that is the arm of capital market.
The other arm of capital market is the securities
market that deal in the issue of sales of long term securities like the money
market. Securities market involves the
lending of money in one form or the other unlike the money market however, the
securities trade in long term debt are bonds issue by the government on agency
which when bought by individual or institution grants loan to what ever organization
that issued it.
It is thus a promissory note or (100) whichever
issue promissory to repay at certain date in the future and pay by the buyer as
a guaranteed rate of interest. Among
such bonds available in Nigeria
capital market are:
i.
The
federation of Nigerian First Development Stock 1964, 1969 and 1979.
ii.
Cooperate
debenture stock: These are issued by the
government whose stock are normally, quested on the stock exchange, are recent
one being the CFAO often for subscription of N25 million 12% redeemed debenture
stock.
The equities on the other hand are purchase share
or stock issued by company or institutions by individual, group or financial
intermediaries. The purchased of share
or stock does not become a creditors as the case of bond or under bond issue,
rather he became an owner of the company.
The corporation promises nothing in return except through good business
management, it increase its earning which allow the purchased (now an owner) to
earn in dividends.
The equities on the other hands are purchased
shares and stock issued by a company or institution by an individual. The equity can be in form of shares (offer
for subscription) as the case was first issued in the Nigeria in
February 1959 when the Nigeria
Cement Company Limited. (Niger Cement)
made a public offer of N100.00 N2 per value share at April, 1960.
The securities market can be newly issued
securities board, or equities that primary segment of the capital market or in
securities that have already been issued.
That is the secondary market for outstanding securities that has also
been issued.
1.2 HISTORICAL BACKGROUND
NIGERIAN STOCK EXCHANGE MARKET
The
Nigerian Stock Exchange (NSE) was established in 1960, 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). All
listed are included in the only index, the Nigerian Stock Exchange, All shares Index (website [1] (http.
In 1998,
the NSE management protested to the government about a report of a committee
the government had established, headed by respected banker Dennis Odife, on the
form of Nigerian Capital Market. The NSE
said that the report recommendation for setting up what would be called the
Lagos Stock Exchange (L.S.E) was bound to be misunderstood by many Nigerian and
Foreign Investors, who might questions its down grading to local exchange. NSE officials requested that the exchange
retain its name and be allowed to operate on level of playing field with
proposed government exchange and argue that the SEN should not be given undue
advantage over the NSE and other competitors.
The Securities and Exchange Commission (SEC), the apex government body
which regulated the capital market in Nigeria favour the multiple
exchange system, which is view at a better option for attracting the investors
to cities other than Lagos,
when capital market activities concentrated.
The Lagos exchange is an
affiliate member of the Federation Stock Exchange (FIBN) its also an observer
at the meeting of International Organization of Securities (I.O.S.C.O) and the
foundation member of African Stock Association (ASEA).
The
exchange has an automated trading system.
Data on his companies performance are published daily, weekly, monthly,
quarterly and annually. In order to
encourage foreign investment in Nigeria,
the government has abolished legislation preventing the flow of foreign broken
to enlist a dealer registration. The
Nigerian Stock Exchange and Investors of any nationality are free to invest.
Nigerian companies are also allowed multiple and
cross burden listing on Foreign Markets Trading days and times are on Monday to
Friday 11.00 to 13.00 charges include 3% commission traded value shared and a
1% securities and exchange with holding tax on dividend and invest remain at
10% Corporate Income Tax 35% per capital gain tax 10% how is the all shares
index calculated what is the value of listed year 1994?
In the 1950s, there serious discussion in both
business and academic circle about the formation of an organization of an
capital market in Nigeria. However, in May, 1958, the Federal Ministry of
Commerce and Industries appointed a committee to consider the desirability and
means of establishing the stock market. The committee recommendation that,
stock exchange market should be established and that part time broker to be
“licensed to market off” sellers and buyers of marketable securities. On 15th September, 1960, the then
Lagos Stock Exchange was incorporated as non profit organization purposely
encourage in low and out flow of securities for the purpose of investment.
The Nigerian Industrial Development Bank (NIDB),
the Central Bank of Nigeria (C.B.N) Federal Government with authorized share
capital of N100.00 dividend into 500 share of N2.00 each. However, this has been increase to N20.00 it
was further recognition to the existence or strengthened by the Lagos Stock
Exchange Act 1961 which gives recognition to the existence to the stock
exchange by granting protection to its business (non-member where prohibited by
its provision from electing in stock exchange quested on the exchange). However, the committee formed for the purpose
of establishing stock exchange market, market submitted to the following
recommendation.
Ø The Established of Rules of Transfer
Ø The creation of facilities for dealing share
Ø The reduction or elimination of tax deduction at
source including measure to encourage saving issue of securities of government
and other organization.
On
the 5th of June, 1961, prior to the acceptance or otherwise of the
recommendation, the Lagos Stock Exchange Act 1961 came into being as a result
the exchange was transformed into Nigerian Stock Exchange with branches Kaduna, Lagos, Port Harcourt. All mentioned branches are operating primary
as trading floor while the National Council remain over-all responsibility for
the quotation and enforcement of regulating capital market. However, being a capital market where flow
objectives of the capital market include the following.
i.
Maintain
the discipline in Capital market
ii.
Broadening
the share ownership practice
iii.
The
creation of appropriate mechanism or instrument for capital market (investment)
or formation of an efficient among competing project.
iv.
Maintain
fair price for securities
v.
Provision
of special financing strategic for project lending long term periods.
1.2 OBJECTIVES OF THE STUDY
The
position of the capital market to the economic development of any economy as
very great and therefore, business managers are very conscious of its operation
its on this basis that this study is paramount in order to understand the
working of the Nigerian Stock Exchange and how its positively engineering the
growth of the Nigeria economy through the provision of capital to individual
and organization to either expand their business or capitalize.
This study
would attempt to look at how the growth of business organization positively or
negatively and the way forward. It would
attempt to look at how the growth of business organization it would also assess
the difficulties organization faces in an attempt to their expand or
re-capitalized their business through the Nigerian Stock Exchange.
It is also hope to mute solution on the
way forward solving some of the problems organization faces in order to acquire
capital through the Nigerian Stock Exchange.
1.3 STATEMENT OF GENERAL PROBLEMS
The
position of the capital market to the following economic development of any
economy as very great and therefore, business managers are very conscious of
its operation. Its on this basis that
the study is paramount in order to understand the working of the Nigerian Stock
Exchange and how its positively engineering the growth of the Nigeria economy
through the provision of capital to individual and organization to either
expand their business or capitalize.
This study
would attempt to look at how the growth of business organization positively or
negatively and the way forward. It would
attempt to look at how the growth of business organization it would also assess
the difficulties organization faces in an attempt to their expand or
re-capitalized their business through the Nigerian Stock Exchange.
It is also
hope to mute solution on the way forward solving some of the problems organization
faces in order to acquire capital through the Nigerian Stock Exchange.
A new era
in life of the Nigerian Capital Market began on Monday July, 31st 1978, with the
opening in Kaduna
a branch of Nigerian Stock Exchange. The
branch serve million of Nigerian Investors.
The idea of having the branch is to assist in spreading the benefits of
stock market operation to the northern part of the country.
The Kaduna
Stock Exchange is located at Turaki Ali House behind NNDC on the first floor of
the building. The formation and proper
use of capital is pre-requisite for development of any country. Although capital on its own cannot bring
development, it has not be combined with the other factors of production like
land and labour.
Capital is
formed when people refused to spend their present income and invest it somewhere
like business for future use. Capital is
formed i.e. surplus money not spent now has to be channeled properly it is that
role of capital market comes in. Therefore,
the Nigerian Stock Exchange Kaduna branch is now located at the Magadishu
layout opposite Unity
Bank Building,
Kaduna.
1.5 RATIONALE OF THE STUDY
This
research project is of utmost important in the light of the fact that brings an
additional understanding of the Nigerian Capital Market in terms of its
operation as it affect organization.
It will
also help to create awareness of the general public particularly investors to
appreciate the opportunities that exist in the capital market.
This study
will secure as reference to student studying financial market to understand the
operation of the capital market easily.
1.6 THE SCOPE OF THE STUDY
Given the
scope of the Nigerian Capital Market, the study will look into the operation of
the Nigerian Stock Exchange within the capital market particularly Kaduna branch.
The role
of securities and exchange commission and to some extend the activities of the
issuing houses as market operators within the capital market and also give some
possible solution and recommendation.
1.7 STATEMENT OF HYPOTHESIS
Ho: The operations of the Capital Market did not satisfy the demand of
Nigerian’s economy.
Hi: Operation of the Capital Market satisfy the demand of Nigerian’s economy.
1.8 DEFINITION
OF TERMS:
(1) N.S.E: Nigerian Stock Exchange
(2) S.E.C.: Security Exchange Commissions
(3) F.I.B.C.: Federal of Internal Stock Exchange
(4) C.S.C.S.: Capital
Securities Clearing System
(5) C.I.C.: Capital Issue Commission
(6) A.S.E.A.: African Stock Exchange Association
(7) L.S.E.: Lagos
Stock Exchange
(8) (J.S.E): Johanneseburg Stock Exchange
(9) F.S.E.: Federation Stock Exchange
(10) I.O.S.C.O.:
International Association Securities Commission
(11) F.A.C.O.M.E.X.:
First African Commodity and Future Exchange
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