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THE IMPACT OF CAPITAL MARKET ON THE NIGERIAN
ECONOMY WITH EMPHASIS ON THE ROLE OF THE
NIGERIAN STOCK EXCHANGE
BY
MBAH EMMANUEL CHIJIOKE REG. NO: PG/MBA/ 09/53698.
DEPARTMENT OF ACCOUNTANCY
FACULTY OF BUSINESS ADMINISTRATION UNIVERSITY OF NIGERIA
ENUGU CAMPUS
JULY, 2011
TITLE PAGE
THE IMPACT OF CAPITAL MARKET ON THE NIGERIAN
ECONOMY WITH EMPHASIS ON THE ROLE OF THE NIGERIAN
STOCK EXCHANGE
BY
MBAH EMMANUEL CHIJIOKE PG/MBA/ 09/53698.
BEING A PROJECT RESEARCH SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD
OF MASTER OF BUSINESS ADMINISTRATION (MBA) DEGREE
IN ACCOUNTANCY
DEPARTMENT OF ACCOUNTANCY FACULTY OF BUSINESS ADMINISTRATION
UNIVERSITY OF NIGERIA ENUGU CAMPUS
JULY, 2011.
CERTIFICATION
This is to certify that Mbah Emmanuel Chijioke, an MBA student in the
Department of Accountancy with Registration Number PG | MBA | 09 | 53698, has
satisfactorily completed the requirement for the course and research work for the
award of Master of Business Administration (MBA) Degree in Accountancy.
________________________ _______________________
R.O. UGWOKE Dr. C. M. Odoh
(Head of Department) (Supervisor)
_____________________ _______________________ Date
Date
_______________________
External Examiner
DEDICATION
I dedicate this piece of work to my Loving mother, Madam Martina
Madukaife Mbah and to the memory of my late father, Chief Pulife Mbah and to
all those who seek knowledge for social JUSTICE & EQUITY.
ACKNOWLEDGEMENT
This work has come to a successful completion due to a combination of
efforts, hard work and material support of some individuals.
First and foremost, I am very grateful to Dr. C. M. Odoh (dutifully
represented by Mrs. E. O. Onyeanu) for his patience, guide and encouragement. I
thank him mostly for taking his time to make necessary observation and
corrections.
In the same vane, I wish to use this medium to express my appreciation to
my lecturers: Dr. (Mrs.) R. G. Okafor (H O D, Accountancy Department), Mr. R.
O. Ugwuoke, Mr. Osita Aguolu, Mrs. E. O. Onyeanu and others whose names may
not be mentioned here for unavoidable reason of space but have impacted
positively on us in the course of this programme. May God reward you all
accordingly.
Equally, I wish to express my profound appreciation to the following people:
Engr. & Mrs. J. O. C Okike and Mr. & Mrs. Simeon Okidu for their moral,
material and financial supports. May the good Lord replenish your purse in million
folds. Mrs. Peace Uhaka is not left out. Her prayers and spiritual support is highly
appreciated. And to my typist, Miss Esther, I say thank you!
Finally, I give thanks to God for His abundant mercies, divine guidance and
protection throughout my stay in the University.
To God be the Glory!
MBAH, EMMANUEL C.
ABSTRACT
The researcher’s mind on the topic, “The impact of the Capital market on the
Nigerian Economy with emphasis on the role of the Nigerian Stock Exchange” was
captured when a similar topic was discussed at a seminar organized by the Bureau
for Public Enterprise (BPE) to conscientize and sensitize Nigerian people to accept
the privatization programme. The organizers sought to expose how highly
underutilized the Nigerian Stock market is and what individuals and Corporations
would gain in patronizing the market. They also compared the operations and
volume of transactions with other emerging stock markets in the world. The
research work is basically, all about assessing the extent of the impact of the
capital market on the socio-economic development of this country and an in-depth
search into ways of improving upon the operations of the Nigerian Stock
Exchange. In his findings, the researcher noted (among other things) that there was
underutilization of the Stock Exchange market due to poor enlightenment
campaign, and lack of transparency and accountability on the part of the operators
of the market. In the conclusion, the researcher admitted that the future prospects
of the exchange market is still bright but emphasized that the operators of the
market must engender accountability and transparency as this will go a long way to
re-installing much desired confidence in the investing public and guarantee the
market’s future development.
LIST OF FIGURES
Figure 2.1: Stock Exchange in Operation … … … … 23
Figure 2.2: The Functional Relationship of the NSEC within
the New Issues market … … … … … 36
Figure 2.3: The Functional Relationship of the Stock Exchange
within the Secondary Market … … … … 38
LIST OF TABLES
Table of 2.1: Impact of the Loss of Investors Confidence in the Nigeria Capital Market … … … … … 32
Table 2.8.3: The Daily Stock Summary … … … … 41
Table 4.1: Identify your Sex? … … … … … … 60
Table 4.2: What is your Occupation? … … … … …. 61
Table 4.3: Are you Aware of the Existence of the Nigeria Stock Exchange? … … … … … … 62
Table 4.4: How Familiar are you with the Operations of the Nigerian Stock Exchange … … … … 63
Table 4.5: Are you Aware of the Aims and Functions of the Nigeria Stock Exchange? … … … … 64
Table 4.6: If No 5 is yes, do you make use of the Exchange? … 65
Table 4.7: Where do you (Corporation, Individuals and Government) raise your Fund? … … … … 66
Table 4.8: Why Prefer the Bank as an Outlet? … … … 67
Table 4.9: Has the Nigerian Stock Exchange contributed Significantly to the Development of the Economy? … 68
Table 4.10: Are you Satisfied with the level of Development in the stock Exchange Market? … … … … 69
Table 4.11: Are you satisfied with the Pricing Policy? … … … 73
Table 4.12: Are you Aware of the Introduction of a Computerized System of Clearing Settlement and Delivery of Trade Transaction, the (CSCS)? … … … … … 74
Table 4.13: What is the Movement of Share Prices since the Introduction of Central Security Clearing System? … 75
Table 4.14: Are you aware of the introduction of the Automated Trading System (ATS), through which stockbrokers can trade from their offices and homes? … … 76
Table 4.15: If your answer to 17 is yes, do you think the Automated Training System (ATS) will enhance the operations of the Stock Exchange? … … … 77
Table 4.16: How can you Assess the Impact of Information Technology (internet services) vis-à-vis the operations of the Nigeria Stock Exchange? … … 78
TABLE OF CONTENTS
Pages
Title Page … … …. … … … … … … i
Certification … … …. …. ... … … … … ii
Dedication … … … … … … … … … iii
Acknowledgement … … … … … … … … iv
Abstract … … … … … … … … … … v
List of Figure … … … … … … … … … vi
List of Tables … … … … … … … … vii
Table of Contents … … … … … … … … vi
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study … … … … … … 1
1.1.1 Evolution of the Capital Market … … … … … 3
1.2 Statement of the Research Problems … … … … 7
1.3 Objective of the Study … … … … … … 8
1.4 Research Question … … … … … … … 8
1.5 Research Hypothesis … … … … … … 9
1.6 Significance of the Study … … … … … … 10
1.7 Scope of the Study … … … … … … … 10
1.8 Limitation of the Study … … … … … … 11
1.9 Definition of Terms … .. … … … … … 12
References … … … … … … … … 14
CHAPTER TWO: REVIEW OF THE RELATED LITERATURE
2.1 Wall Street – Where It All Began … … … … 15
2.2 The Nigerian Capital Market … … … … … 16
2.3 The Role of the Nigerian Capital Market … … … … 17
2.3.1 The Pooling Function … … … … … … 19
2.3.2 Facilitating Capital Formation … … … … … 19
2.3.3 Risk Reduction Function … … … … … … 20
2.4 The concept of the Nigeria Stock Exchange … … … 20
2.5 The Nigerian Stock Exchange Market … … … 23
2.5.1 Membership of the Nigerian Stock Exchange … … 24
2.5.2 Functions and Importance of the Nigerian Stock Exchange 25
2.6 Securities and Exchange Commission (SEC) … … 27
2.6.1 Duties and Functions of the Securities
and Exchange Commission … … … … … 28
2.7 The Impact of the NSE Crisis on the Nigerian Capital Market 29
2.8 The Stock Exchange in Operation … … … … 34
2.8.1 The Primary Market … … … … … … 34
2.8.2 Evaluation of the Nigerian Stock Exchange … … … 39
2.8.3 The Daily Stock Summary … … … … … 41
2.9 Problems Associated with the Nigerian Stock Exchange … 47
References … … … … … … … … 50
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction ... … … … … … … … 51
3.2 Research Design … … … … … … … 51
3.3 Sources of Data … … … … … … … 52
3.3.1 Primary Data … …. … … … … … … 52
3.3.2 Secondary Data … … … … … … … 53
3.4 Method of Data Collection … … … … … … 53
3.4.1 Reasons for using the Aforementioned Methods … … 53
3.5 Determination of Population Size … … … … 54
3.6 Sample Procedure … … … … … … … 54
3.7 Methods of Administering Questionnaires … … … 55
3.8 Decision Rule … … … … … … … 55
References … … … … … … … … 57
CHAPTER FOUR: PRESENTATION AND ANALYSIS
4.1 Introduction … … … … … … … … 58
4.2 Presentation and Analysis of Responses from Questionnaire 59
4.3 Analysis of Interview … … … … … … 80
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS.
5.1 Summary of Findings … … … … … 86
5.2 Conclusion … … … … … … … … 87
5.3 Recommendations … … …. … … … … 88
Bibliography … … … … … … … 90
Appendix – Questionnaire … … … … … 91
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Nigeria has a formal and active capital market. Before 1961, nearly all formal
savings and deposits went through the banking system while the then colonial
masters invested major capital balances for the country on the London stock
exchange. However, following the establishment of the CENTRAL BANK OF
NIGERIA in 1959, it was logical to have a stock exchange in 1960, which
commenced operations in 1961. Thus, the foundation was ordered for the
operations of the Nigerian capital market. The capital market tends to provide a
forum for the interaction of the economic surplus and economic deficits to attract
business under a highly regulated environment.
Earlier in 1959, the Central Bank of Nigeria had floated the first Nigerian
development loan stock, which was listed overseas. Subsequent issues in 1961 and
thereafter were listed on the new local exchange.
The Nigerian stock exchange is a private, non-profit making organization
limited by guarantee. It was incorporated via the inspiration and support of
businessmen and the federal government through the CBN, owned by about 300
members. The membership includes financial institutions, stockbrokers and
individual Nigerian of high integrity who have contributed to the development of
the stock market and the Nigerian economy. The council members (Board of
Director) of the stock exchange are elected at apiece annual general meeting by
members of the exchange. The tenure of the presidency is limited to one three-year
term. The council is responsible for policy-making but the Director -General
(formerly Prof. Ndi Okereke Onyiuke , Emmanuel Ikhazobor) and presently at the
time of this research, Dr. Oscar Onyema and his team of executives administer the
day to day affairs of the exchange. The council members, management and staff of
the Nigerian stock exchange as well as stockbrokers are subject to a stringent
regime of codes of conduct, which calls for a higher degree of integrity, discipline,
skill and high sense of patriotism.
Dealing members of the stock exchange are the stock broking firms licensed
by the exchange to purchase and sell shares on behalf of the investing public.
There are over 200 of them at the moment.
The exchange is a Self-Regulatory Organization (SRO), making and
enforcing rules for its members. In 1977, the exchange was reorganized and
renamed “The Nigerian Stock Exchange (NSE)”. Today, the NSE has 10
functional trading floors in different parts of the country, namely; Lagos, Abuja,
Kaduna, Port Harcourt, Kano, Onitsha, Ibadan, Yola, Benin, Uyo and Ilorin.
1.1.1 Evolution of the Nigerian Capital Market
The Nigerian capital market was established in 1960 and became open for
operation in 1961. However, the evolution of the Nigerian capital market can be
traced to as far back as 1946 when the government floated a N600,000 (1.25% of
Government stock as part of the Nigerian Ten-Year plan embarked on to help raise
funds from the London Stock Exchange.
In May 1959, the Central Bank of Nigeria (CBN) in pursuance of its role
with respect to the development a capital market floated the first federation of
Nigerian development loan of N4million on behalf of the government. Due to non-
existence of a formal securities market then, the CBN had to ensure that the stacks
carried with them reasonable assurance of marketability by introducing a central
register for matching buyers and sellers of shares and suggesting prices at which
the deals took place.
Following the favorable report of the Barback committee, whose
recommendation led to the registration of “The Lagos Stock Exchange” in March,
1960. This was subsequently followed by its incorporation under Section 2 Cap 7
on the 15th September, 1960. Trading however commenced formally on June 5
1961 after the enactment of Lagos Stock Exchange (LSE) Act of 1961.
Some catalytic institutions were established between 1959 and 1965. These
institutions are namely; Investment Company of Nigeria (ICON) ltd, Nigeria
Acceptance ltd (now NAL merchant Bank), and Nigeria Stock Brokers ltd.
The establishment of the above institutions gave rise to the need for the
orderly development of the capital market by regulating the time at which the
issues were brought to the market. This necessitated the setting up of the Capital
Issues Committee, an adhoc body with no legal backing under the CBN in 1962.
Trading at that period was however very low because of predominant lack of
awareness of the mechanics of stock exchange transactions and poor
communication. An evidence of the prevailing inertia in the stock exchange market
at the time is the fact that between 1962- 1970, the exchange handled only four
new issues of industrial securities. Issues of federal government were once a year
and annual turnover rarely exceeded N15m of which government stock accounted
for over 90%.
The market however experienced a significant growth with the
implementation of the Nigerian Enterprises Promotion Decree of 1972 and 1977.
The companies that complied with these decrees through the Nigerian stock market
boosted equity listing such that by the end of 1980, a total of 91 companies were
listed on the exchange.
In 1973, the government promulgated the Capital Issues Commission (CIC)
Decree of 1973 to give legal backing and more power to the commission in place
of the capital issues committee so as to enhance the implementation of the Nigeria
Enterprises Promotion Decree (NEPD).
However, the CIC continued to operate as a department in the CBN but had
the function of determining the price, timing, and the amount of offers for sale or
subscription as set up by the Financial System Review Committee headed by Dr.
Pius Okigbo (the then Economic Adviser to the federal government).
“Taking into account the historical development of the Financial System in
Nigeria ;its evolution and impact on socio-economic and political development of
an egalitarian society, the Financial System Review Committee was charged with
the following terms of reference:
I. To examine the adequacy, relevance or otherwise of the institution and the
structure of the financial system to meet the needs of the economy for rapid
economic development.
II. To examine the organizational and ownership structures of institutions in the
system and evaluate their viability in the context of the stated preamble, the
economy’s future domestic and international requirements and development
trends.
III. To study operational trends in the system with particular reference to
promotional activities of the financial institutions generally.
IV. To make recommendations in the light of their findings in respect of (1) and
above all.
V. Any other matters or issues which the committee in its own judgment deems
relevant and helpful in the successful discharge of their task”.
Dr. P. C Okigbo’s committee among other things recommended the following:
I. Facilitate effective management of the economy
II. Provide non-inflationary support for the economy
III. Ensure that no viable project is frustrated singly for lack of fund
IV. Achieve greater mobilization of savings and its efficient and effective
channeling
V. Insulate the economy as much as possible and as much as desirable from the
vicissitudes of the international economic scene.
VI. The establishment of a Securities and Exchange Commission (SEC) to
replace Capital Issues Commission (CIC) and the establishment of additional
stock exchange. This resulted to the establishment of trading floors at
Kaduna, Port Harcourt and the Lagos Stock Exchange (LSE) that was later
redesigned the Nigerian Stock Exchange (NSE).
1.2 STATEMENT OF THE RESEARCH PROBLEMS
This research work is concerned with the reasons why the Nigerian Stock
Exchange has not made the much desired impact on the economy of this country as
designed by the decree establishing it. It will also evaluate the impact of the market
with a view to finding solutions to the following problems:
� How can the desired awareness and confidence be instilled on this market?
� How can the functions and roles of this market in facilitating the growth of
the economy be achieved?
� How can this market be developed to meet international standard?
At the Nigerian Stock Exchange (NSE), buyers and sellers are the same
people. To ensure sound economic development, trading on the exchange has to be
extensive. This is because an enduring economic development cannot be achieved
if the market is not properly developed. The market and its operators must be seen
creating the economic impact and confidence that will enhance the capacity of the
market.
1.3 OBJECTIVE OF THE STUDY
The study has the main specific objective which is to ascertain the impact of
the capital market on the Nigerian economy and to appraise the awareness or
otherwise of the existence of the stock market by showing its impact in the
business world. Other specific objectives were raised:
1. To determine the relationship between the capital market and Nigerian
Economy;
2. To determine or rather to evaluate if the deficiencies of the market affect
Nigerian Economy;
3. To establish the effect of the Nigerian stock exchange crisis on Nigerian
capital market;
4. To ascertain if there are challenges of the Nigerian stock exchange in
developing the capital market;
5. To determine the role of capital market in developing the Nigerian
Economy.
1.4 RESEARCH QUESTIONS
To achieve the above objectives, the following research questions were
raised:
1. Is there relationship between capital market and Nigerian Economy?
2. How do the deficiencies of the Nigerian stock exchange affect the
Nigerian economy?
3. How does the crisis in the Nigerian stock exchange affect Nigerian
Capital market?
4. What are the challenges of the Nigerian stock exchange in developing the
capital market?
5. What are the roles of the capital market in developing Nigerian
economy?
1.5 RESEARCH HYPOTHESIS
1. There is no significant relationship between capital market and Nigerian
economy.
2. The deficiencies of Nigerian stock exchange market do not affect Nigerian
economy.
3. The crises of Nigerian stock exchange negatively affect Nigerian capital
market.
4. The Nigerian stock exchange does not face any challenge in developing
capital market.
5. Capital Market did not play a significant role in developing Nigerian
Economy.
1.5 SIGNIFICANCE OF THE STUDY
It is a noted fact that for a meaningful transformation of a country to take
place, her capital market must be effective and active.
This study will be of significant interest to individuals, corporate bodies and
government as it would help them in mobilizing funds from the various networks
of institutions that exist in the market.
This study will also be significant to the institutional operators of the market
especially the Nigerian Securities and Exchange Commission (SEC) and the future
researchers who might want to share this experience. This study will however offer
some invaluable points that will bring to the researcher’s mind on the functions and
prospect of the Nigerian stock market.
1.7 SCOPE OF THE STUDY
The study covers the Nigerian capital market with a holistic emphasis on the
roles of the Nigerian stock exchange with Onitsha branch of the exchange as a
contact point. It covers all relevant issues pertaining to the Nigerian capital market
and the Nigerian stock exchange Vis-à-vis the Nigerian economy.
1.8 LIMITATIONS OF THE STUDY
In the course of this study, the researcher came across problems which in
one way or the other challenge the simple flow of this work. These include:
i. DISTANCE: In the course of this study, the researcher was visage with the
challenge of actually travelling to the Nigerian stock exchange in Onitsha
and visiting some stock broking firms in Enugu.
ii. TIME: It seems there was not enough time to meet up with this work. But
however, the researcher properly managed his time effectively and
efficiently.
iii. FINANCE: at a time it was difficult and nearly impossible to continue
because of demand for finance.
iv. FORECASTING AND HOARDING OF INFORMATION: Forecasting
seems to be prevalent in the market as most of the transactions were
dependent on it. Equally, I observed in the course of this research that those
approve for information were not really willing to give it.
v. FATIGUE: The human bourgeois also tried to hamper this study by
constant body breakdown as a result of fatigue, tiredness and distractions.
1.9 DEFINITION OF TERMS
To ensure comprehensive understanding of this research work, the under
listed terms are defined thus:
1. Stockbroker: Is agent who purchases and sells securities on a stock
exchange market on behalf of clients and receive remuneration for the
service in form of a commission.
2. Stock Exchange: Are a market where securities (bonds, stocks and shares of
varying types) are traded openly and where one can purchase or sell any of
such securities with relative ease.
3. Capital Market: Is a market in which long term capital is raised by industry
and commerce, the government and local authorities. Simply, it is that part
of the financial market that provides facilities for the transfer of medium and
long-term funds to various economic units.
4. Stockholders: Individuals, businesses and groups owning stocks in a
corporation.
5. Financial Instrument: Is a contract involving a financial obligation.
Examples include stock, bonds, loans and derivatives.
6. Shares: A share confers on its owner a legal right to have part of the
company’s profit and to exercise any voting rights attached to that share.
7. New Issue Market: Market where stocks are issued for the first time to the
members of the public.
8. The Secondary Market: This is a market where stocks are not being sold
for the first time. It can also be referred to as the market for second hand
stocks.
9. Deficit Savings Unit (DSU): An economic unit whose current income is
less than its current expenditure.
10. Savings-Surplus Economic Units: These are units with more funds than
they require for current consumption. They are therefore the ultimate savers
or fund suppliers to the system.
11. Financial Institutions: These are institutions that use their funds chiefly to
purchase financial assets, deposits, bonds, loans and so on.
REFERENCES
Alile H.I (1984); the Nigerian Stock Exchange Historical Operations and
Contributions to Economic Development: Bullion of the Central Bank of Nigeria.
Lead Capital (2010): Stock watch, a Guardian publication. Onyiuke Ndi Okereke J. (2010), Overview of the Nigerian Capital Market. Okigbo P. C (1981); the Nigerian Financial System, Longman Essex, U.K, Oxford Dictionary of Book-keeping, “Third Edition”. The Guardian Newspaper: Friday August 6, 2010 p.14
CHAPTER TWO
LITERATURE REVIEW
2.1 WALL STREET- WHERE IT ALL BEGAN
Securities are traded in a variety of forms and in diverse trading places. Wall
Street is where it all began (The New York Institute Of Finance; 1992), but one
will see the Nigerian financial market place this day bears tiny resemblances to its
origin there. According to the Institute, prior to the revolution, New York City’s
leading merchants met regular under a buttonwood tree located at what is this day
the corner of Wall and Broad Streets. These primeval merchants traded in
commodities such as furs, tobacco, and currencies and provided services such as
insuring ships’ cargoes.
As companies were organized to conduct different types of commercial
activities such as banking, retail trade or shipping, an informal market in shares of
these companies developed among merchants who controlled them. Twenty four of
these primeval merchants or stockbrokers as they came to be called entered into a
formal agreement on March 17, 1792, to trade only among themselves and to
maintain concurred-on commission rates. This marked the founding of what is this
day the New York Stock Exchange (NYSE).
2.2 THE NIGERIAN CAPITAL MARKET
The capital market, according to Professor Ndi Okereke Onyiuke (2010), is
fabricated up of markets and institutions, which assist the issuance and secondary
trading of long-term financial instruments. She argued that the capital market
unlike the money market which functions basically to wage short-term funds
provides funds to industries and government to meet their long-term capital
requirements, such as funding of fixed investments-buildings, plants, machinery,
bridges etc.
Emekekwue P.(1996,22), defined the capital market as that part of the
financial market that provides facilities for transfer of medium and long term funds
to the various economic units.
Adekanye F.(1986,25), defined the capital market as that of the financial
market from which large companies and private enterprises attract long-term
investment funds through a network of financial institutions and stockbrokers
licensed to perform capital market functions.
The networks of financial institutions that participate in the capital market are
namely:
1. Nigerian Stock Exchange.
2. Insurance companies
3. Nigerian Securities and Exchange Commission (SEC)
4. Discount Houses/ Stock broking firms
5. Merchant Banks.
6. Development Banks.
7. Pension funds.
8. Central Bank of Nigeria (CBN).
9. Investment firms.
10. Individuals.
2.3 THE ROLES OF THE NIGERIAN CAPITAL MARKET
The Nigerian capital market is a market for sourcing of medium and long-
term funds by both the government and private sectors of the economy. The
strategic roles of the capital market in the allocation of scarce financial resources
for rapid economic growth and development of any nation is well documented. For
example, Oladejo R. (2003) enumerates the gains of the Nigerian capital market as
follows:
I. Helps the economy to increase capital formation;
II. Provides funds to government and companies at more captivating terms;
III. It also provides the necessary elements to manage financial risks and
IV. Ensures continuity of the enterprise long after the founder.
In the book “The guide to investing in emerging securities market”, Dr. B.
Persuade (1990), further enumerates the role of capital markets in economic
development to include:
a) It provides additional channels for encouraging and mobilizing domestic
savings for productive investments and substitute bank deposits, real estate
investment and financing of consumption loans.
b) It fosters the growth of the domestic financial services sector and various
firms of institutional savings such as life insurance and pensions.
c) It provides savers with superior endorsement than most debt instruments
against inflation and currency depreciation and thus alleviates two of the
major reasons encouraging the flight of domestic capital abroad as well as
providing captivating automobile for repatriating flight capital.
d) It encourages privatization by increasing the marketability of new issues.
And this marketability facilitates the dispersal of ownership from traditional,
industrial and financial interests.
e) It improves the gearing of the domestic corporate sector by facilitating
equity financing, and this helps to reduce corporate dependence on
borrowing, thus making the financial system more solvent.
f) It provides, through equity financing, a cushion for companies against the
variability of cash flows and even doable losses.
g) Also, it is permanent financing which does not demand regular fixed returns
like debt.
Writing further on the role of Capital market, Emekekwue P. (1996: 16)
categorized these functions into three major headings namely:
1. The Pooling Function.
2. Facilitating Capital Formation.
3. Risk Reduction Function
2.3.1 The Pooling Function
The capital market through its agencies like banks, insurance companies etc
pools the resources of the economic surplus units and channel them to economic
deficit units who will then put such funds to productive use.
2.3.2 Facilitating Capital Formation
Emekekwue P.(1996,16) stated that in disbursing the resources that they
have pooled together, the capital market through its agencies ensures that the funds
are given to those economic units that will utilize the funds judiciously so as to
increase their capital stock. To that effect, the economic units receiving the pooled
resources have increased their capital stock hence financial institutions facilitate
capital formation.
2.3.3 Risk Reduction Function
Through its resource pooling (savings) function acting as conduit pipe to
channel those resources to savings deficit economic units, the financial institutions
diversify ways for existing resources to meet with competing needs. This
diversification process of resources reduces risk inherent in investment.
With all the above enumerated roles of the Nigerian capital market however,
attainment of such goals is not feasible without the pivotal role of the Nigerian
Stock Exchange. The Nigerian capital market without the Nigerian stock exchange
is like an automobile without fuel to propel it. So, next pages will focus on the
Stock exchange.
2.3 THE CONCEPT OF A STOCK EXCHANGE
There are many views of what a stock exchange is. To F. E Armstrong
(1994), author of “The book of the Stock Exchange” a stock exchange is defined as
the citadel of Capital market, the temple of values. It is the axe of which the whole
financial structure of the capitalist system turns”.
Literally however, a stock exchange can be described as a market for
securities. A place where securities (bonds, stocks are bought and |or sold any of
such securities) with relative ease. According to Alile and Anao (1986; 29),
securities are documentary evidence of ownership or entitlement to claim upon the
assets of the issuing organization, government. These documentary evidences
usually have no fixed or absolute value but are traded on the stock exchange at
values which are subjectively determined by those buying or selling them.
Professor F. Okafor (1983) describes a stock exchange as an organized
secondary market since a stock exchange is strictly a market for existing rather
than new securities. The stock exchange provides an avenue for the movement of
long-term capital funds from those with savings to invest in those areas of
industries, commerce and government where funds are absent for expansion and
other developmental purposes.
The stock exchange is also an institution which sees to the efficient
allocation of acquirable capital funds to the diverse uses in the economy, and
through its sensitive pricing mechanism ensures that so much of the total
acquirable capital resources are allocated to apiece firm within apiece industry as
that industry deserves to have, having regards to their relative contribution to total
societal wealth or satisfaction vis-à-vis other firms or industry.
According to Alile and Anao (1986), the stock exchange can also be a
mechanism (barometer as some would suggest) which can measure and detect the
symptoms of an impending economic boom or decline long before the predicted
prosperity or decline actually occurs. The stock exchange is healthy to change in
economic conditions and trends which are a reflection of the total psychology or
judgments of persons using the stock exchange, among which the professional
investment economist or analyst exerts the greatest influence.
The stock exchange comprises of different individuals, firms, institutions
and activities which relate to it. This can be demonstrated diagrammatically thus:
Fig.2.1
Savers underwriters NIGERIAN ENTERPRISE
PROMOTION BOARD
NSE STOCK EXCHANGE FUND ISSUING HOUSE
FUND USERS
Stockbroker security register Professional group
(solicitors/Accountant/ valuers)
Source: Alile and Anao’s Stock Exchange in Operation. Pg. 27
2.4 THE NIGERIAN STOCK EXCHANGE MARKET
The Nigerian stock exchange like any other stock exchange is an organized
auction market where buyers and sellers meet, through their brokers to effect
transactions in securities that have been listed. It is a non-profit making
organization with association of persons who have either bought shares from the
association or they have subscribed originally to the memorandum and articles of
association. The Nigerian stock exchange market provides a forum for all parties
namely; the interested investors, intermediaries, willing buyers and sellers to
interact and consummate economic deals on securities under the supervision of the
government regulatory agencies like the Securities and Exchange Commission
(SEC).
According to G. Onosede (1983; 23) a stock exchange market is where
securities (shares, bonds and stocks) are bought and sold openly with relative ease.
It is the intermediaries between those who wish to raise money for projects and
those who wish to invest in projects.
Alile, H.I (1988) defined stock exchange market as a place where enormous
capital which is required to operate the huge industrial and commercial
corporations of today can be raised in such large amounts and at such competitive
terms (costs, conditions, length of negotiations etc) that no other institutions in the
capitalist system can possibly match. Supporting the above assertion, Hanson J. L
(1982;12) defined the stock exchange market as a place where dealings in the
securities of Companies and the public sector take place between those wanting to
buy securities and those wanting to sell them.
2.4.1 Membership of the Nigerian Stock Exchange
The membership of the Nigerian Stock Exchange can be classified into three
broad headings namely:
1. Foundation Members: Who signed the Memorandum of Understanding
and the Articles of Association of the NSE on the 15th of September, 1990 at its
operation. They are:
1. John Holt Nigeria Limited
2. C. T Brewing and co. Nigeria Limited
3. The Investment Company of Nigeria (ICON) Limited
4. Chief Theophilus Adebayo Doherty.
5. Chief Odumegwu Ojukwu.
6. Mr. Akintola Williams
7. Alhaji Shehu Bukers
2. Ordinary Members: These are members who on application in accordance
to the articles of the NSE were admitted into the register of membership.
3. Dealing Members: Refer to individuals, firms, or corporate bodies licensed
by the Council of the NSE to deal on the Nigerian Stock Exchange.
2.4.2 Functions and Importance of the Nigerian Stock Exchange
The Nigerian stock exchange is a Self-Regulatory Organization (SRO),
making and enforcing rules for its members. It regulates its members (brokerage
firms). It also regulates its listed companies to ensure compliance with listing rules.
Femi Adekanye (1986) enumerated the functions of the Nigerian stock exchange to
include the following:
1. To act as the central meeting place for members to buy and sell existing
stocks and shares and for granting quotations to new shares| issues through
the provision of new or fresh capital raised through the market.
2. To provide machinery through stocks and shares for mobilizing private and
public savings and making these available for productive investment.
Supporting the above points, Yusuf R. O (2003, 15) stated that without the
capital market being fully participatory, growing the economy will continue
to be a difficult task..
Femi Adekanye (1986, 13) went further to enumerate the functions of the
stock exchange to include:
3. To provide opportunities for the continued operation and attraction of
foreign capital for Nigeria’s development.
4. To facilitate dealings in government securities.
5. To prescribe requirements for new listings and to regulate secondary trading
activity and the activities of its dealing members.
6. To make information on the quoted companies available for fair dealings.
7. To protect the public from shady dealings and practice in quoted securities
with the objective of ensuring fair dealings.
2.5 SECURITIES AND EXCHANGE COMMISSION (SEC).
The Nigerian Securities and Exchange Commission was established in 1977
by securities Act of 1979 and re-enacted in 1988 to be the apex regulatory body of
the Nigerian capital market. In other words, it is the government regulator of the
Nigerian capital market whose legal muscle is derived from the investments and
securities act of 1999(ISA).
Securities and Exchange Commission was established as a result of the
observation of the Industries Review Panel that examined the short-comings in the
implementation of the indigenization exercise and government’s acceptance of the
recommendation of Okigbo’s Financial System Review Committee. The Securities
and Exchange Commission (SEC) replaced the Capital Issues Commission (CIC).
2.5.1 Duties and Functions of Securities and Exchange Commission (SEC).
The Securities and Exchange Commission performs the following functions:
i. Investors’ endorsement thereby enhancing thereby enhancing their
confidence in the capital market.
ii. It ensures orderly, fair and equitable dealings in securities business.
iii. Promotes capital market growth and development.
iv. It ensures that information on the quoted companies is made available at all
times in an efficient manner.
v. It creates the necessary atmosphere for the orderly growth and development
of the market thereby giving full effect to the provision of the Decree.
vi. Price determination: this is one of the most important functions of the
Securities and Exchange Commission. This is because if prices are not well
fixed, the parties involved may not be satisfied.
vii. Above all, it is the apex regulatory body for NSE and its branches to which
it is at liberty to delegate powers.
2.6 IMPACT OF THE NSE CRISIS ON THE NIGERIAN CAPITAL
MARKET
Basically, the imbroglio in the Nigerian Stock Exchange (NSE) has had far
reaching impact in the Nigerian capital market. The impact of the crisis in the
capital market is both positive and negative one.
In the positive sense, the shake up in the Nigerian stock exchange was
necessary for the endorsement and measure of investors’ interests.
According to Lanre (2010), investors would benefit from the turn of event
because the unfolding scenario is capable of lifting investors’ confidence in the
market since it is meant to protect their investments.
Another positive impact in the crisis is its capability to educate investors and
the general public on the state of affairs in the market.
No doubt the turn of events in the capital market is not palatable with
investors and economy at large, but it sure has a positive impact on how investors
should approach the capital market. It is obvious from the unfolding events that
most investors and stockbrokers approach the Nigerian capital market as though it
were money market. They invest and hope to reap 100% return in few months
time. Their desire to reap in short-term motivated them to engage in high
speculations which invariably influenced stock prices.
The timely sanction of the management of the NSE by the SEC is a positive
pointer that the regulatory body is not in forgetfulness of sharp practices in the
capital market. This is in tandem to her promises when she took over as DG of
SEC. Barely a month after she assumed office as the Director General of SEC, Ms
Arunma Oteh, promised tougher sanctions for anyone who infringes on capital
market’s regulations. She expressed her determination to eliminate sharp practices,
deter malpractice, and change behaviors by ensuring that both the institutional and
individualized costs of any wrong doing are extremely high”.
In an interview allowed to Daily Sun on Monday, August 23, 2010, the
president of Chartered Institute Bankers of Nigeria (CIBN), Laoye Jaiye Ola
pointed out that the probing of the NSE management was necessary to engender
accountability and transparency in the market.
However, the negative impact of the crisis is far more reaching than the positive
effect. The question of investors’ confidence in the market is in doubt as investors
are gradually pulling off their investment from the market. According to a former
governor in Ogun State, Olusegun Osoba, the hundreds of millions of naira he sank
on stocks had all gone down the drain. His regrets: “If I had known it would be like
this, I would have stuck to my strategy of buying property. I was persuaded into it
and it hit me hard. You can envision when First Bank went from N48 to N13. Then
Access Bank went from N20 to N3”. According to Mr. Oladipo Williams, the
immediate past president of Chartered Institute of Stockbrokers (CIS), “there is
considerable loss of confidence by the generality of investors which invariably
causes low patronage in the market.
Dr. Prosper Ahworegbe, a medical director/shareholder, stated “the profit
had discouraged him and his friends from investing in the market for now because
according to him, he has suffered enough losses and sleepless nights over the
crisis”. As a result of loss of investors’ confidence in the market, the all share
index depreciated by 105.39 points or 0.4 per cent to close on Friday, August
6,2010 at 25,738.79 While market capitalization lose lower at N6.3 trillion (from
N15 trillion).
The plateau below represents the impact of loss of investors’ confidence in the
Nigerian Capital Market.
Table 2.1
Date Share
Index
No. of
Deals
Volumes of
Shares
Values of
Shares
Market
Capitalization
2/8/2010 25,634.39 5,997 193.3million N2billion N6,269trillion
3/8/2010 25,418.84 6,804 266.2million N1.2billion N6,216trillion
4/8/2010 25,691.30 3,469 266.2million N925.8billion N6,283trillion
5/8/2010 25,715.39 1,882 129.1million N639.4million N6,289trillion
6/8/2010 25,738.79 6,394 184.4million N2.6billion N6,294trillion
9/8/2010 25,606.09 8,895 201.1million N1.8billion N6,262trillion
11/8/2011 25,032.09 6,558 259.8million N1.4billion N6,121trillion
12/8/2010 24,988.03 5,208 164.2million N3.2billion N6,100trillion
13/8/2010 25,984.80 6,092 145.2million N2.3billion N6110trillion
16/8/2010 25,156.46 5,819 145.0million N2.9billion N6,152trillion
17/8/2010 25,170.02 6,285 263million N2.1billion N6,155trillion
20/8/2010 25,106.89 6,054 292.5million N1.6billion N6,140trillion
23/8/2010 25,321.06 5,680 195.1million N1.6billion N6,108trillion
27/8/2010 24,274.50 6,550 227.9million N2.1billion N5,937trillion
Source: Lead Capital Regular Market Report. (August 2010).
From the above data, it is clear the loss of investors’ confidence has struck
the market, reducing the market capitalization from N15trillion to N6trillion.
Beyond investors’ confidence, however, the stock market is characterized by
its volatility. What causes its rises and falls has several explanations. Some of them
are obvious whereas others are not easily so determined. Most of the market
movers are economic, political and societal character.
According to Hulbert (2008;37), some of the factors that cause movement in
the stock market have long term effects while the influences of others are felt only
in the short-term.
Some of the easily determined market movers include the following:
i. Inflation
ii. Earnings
iii. Interest rates
iv. Domestic political run out
v. Terrorism and times of war
vi. Oil and energy prices
vii. Crime and fraud
viii. Uncertainty
2.7 THE STOCK EXCHANGE IN OPERATION
The operation of the Nigerian Stock Exchange is organized into the primary
and secondary market. Securities listed on this market include:
• Government notes and bonds
• Principal bonds
• Corporate bonds
• Corporate stocks
• Mortgages.
The above securities can be classified as debt securities or equity securities.
Debt instruments have financial claims in which the issuer has to pay interest at
intervals and eventually redeem the issue at a future date; example is the federal
government stocks and industrial loans, preference stocks and bonds.
Equity on the other hand refers to the capital of the owners of the firms, example,
ordinary shares. It is viewed and of course, a source of permanent capital with no
contractual obligation by the firm.
2.7.1 The Primary Market
Also known as market for new securities, the primary market is concerned
with the initial issue of securities. The primary market securities may be issued
through the following ways:
• Offer for subscription
• Offer for sale
• Right issue
• Introduction and
• Private placement
Offer for Subscription
According to Emekekwue P. (1996; 359), it is direct issues to the public by
public companies. It is a situation where new shareholders are invited to subscribe
to the shares of a company as in supplementary issue. The proceeds of the issue go
to the company making the issue.
Offer for Sale: According to Emekekwue: according to Emekekwue (1996;361), it
is a sale made by existing owner of shares usually the principal owner of a business
which has been turned into a public company, proceeds of which go to the vendors
and not the company.
Right Issue: This is a situation whereby offers to buy more shares are made to
existing shareholders based on specific terms, sometimes at concessionaire prices.
Proceeds go to the company usually to finance long-term projects.
Introduction: is a situation where a company seeking quotation already has enough
shares held by the public.
Private Placement: Placing can be a popular means by which small companies
can approach the stock exchange for the first time to either raise new money or to
float off the existing shares on the market or combination of both. The company or
the vendor can by this method escape payment of both the underwriting
commission and payment of a fee to issuing house.
Securities are approved by the council of the exchange after the approval of all
applications made to it. The SEC determines the price at which these securities are
to be sold before activities in the primary market commence.
Figure 2.2 Shows the Functional Relationship of the NSEC within the new
Issues Market
Source: S. B Falegan” Nigeria’s Financial System” pg.241
Minister of Finance
N.S.E.C
Stock Exchange
Market
President in council
issuers investor
Issuing
House
Notes:
a. Issuer enters into an underwriting agreement with underwriting syndicate
and applies for listing of the newly offered securities on the stock exchange
before public offering.
b. Underwriters make a firm commitment on newly issued securities and
distribute them to the general investors. Investors include individuals and
institutional investment.
c. Stock exchange market via SEC’s surveillance examines the registration
statement for public offerings of corporate securities.
d. SEC also formulates policies for further offerings and encouraging non-
profit companies to go public.
e. President in council approves rules and regulations of the SEC.
The secondary market on the other hand is the market for trading in
outstanding securities. That is to say those securities that have been traded, bought
or sold are categorized under the secondary market. The secondary market
augments the supply of funds to the primary market.
Alile and Anao (1986, 23) pointed out that the secondary market is what
properly constitutes the stock exchange because it is the mechanism that gives
liquidity to the securities listed on the exchange. They went further by saying that
if there were no secondary market in which investors can liquidate their
investments as and when necessary, many investors may not buy new shares in the
first place.
Fig. 2.3: Shows the Functional Relationship of the Stock Exchange in the
Secondary Market.
Source: S. B. Falegan “Nigeria’s financial system” (1985: 242)
2.7.2 Evaluation of the Nigerian Stock Exchange
In evaluating the performance of the exchange, certain questions are worth
considering:
President in council
Investors Investors
S.E.C
NSE
Issuing House Purchaser Sellers
Investor Investor
Minister of finance
1. What is the extent of the usage of external finance in Nigeria?
Okigbo, 1981, states that most Nigerians depend on internal finance for
expansion and growth rather than on external finance. This he says dampens the
effectiveness of the market. He contended that other outlets for raising funds exist,
as such; the stock exchange seems to be ignored.
Speaking on the strategies for deepening the capital market, Akingbola in
Vanguard of 14 march, 2003, posited that though the Securities and Exchange
Commission (SEC) and the Nigerian Stock Exchange have made remarkable
strides in the process and transactional capabilities in recent years, it is still vital
that they continuously review their operations to eliminate to various bottlenecks to
the hitch free operations of the stock market.
Ade and Wole (1982, 225) comment that regarding the Indigenization
Decree, the stock exchange has been fairly successful. They contended that the
exchange has been successful in increasing the number of securities traded in the
exchange and therefore had contributed in the development of the economy.
Gbenga A. and Dianna D. (1997,24) in their presentation “Nigerian stock in
unprecedented boom” added that the exchange has increased the number of
securities traded on it with the equities accounting for 97.9% while corporate debts
accounted for 1.1% and the three tiers of government has the rest.
2. How has the exchange contributed to the yearly capitalization in the
country?
Gbenga and Dianna D. said that the contribution has been very satisfactory.
According to SEC 1996 report, aggregate market capitalization of securities listed
on the exchange rose by N 105.5million (i.e58.5%); from N 189.3billion in 1995 to
N285.5billion in 1996.
According to SEC yearly report of 1996, the legislative and market reforms
undertaken between 1994 and 1995, to establish investment friendly environment
were instrumental to the increase in the market capitalization.
2.7.3 The Daily Stock Summary as at 13th
July, 2011
1st Tier Securities
Sector Company Name AGRICULTURE AGRO
–ALLIED:
FTN Cocoa Processor Plc Livestock Feeds Plc Okomu Oil Palm Plc Presco Plc Sector totals AUTOMOBILE AND
TYRE:
R T Briscoe PLC Sector Totals
BANKING:
Access Bank plc Afribank Nigeria plc Bank PHB PLC Diamond Bank plc Eco Bank plc Fidelity Bank plc Fin Bank plc First Bank of Nig. Plc First City Monu. Bank plc Guaranty Trust Bank plc Intercontinental Bank plc Oceanic Bank (Nig.) plc Skye Bank plc Spring Bank plc Stanbic IBTC Bank plc Sterling Bank plc UBA PLC Union Bank Nig. Plc Unity Bank plc
No of Deals 2 1 18 15 36
14 14
171 56 36 43 28 94 34
704 29
734 94 55
106 1
51 10
254 147
9
Quotation
(N)
0.50 0.50
16.10 8.00
2.09
6.37 0.95 0.71 5.00 2.80 2.23 0.57
11.55 6.33
13.93 1.05 1.21 7.05 0.85 9.58 1.54 5.25
2.350 0.87
Quantity Traded
103,165 20,000
724,700 353,790
1,201,655
155,348 155,348
6,484,804 1,738,923 3,455,323
755,910 371,946
3,372,995 1,450,080
18,138,511 1,378,000
22,341,042 4,195,884 1,650,779 2,850,553
11,789 1,396,785
414,756 8,419,494 6,947,962
132,499
Value Of Shares(N)
51,582.50 10,000.00
11,609,694.00 2,830,620.00
14,501,896.50
317,423.52 317,423.52
42,745460.99 1,623,421.95 2,491,442.45 3,767,254.44 1,071,520.66 7,553,043.80 839,218.14
211,174,746.82 8,754,810.00 313,934,877.41 4,275,474.07 2,014,726.17 18,673,895.53 9,549.09 13,417,429.15 639,024.24 44,490,361.77 16,335,032.87 114,170.16
Wema Bank plc Zenith Bank plc Sector Totals
BREWERIES:
Champion Brew. Plc Guinness Nig. Plc International Brew. Plc Nigerian Brew. Plc Sector Totals
BUILDING
MATERIALS:
Ashaka Cement plc CementCo.of North,Nig.plc Dangote Cement plc Larfarge Wapco plc Sector Totals CHEMICAL & PAINTS:
African Paints(Nig.)plc Berger paint plc Cap plc IPWA PLC Sector Totals
COMMERCIAL SERV:
Courteville investments plc Red Star Express plc Sector Totals
COMPUTER & OFFICE
EQUIPMENT:
Tripple Gee $ Co. plc Sector Totals CONGLOMERATES:
PZ Cussons Nig. Plc Trasnational Corp. Nig. Plc UACN PLC Unilever Nig. Plc Sector Totals
43 366
3,065
2
52 3
163 220
25 21 51 51
148
2 1
19 1
23
1
23 24
1 1
28 13 50 48
139
0.96 14.03
4.46 244.99
6.39 88.00
20.70 9.30 122.40 48.05
3.16 9.91 29.45 0.91
0.50 2.78
3.25
37.00 1.03 39.01 27.00
3,049,778 19,161,639
107,719,452
5,000
66,964 2,565
1,430,752 1,505,281
30,804
229,253 82,865
1,251,916 1,594,738
1,500 1,000
144,539 500
147,539
500,000 336,970 836,970
2,895 2,895
77,152 477,680 278,096 295,599
1,128,527
2,877,633.40 268,667,294.61 965,470,387.72
22,300.00 15,742,394.40 15,595.20 126,159,721.14 141,940,010.74
615,645.40 2,085,172.05 10,072,372.69 60,077,148.74 72,850,338.88
4,515.00 9,420.00 4,256,783.55 455.00 4,271,173.55
250,000.00 936,776.60
1,186,776.60
8,945.55 8,945.55
2,735,606.40 492,010.40 10,852,856.53 7,841,981.94 21,922,455.27
CONSTRUCTION:
Constain (WA) Plc Julius Berger Nig. Plc Sector Totals ENGINEERING TECH: Cutix plc Sector Totals
FOOD/BEVERAGES
AND TOBACCO:
7-Up bottling company, plc Cadbury Nigeria plc Dangote flour mills plc Dangote sugar refinery plc Flour mills Nig. Plc Honey well flour mill plc N Nig. Flour mills plc National salt Co. Nig. Plc Nestle Nig. Plc Nig. Bottling Co. plc Tantalizers plc Sector Totals
HEALTHCARE:
Evans Medical plc Fidson healthcare plc Glaxo Smithkline Nig. Plc May and Baker Nig. Plc Sector Totals HOTEL & TOURISM:
Capital Hotel plc Ikeja Hotel plc Sector Totals INDUSTRIAL DOMESTIC PRODUCTS: Alumaco Plc First Aluminum Nig. Plc Vitafoam Nig. Plc Sector Totals
16 15 31
5 5
23 50 32
100 65
9 3
22 36 28
2 370
1 9
16 5
31
2
14 16
1 1 20 22
2.81
56.30
2.30
45.00 17.80 16.00 12.00 81.00
4.25 24.70
4.99 400.01 41.50
0.50
1.20 1.80
23.11 3.80
5.14 1.46
7.75 0.50 6.00
160,500 98,845
259,345
109,767 109,767
87,385 434,612 224,987
1,033,705 2,852,411
24,560 3,032
875,602 18,535
161,212 172,000
5,888,041
40,000 47,850 321,763 38,600 448,213
56,000 2,996,510 3,052,510
4,394 6,000 711,755 722,149
450,346.08 5,287,252.50 5,737,598.58
246,312.06 246,312.06
3,973,011.11 7,691,575.61 3,599,792.00 12,211,980.02 230,157,290.25 99,383.60 72,838.00 4,383,592.89 7,447,325.76 6,786,071.00 86,000.00
276,508,860.00
45,600.00 85,902.00
7,509,358.76 146,186.00 7,787,046.76
287,840.00
4,374,904.60 4,662,744.60
34,053.50 3,000.00 4,274,995.55 4,312,049.05
INFO. AND COMM.
TECH:
Starcomms Plc Sector Totals INSURANCE:
Alico Insurance plc Continental Reinsurance plc Custodian and Allied Ins. Plc Equity Assurance plc Goldlink Insurance plc Guaranty Trust Assur. Plc Guinea Insurance Plc Intercontinental Wapic Ins. Int’l Energy Ins. Co. Plc Law union and Rock Ins. Plc N.E.M Ins. Co (Nig.) plc Niger Insurance Co. plc Oasis Insurance plc Prestige Assurance Co. plc Standard Alliance Ins. Plc Unic Insurance plc Universal Ins. Company plc Sector Totals
LEASING:
C and I Leasing plc Sector Totals MARITIME:
Japaul Oil & Maritime serv.plc Sector Totals MEDIA:
Daar Communications plc Sector Totals MORTGAGE COMP:
Resort savings & loans plc Union Homes Sav.&loan Plc Sector Totals
26 26
47 12
8 3
10 15
1 1 4
20 21 16 12
6 682
2 3
863
10 10
93 93
5 5
1 12 13
0.53
0.66 1.06 2.96 0.50 0.50 1.42 0.50 0.53 0.50 0.50 0.53 0.50 0.50 1.83 0.50 0.50 0.50
107
1.05
0.50
0.50 0.53
649,138 649,138
1,752,749 1,875,000 579,250 2,040,000 2,022,370 822,470 20,000 7,200 2,777,779 4,278,075 4,411,575 3,556,008 1,930,000 229,150 11,001,000 91,264 206,000 37,599,890
296,455 296,455
2,471,750 2,471,750
12,500 12,500
450,000 515,000 965,000
346,666.14 346,666.14
1,208,184.34 2,010,750.00 1,714,980.00 1,020,000.00 1,011,185.00 1,167,907.40 10,000.00 3,672.00 1,388,889.50 2,139,037.50 2,308,373.00 1,796,472.00 965,000.00 417,066.75 5,500,500.00 45,632.00 103,000.00 22,810,649.49
317,206.85 317,206.85
2,545,932.40 2,545,932.40
6,250.00 6,250.00
225,000.00 272,950.00 497,950.00
Other Fin. Institutions:
Crusader (Nig) plc Sector Totals PACKAGING:
Nig.Bags manuf. Co. plc Sector Totals
PETROLEUM:
Beco petroleum product plc Conoil plc Eterna Oil and Gas plc Forte Oil plc Mobil Oil (Nig) plc Mrs Oil Nigeria plc Oando plc Total Nigeria plc Sector Totals PRINTING
& PUBLISHING:
University Press plc Sector Totals REAL ESTATE:
UACN property Dev.Co plc Sector Totals ROAD
TRANSPORTATION:
Associated Bus CO. PLC Sector Totals THE FOREIGN
LISTINGS:
EcoBank Transnational Inc. Sector Totals Type Totals Grand Totals
2 2
447 447
7
26 8 6
18 2
129 15
211
13 13
27 27
2 2
18 18
5,922
5,922
0.50
2.70
0.50 34.30 4.30 19.28 157.50 70.75 40.80 195.50
5.00
20.15
0.57
14.43
500,000 500,000
2,684,233 2,684,233
37,822 38,220 70,891 3,582 4,003 500 455,789 10,346 621,153
102,030 102,030
649,207 649,207
23,500 23,500
218,870 218,870
172,114,926
172,114,926
250,000.00 250,000.00
6,936,585.06 6,936,585.06
18,911.00
1,253,797.80 289,944.19 69,060.96 603,012.71 33,610.00 18,273,429.63 2,068,232.25 22,609,998.54
503,451.00 503,451.00
12,875,706.00 12,875,706.00
12,925.00 12,925.00
3,158,294.10 3,158,294.10
1,598,686,411.60
1,598,686,411.60
As one can see from the summary above, the banking sub-sector led on the
performance chart with 107.71 million shares valued at N965.47 million
exchanged in 3,065 deals.
The volume recorded in the sub-sector was driven by transaction in the
shares of Guaranty Trust Bank, Zenith Bank, First Bank, UBA and Union Bank.
The total volume of 75.00 million shares valued at N854.60 million traded in the
shares of five stocks accounted for 43.58 per cent of the entire market volume and
their value represented 53.46 per cent of the market’s value.
Following on the performance chart was the Insurance sub-sector with
37.599 million shares worth N22.810 million traded in 863 deals while the Food
Beverages & Tobacco sub-sector ranked third with 5.888 million shares valued at
N276.508 million exchanged by investors in 370 deals.
However, on top of the gainers table were Capital Hotel, Bagco, Prestige,
GT Assurance and Skye Bank. Each gained 24 kobo, 12 kobo, 8 kobo, 6 kobo and
29 kobo to close at N5.14, N2.70, N1.83, N1.42 and N7.05 respectively.
Conversely, CAP, Glaxosmith, FCMB, Sterling Bank and Access Bank led
the losers. Each lost 155 kobo, 121 kobo, 33 kobo, 8 kobo and 33 kobo per share
from N31.00, N24.32, N6.66, N1.62 and N6.70 in that order.
2.8.4 Problems Associated with the Exchange
Despite its enormous contribution in the economic development of the
country, the Nigerian stock exchange market still has some problems bedeviling it.
Among these unresolved issues are:
1. Lack of disclosure of accurate information: some firms in the exchange still
don’t disclose accurate information about their financial stands. There is no
doubt that improvement in this area is very important to ensure guided and
informed action of investors and also the protection of the potential
investors’ interest. Disclosure of accurate information by companies will go
a long way in increasing the confidence of both local and foreign investors
in the market.
2. Low level of awareness about the market: according to Nkem Ossai (1997,
23), there is low level of awareness about the market. He said, it is only
eliciting among the tiny few that are aware of its existence.
3. Speaking further on the above, R. O Yusuf (2003), posited that for
Nigerians both at home and abroad to invest more in stocks, the authorities
of the market should embark on public enlightenment and education of the
investing public to take advantage of its remote trading system.
4. Lack of interest in the market: Okigbo tells us in his book that since other
outlets exist, firms tend not to bother with the exchange especially the
government stocks which have the lowest yield.
5. Existence of technical and share valuation/price problem: according to
Nkem Ossai (1997, 25), stock exchange market as Jankara market, by most
technical yardsticks, has virtually collapsed. We risk playing into the hands
of those currently paddling the more noxious idea of a government stock
exchange.
6. Unstable political cum socio-economic environment: the instability that had
bedeviled our political cum socio-economic environment never helped
matters as investors are always skeptical to invest in an unstable
environment.
7. Uneven distribution of wealth: the creation of a stock exchange market has
increased uneven distribution of wealth. Dealings on the exchange can only
be undertaken by wealthy people thereby widening the gap between the rich
and the poor who cannot afford to go through the exchange.
8. Mono-sector driven tendency: according to the analysis of the Daily Sun of
Thursday, July 14, 2011, the banking sub-sector was leading the
performance chart. A situation where the banking sub-sector continues and
remains the most active in the market is not good for the economy. The
analysis showed that the banking sub-sector was still leading in terms of
volumes of shares and market capitalization.
9. Lack of Government patronage: for some times now, the government bonds
have been dominant. Mr. Akingbola E.(2002,32) suggested the reactivation
of the Government Bond Market, adding that the success of the market
would depend significantly on the level of official commitment particularly
in terms of returns.
10. Lack of public confidence: according to Mr. Oladipo Williams, immediate
past president of Chartered Institute of Stockbrokers (CIS), there is
considerable loss of confidence by the generality of investors which
invariably causes low patronage in the market. There is therefore an urgent
need for restoration of public confidence which can only be built by
engendering accountability and transparency.
REFERENCES
Peter S. Rose (1994), “Money and Capital Market: financial Institution and Investments in Global Places”. New York, Addison Wesley. pp 628-635.
Central Bank of Nigeria Statistical Bulletin: vol. 6 No.1 of June, 1995. Emekekwue, P. (1996), “Second Revised Version of Corporate Financial
Management”. Enugu: African Bureau of Educational Sciences. Armstrong F.E (1993), the Capital Market Operations, Enugu. (A Seminar Paper
Presented in UNEC on 21st march, 1993). Alile and Anao (1986), “The Nigerian Stock Exchange Market in Operation”
Lagos: Jeromalarho and Associates Ltd. Onyiuke Ndi Okereke J.(2010), “Overview of the Nigerian Capital Market
”.Enugu. A paper presented at a seminar held at UNEC in June, 2010.
The Guardian Newspapers: August 8, 2010 pg. 14.
Agbana G. (2009), Footpath to Capital Market Competitiveness Engages Stakeholders” The Guardian, September 19, 2009. Pg. 14.
Hulbert R. C (2008), Investment Opportunities in Times of Financial Crisis:
The Surround Struck Journal 2008. Ossai N. (1997), Stock Exchange as Jankara market: October 23 of Guardian
Newspapers. Okigbo P. N. C (1981: 90), “Nigerian Financial System, Structure and Growth”
Essex, U.K: Long Man Group Ltd. The Daily Sun Newspaper, July 14, 2011. htt://www.nigeriabusinessinfo.com|capitalmarket.htm//structure.
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 INTRODUCTION
This chapter will focus on the procedures for collection and analysis of data.
Having reviewed the related literature on the impact of the capital market on the
Nigerian economy with emphasis on the role of the Nigerian Stock Exchange, the
researcher’s attention will now move to the methods of data collection and analysis
called methodology.
Research methodology according to Baridman (1990:20) should wage a
detailed statement of methods used in collection of data; why those methods were
chosen and not others.
The research work is a case study in which the Nigerian stock exchange was
singled out as a representative of the capital market. The choice of the stock
exchange as the case study is justified by the singular, critical and unique position
of it in the development of the real financial and socio-economic structure of the
economy.
3.2 RESEARCH DESIGN
The researcher employed various methods and procedures to achieve the
objectives of the research. The researcher obtained information from both primary
sources and secondary sources. Primary sources include oral interviews, direct
observation and administration of questionnaires. Secondary sources which are the
desk research include materials obtained from journals, newspapers, annual
reports, magazines, seminar papers, unpublished thesis, World Wide Web and
electronic media.
The data collated were placed into useable form through editing, tabulating
and analysis. In editing, non-relevant data were discarded and the relevant data
were tabulated so that statistics could be developed from them. The data were
subjected to analysis and the research formed interpretation from the result.
3.3 SOURCES OF DATA
As mentioned above, the researcher made use of both primary and secondary
sources of data for this study.
3.3.1 Primary Data
Primary data were gathered by the researcher through personal observation,
oral interview and administration of questionnaire. The questionnaire contained
both structured and unstructured questions to probe into the research problem.
3.3.2 Secondary Data
Secondary data also known as desk research was used. The researcher also
got information through secondary data. And such information was got from the
Newspapers, Internet, Books, Annual reports, Seminar papers, Journals, press
released by the Stock Exchange Commission, Central Banks of Nigeria, Nigerian
Securities and Exchange Commission and other vital documents regarding the
Nigerian stock market.
3.4 METHOD OF DATA COLLECTION
This refers to the research instruments used by the researcher to collect
whatever data was needed. The research instruments used in this work include:
questionnaire, interview schedule and desk research.
3.4.1 Reasons for using the Above Mentioned Methods
The questionnaire permits for wider coverage for minimum expenses. It
researches to people that would have been hard to contact especially since most of
them were sent through E-mail to respondents. It also afforded the respondents
more sufficient situations in which to check options.
The interview schedule was to complement the questionnaire and help to
secure information the researcher found useful in completing the research work.
Desk research enabled the researcher to know the actual situation of events
by comparing figures of past with the present so as bring a more accurate
generalization.
3.5 DETERMINATION OF POPULATION SIZE
In determining the population size, the researcher has to adopt the stratified
deliberate sampling method. This method was chosen because of the
heterogeneous nature of the population which includes staff of quoted companies,
stock brokers and general investors.
In effect, it is not doable to collect information from all doable respondents
hence stock broking firms were chosen to represent the registered dealing members
in the NSE while individual’s investors (shareholders) were chosen to represent
other investors.
3.6 SAMPLE PROCEDURE
In the process of carrying out research of this sort, a comprehensive
information that will help one come up with a concrete result with relevant
references to the study has to be built up. To this end, a decision has to be
prefabricated on whether such information will surface from all the sample
population. In respect to the study, a sample of the population was adopted to
enable the researcher swiftly get at them.
Also, interviews were conducted, categorically with officials of stock
broking firms and few individual investors under the population size.
Questionnaires were distributed to the sample population. With that, the
researcher gained quicker response.
3.7 METHODS OF ADMINISTERING QUESTIONNAIRES
In administering the questionnaires, hand to hand approach has to be used.
The researcher adopted this method for quicker response and to ensure prompt
return and accountability.
Equally, some questionnaires were e-mailed to respondents due to their
location and importance of their contribution to this research. For instance, one
hundred (100) questionnaires representing one hundred percent (100%) of
distributed questionnaires, eight five (85) questionnaires were returned and
received representing eight five (85%) of the distributed questionnaire which
evidently is a favorable response rating.
3.8 DECISION RULE
The decision rule states that data collected from the secondary sources will
be affected to the “Impact of the Capital Market on the Nigerian Economy with
Emphasis on the Roles of the Nigerian Stock Exchange”.
In view of the decision rule of data collected through questionnaire
responses and individualized interview questions, various data were presented and
analyzed.
Some of the decision rule techniques applied are as follows:
RECORDS: Many records are maintained for the past and ongoing activities of
the Nigerian Stock Exchange and these often wage data for analysis.
TABULATION: The tables for apiece /group of respondents were separately
presented and this enables simple assessment of the majority response to apiece
research question.
PERCENTAGE (module response): responses to questionnaires were decided on
percentage basis.
REFERENCES
Baridman D. M (1990) “Research Methods in Administrative Sciences” Bark publishers, Port Harcourt; 2nd Edition pg. 20.
Ezejunlie C and Ogono (1990) “Basic Principles in Managing Research
Project” Onitsha, Africana Publishers. Pg. 30- 32. Ikeagwu E. K (1998) “Groundwork of Research Methods and Procedures”
Enugu: IDS Publishers.
CHAPTER FOUR
PRESENTATION AND ANALYSIS
4.1 INTRODUCTION
This chapter would be used to present and analyze the various tools
employed by the researcher to help it gather information regarding the subject
matter. The tools as mentioned earlier are:
(i) Questionnaire
(ii) Interview
(iii) Direct observation.
1. Questionnaire: The data gathered through the questionnaire will be used to
test the research question.
2. Interview: The data gathered through this invaluable tool is further used to
authenticate the premise of the research questions.
3. Direct Observation: This is further employed to produce data which depicts
clearly the true and unbiased state of the Nigeria stock exchange.
To further authenticate the findings drawn from the aforementioned tools, a
comparative analysis of the Nigeria stock exchange and other emerging stock
markets in the world may be carried out when necessary.
Questionnaire and Collection
In the analysis of questionnaire, the sample size is 45. This is restricted to
random sampling technique. Questionnaires were distributed among different
groups irrespective of their occupation. A copy of the questionnaire is attached as
appendix. Each questionnaire contains 20 questions. Out of the 45 questionnaires
administered, 5 persons defaulted and could not submit theirs. The researcher then
worked with 40.
Question 1 and 2 in the questionnaire are based on sex and education. As
such, the main analysis of this study will start from question 3.
4.2 PRESENTATION AND ANALYSIS OF RESPONSES FROM
QUESTIONNAIRE
The response from the respondents was quite encouraging as most of them
really bare their mind and made some invaluable comment on the economy in
general. I therefore wish to present the responses in tabular from for the purpose of
clarity and comparison.
Item 1
Table 4.1: Identify your Sex?
Options No of respondents Percentage (%)
Male 36 90%
Female 4 10%
Total 40 100%
Comment: Out of the forty respondents, 36 are males while 4 are females
representing 90% and 10% respectively. This can also be analyzed in a bar chart
thus:
0
20
40
60
80
100
A B
ITEM 2
Table 4.2: What is your Occupation?
Options No of Respondents Percentage %
Civil/Public Servant (A) 10 25
Businessmen (B) 20 50
Bankers Etc (C) 10 25
Total 40 100
Represented in Bar chart thus
Comment: From the foregoing presentation, one can see that the sample size is
made up of 10 bankers. One would assume that this group is well disposed to make
an informed decisions.
0
10
20
40
60
80
100
A B C
ITEM 3
Table 4.3 Are you Aware of the Existence of the Nigeria Stock Exchange?
Options No of Respondents Percentage %
Yes (A) 38 95%
No (B) 2 5%
Total 40 100
The above can be represented thus on a bar chart.
Comment: One can see clearly that 38 of the sample are aware of the Nigerian
stock exchange while only 2 are not aware representing 95% and 5% respectively.
0
20
40
60
80
100
A B
Options
ITEM 4
Table 4.4: How Familiar are you with the Operations of the Nigerian Stock
Exchange.
Options No of Respondents Percentage %
Yes familiar (A) 22 55%
Fairly familiar (B) 16 40%
Not familiar (C) 2 5%
Total 40 100
This can be represented in a bar chart thus:
From the above table and chart, one could vividly see that 22 of the
respondents representing 55% are very familiar with the Nigerian stock exchange
while 16 who are fairly familiar with the operations of the exchange represent 40%
and 2 persons who are not familiar represent 5%.
0
10
20
30
40
50
60
A B C
Options
ITEM 5
Table 4.5: Are you Aware of the Aims and Functions of the Nigeria Stock
Exchange?
Options No of Respondents Percentage %
(A) Yes 36 90%
(B) No 4 10%
Total 40 100
This can be represented in a bar chart as thus:
From the above table and chart, 90% of the sample population are aware of
the aims and functions of the stock exchange. The high percentage depicts the
literacy level of the sample population.
0
20
40
60
80
100
A B
ITEM 6
Table 4.6: If No 5 is yes, do you make use of the exchange?
Options No of Respondents Percentage %
(A) Yes 8 20%
(B) No 25 62.5%
(C) No response 7 17.5%
Total 40 100
This can be represented in the bar chart as thus:
From the above table and chart, only 8 people out f 36 that are aware of the
exchange actually patronize it representing 20% of the population. Meanwhile, 7
persons did not respond to this question while 25 said that they do not have
anything to do with the exchange representing 62.5%. This is not a healthy
development for Nigerian economy.
0
10
20
30
40
50
60
70
A B C
ITEM 7
Table 4.7: Where do you (Corporation, Individuals and Government) raise
your Fund?
Options No of Respondents Percentage %
(A) Banks 15 37.5%
(B) Friends 7 17.5%
(C) Family Members 10 25%
(D) NSE 8 20%
Total 40 100%
This can be represented in a bar chart
From the above table and chart, it could be understood that the highest
percentage of the population source their funds from the banks. While other
options like family, NSE and friends count for minor percentages of 25%, 20% and
17.5% respectively, the bank account for the highest percentage of 37.5%. This
shows clearly that Nigerians do not patronize the stock market.
0
10
20
30
40
A B C D
ITEM 8
Table 4.8: Why Prefer the Bank as an Outlet?
Options No of Respondents Percentage %
(A) Convenience 20 50%
(B) Cost Effective 17 42.5%
(C) Only outlet known 3 7.5%
Total 40 100
The above information can be represented in a bar chart thus:
From the above table and chart convenience is the most influencing factor
and basic consideration given when choosing where to raise or even invest funds.
Critically speaking, the time factor is a crucial issue worth considering before
investing or acquiring funds.
0
10
20
30
40
50
60
A B C
Cost effectiveness which takes the second rating is another significant issue
in the acquisition of fund. Attention is higher placed on cost when considering
sources of fund as no investor will want to source funds where the cost will
outweigh the expected return on investment.
ITEM 9
Table 4.9: Has the Nigerian Stock Exchange contributed significantly to the
Development of the Economy?
Options No of Respondents Percentage %
(A) Yes 32 80%
(B) No 8 20%
Total 40 100
The above table can be represented in bar chart thus:
From the above table and chart, one can see vividly that majority (32) of the
respondents agree that the Nigeria stock exchange has contributed to the socio-
0
20
40
60
80
100
A B
economic status of the country while only 8 persons representing 20% disagreed
with the assertion. This might be partly due to the lack of awareness of the role the
exchange has played and continue to play on the socio-economic development of
the country.
ITEM 10
Table 4.10: Are you satisfied with the level of development in the stock
exchange market?
Options No of Respondents Percentage %
(A) Yes 10 25%
(B) No 30 75%
Total 40 100
This can be represented in a bar chart
From the above table and chart, it is clearly seen that more than half the
sample size are not satisfied with the level of development in the market while
0
20
40
60
80
A B
others were satisfied. Those who were not satisfied were further asked to give
reasons why they are not satisfied with the level of development in the market
hence the question.
ITEM 11
What are your reasons for dissatisfaction with the level of development in
the market? The 30 people who were not satisfied with the level of development in
the market hinged their position in the following points:
(a) Information: They all agreed that the information made available to the
public by the Nigerian Stock Exchange were either too scanty, technical and
do not aid potential investor to make informed decision.
(b) Pricing Policy: They also complained that share prices in the market is most
times determined by personal feelings and goodwill instead of allowing the
forces of demand and supply to take its course.
(c) Returns in form of Dividends: Investors/respondents frowned seriously at
the method adopted by these companies to compensate investors for their
investment. They complained that a situation where investors do not receive
dividends for a number of years on their investments is not encouraging.
Most times, the investors are not informed as to why they are not entitled to
dividends over years. They therefore challenged the stock exchange to do
more to create the confidence that would attract the needed public patronage.
(d) Fraudulent disclosure of financial data by companies quoted at the
exchange: The respondents complained they cannot even repose confidence
on some companies quoted at the exchange as most of them do window
dressing and do not disclose to potential investors the real financial status.
(e) Corruption: They also complained that the exchange is also bedeviled by
the corruption wave in the country. The recent imbroglio in the Nigerian
stock exchange is a case in point. And a situation where touts parade
themselves as brokers and speculators for different companies has not
helped matters. They therefore called for total sanitization of socio-
economic system before they can invest their hard earned funds or patronize
the Nigeria Stock Exchange Market.
(f) Lack of Aggressive Awareness Campaign: They also challenged the
exchange to embark on aggressive campaign so as to enlighten people in
their activities and make more impact on the lives of Nigerians. They said
that the development is hindered because the average Nigerian is not
informed of what he could gain from the stock exchange market. Lack of
this grass-root campaign has in no mean way hindered the development
efforts of the Nigerian Stock Exchange over the years.
ITEM 12
Table 4.12: Can the problems be overcome in the near future? The
respondents all emphasized that the above mentioned problems can be overcome
if...
(a) High level of confidence is built in the investing public by the Nigerian
Stock Exchange.
(b) Information dissemination is taken seriously
(c) Corruption is eschewed.
(d) Nigerians are made to understand the short and even long-term gains of
patronizing the market.
(e) Issue of disclosure is taken seriously by eschewing every form of
window dressing of accounting and other financial information by
companies.
(f) Princes are allowed to be determined by the forces of demand and
supply.
Question 13
Table 4.11: Are you satisfied with the pricing policy?
Options No of Respondents Percentage %
(A) Yes 18 45%
(B) No 22 55%
Total 40 100
It could be represented in a bar chart thus:
From the above table and chart, 18 persons out of the 40 representing 45%
were satisfied with the pricing policy while 22 representing 55% are not satisfied.
Question 14
0
10
20
30
40
50
60
A B
If your answer to question 13 is No, what are your reasons?
The respondent agreed that the pricing policy is made arbitrarily on the
ground of feelings and reputation of the company and not on the basis of demand
and supply.
Question 15
Are you aware of the introduction of a computerized system of clearing
settlement and delivery of trade transaction, the (CSCS)?
Table 4.12
Options No of Respondents Percentage %
(A) Yes 25 62.5%
(B) No 15 37.5%
Total 40 100
This can be represented in a bar chart
0
10
20
30
40
50
60
70
A B
Options
From the foregoing table and chart, 25 out of the 40 respondents are aware
of the computerized system of clearing, settlement and delivering of trade
transaction (CSCS) while 15 of the respondents are not even aware of this new
mode of transactions.
ITEM NO 16
Table 4.13: What is the movement of Share Prices since the
Introduction of Central Security Clearing System?
Options No of Respondents Percentage %
(A) Stable - -
(B) Unstable - -
(C) The Same 40 100%
Total 40 100%
0
20
40
60
80
100
120
A B
From the above, it demonstrates the unanimous acceptance by the
respondents that the share prices cannot be influenced by the introduction of
central security clearing system. It can only be influenced by demand and prices in
the market.
QUESTION 17
Are you aware of the introduction of the Automated Trading System
(ATS), through which stockbrokers can trade from their offices and homes?
Table 4.14
Options No of Respondents Percentage %
(A) Yes 14 35%
(B) No 26 65%
Total 40 100%
This can be represented in a bar chart
0
10
20
30
40
50
60
70
A B
Options
From the above table and chart, one can see that only 35% of the sample size
is aware of the ATS system while 65% are not aware of it.
QUESTION 18
If your answer to 17 is yes, do you think the Automated Training
System (ATS) will enhance the operations of the Stock Exchange?
Table 4.15
Options No of Respondents Percentage %
A. Yes 40 100%
B. No 0 0%
Total 40 100%
This can be represented in a bar chart thus:
From the above table and chart, they all agreed that the system will enhance
the operations of the Stock Exchange as it will save time and even cost.
0
20
40
60
80
100
120
A B
QUESTION 19
How can you assess the impact of information technology (internet services)
vis-à-vis the operations of the Nigeria Stock Exchange?
Table 4.16
Options No of Respondents Percentage %
(A) Very satisfactory 12 30%
(B) Satisfactory 24 60%
(C) Not satisfactory 4 10%
Total 40 100%
The above table can be represented in a bar chart thus:
From the above table and chart presentation, one can see vividly that the use
of information technology via the internet has made a lot of positive impacts on
operations of the Nigeria Stock Exchange. This is because 90% of the total
0
10
20
30
40
50
60
70
A B C
Options
population is satisfied with the use of internet to transact business and access the
daily operations of the Nigeria Stock Exchange. It is however, pertinent to say that
the use of the internet service is only available to the educated and privileged few
in the society.
Question 20
Do you feel that the creation of the market has necessarily impacted
positively on the socio-economic development of Nigeria?
Options No of Respondents Percentage %
(A) Yes 40 100%
(B) No - -
Total 40 100%
Represented in bar chart thus:
0
20
40
60
80
100
120
A B
Options
From the above table and chart, it can be seen that the entire sample
population are of the opinion that the creation of the Stock Exchange Market has
impacted positively on the socio-economic development of Nigeria. This, it has
done by taking some necessary though hard steps since inception to improve on the
material welfare, accelerating rapid socio-economic development needed to put the
country’s market into international standard.
4.3 ANALYSIS OF INTERVIEW
1. Nigeria Stock Market is under developed.
2. Confidence in the market’s future development.
Here, an attempt shall be made to analyze the extract of the interview
conducted on some people on the above mentioned points. Speaking on the stock
market level of development and confidence in the market’s future development
Mr. Sunday Nwosu, one of the operators stated that a situation where only about
12 million independent shareholders patronize the stock market is in sharp contrast
and leaves much to be desired when compared to United States where 88 million
Americans were shareholders. That means that multiples of them depends on the
capital market for their livelihood. He disclosed that the enlightenment campaign
of the association and the BPE on the benefits of investing in the capital market
was what helped to shore up the number.
On the future prospects of the market and level of confidence, he affirmed
that the Nigerian capital market has the potential of becoming the best emerging
market in sub-saharan Africa.
Expressing optimism, Nwosu declared that in no distant time, our stock
market would be like the developed market of the world. He stated that with the
relentless efforts of the BPE and on-going reforms of the Stock Exchange
Commission, Nigerians are being sensitized on the gains of investing in stocks
which many people do not know about.
A second interviewee, Mr. S. Nwosu a Banker stated that the level of
development existing at the stock exchange is a bit impressive based on
information at the stock exchange but pointed out that the capitalization of the
stock exchange was poor when compared to international standard.
He spoke on the factors that have held the Nigerian stock market down. He
made mention of the instability of the socio-political environment. For example,
during the last Nigeria labour congress strike, one could see the impact on the
operations of the stock market thus:
24th July, 2003 (During strike)
No of Stocks Traded - 19, 206, 552
Value (N) - 226, 224, 510.54
When compared to July 26, 2003 (After strike)
No of stock traded - 27,909, 199
Value in (N) - 669, 658, 450.42.
The incessant and unstable political and socio-economic and industrial
disharmony also impeded the operations of the Nigerian stock market.
A third interviewee, Mr. S. Nkwor lamented on the high cost of raising
funds in the market. He said that investors can only be attracted to the market if
cost of raising funds in the capital market is cheaper than in the money market. He
appealed to both the Securities and Exchange Commission (SEC) and Nigerian
Stock Exchange (NSE) to (as a matter of urgency) reduce the cost of sourcing
funds to enable them attract more companies and investors to the market. With
regard to the pricing policy, he stated that the pricing was carried out based on
feelings rather than on the forces of demand and supply. He contented that the
pricing policy was not weighed by the proper procedure but by influence of the
people. He, therefore, suggested that the pricing policy should be allowed to be
determined by the forces of demand and supply, after consideration of the earning
capacities of the company and not on sentiments.
Communication: He believed that with the introduction of over the counter
market and the use of internet and other information technology gadgets the stock
exchange is titling towards international standard.
Confidence in the Market’s Future Development: On the above point, Mr.
Nkwor stated that future prospects of the exchange is bright but emphasized that
the operators engender accountability, transparency and efficiency as this will help
install confidence in the market future development. He therefore proposed that the
following points should be seriously reviewed to ensure efficiency and attract
public confidence in the stock market. They include:
1. Cost of Registration
2. Information made available to the public
3. Uneven Distribution of National Income
1. Cost of Registration: Although the cost of registration has been reduced to
enable more companies obtain quotations in the stock exchange. The cost is
still high compared to what is obtainable in the second-tier security market.
This high cost has excluded small companies and other individuals from
operating in the market. He also talked about anti-trust which prevents
individuals from using privilege information in the market.
2. Information Made Available to the Public: On this he stated that
information made available to the public is scanty and in a language that are
technical to understand.
3. Uneven Distribution of National Income: The Market is made open to
some privilege individuals. He concluded by saying that the exchange has a
bright prospect in accelerating rapid economic development and well being
of the people.
Contributing, Uche Ezechukwu in business day, August 18, 2010, pointed
out that the level of development at the Nigeria capital market scene is exacerbated
for reasons that include:
1. Absence of a strong and well funded regulator;
2. A socio-economic environment that extols wealth no matter however is
made;
3. Suffocating competition that encourages unorthodox practice as firms try to
stay afloat and ahead of competition;
4. Weak legal framework;
5. Weak internal control environment as a result of employment policies that
place less emphasis on merit and integrity;
6. Weak audit committees as a result of membership that is largely financially
illiterate and ill-motivated because of absence of remuneration for services
rendered;
7. Weak external audit function, partly as a result of few bad eggs in the
possession and partly as a result of letters place on independence of the
auditors in actual practice.
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 SUMMARY OF FINDINGS
From the data collected and analyzed, the following parts can be noted:
1. A good number of population were not satisfied with activities of the
exchange due to poor information dissemination thereby leading to low
patronage and apathy. And when they are disseminated, they are either too
technical or scanty for the ordinary person to comprehend.
2. The participators are the few rich corporations and individuals who can
afford to pay for the huge cost usually associated with the listing and other
transaction in the exchange.
3. The public lacked confidence in the activities of the exchange as those who
have invested in shares and other stocks for years could not boast of
receiving any reasonable returns on their said investments.
4. Pricing policy is weighed by feelings and reputation of the company and not
on the basis of demand and supply.
5. The exchange was also noticed to be monotonous in nature as the stocks of
the banking sub-sector for years dominated transactions on the floor of the
exchange.
6. The people have not appreciated so well the roles and functions of the
exchange in economic development and what they stand to gain from
patronizing the exchange.
7. Most people like to either raise funds or invest through the banks due to the
rigors involved in going through the stock market.
5.2 CONCLUSION
It can be concluded that a good number of people do not make use of the
exchange due to the following reasons:
1. Ignorance is a major impediment on the part of individuals and rigorous
quotation requirements at the exchange.
2. Crisis of integrity that rocked the Market as a result of the imbroglio in
the Nigerian stock exchange (NSE) has had far reaching effect.
3. Existence of other institutions which seems more convenient for fund
seekers than the exchange.
In summation, despite the numerous problems confronting the exchange, it
is pertinent to affirm that the market has bright future prospects and would emerge
the best in sub-Sahara Africa, if the proposed steps are strictly adhered to.
5.3 RECOMMENDATIONS
From the above findings, the following recommendations can be made:
1. The cost and stringent requirement involved in listing and registration
should be drastically reduced to attract more people to the market.
2. The management of the Stock Exchange should intensify its efforts to
enlighten the people especially at the grassroots on the numerous gains
they stand to get from patronizing the Exchange.
3. The current over the counter market (OTC) transactions should be
encouraged.
4. Transparency and accountability should be engendered to be the watch-
word and both the management and operators of the exchange should
conform to this order. Every form of window dressing of the financial
statements by companies should be eschewed.
5. The exchange should be professionalized and should not be an all
comer’s affairs.
6. Reforms that should endear foreigners and citizens as well should be
introduced immediately.
7. The pricing policy should be based on the forces of demand and supply
mechanism rather than on sentiments and reputation of companies.
8. Information made available should be more explicit to allow for informed
decision.
9. Awareness regarding the impact of the market on economic development
should be encouraged by organizing seminars, symposium etc and by
employing the mass media to accelerate this campaign.
10. The government should ensure some level of political stability to enable
investors both foreigners and local investors patronize the stock market.
The Nigerian stock exchange market is a very important vehicle that could
enhance the much-desired socio-economic development of this country. And this
feat could only be achieved by hiring the right people, technology and stable socio-
political environment.
BIBLIOGRAPHY
Adeojo and Wole Adewunmi (1982), “Banking and Finance in Nigeria”, Graham Burni Pp. 25.
Adekanye F. (1986), “The Elements of Banking in Nigeria”, Graham Burn: Pp. 25. Alile, H. and Anoa A. L. (986), “The Nigerian Stock Market in Operation”, Lagos,
Jeromalarho and Associates Pp. 14. Alile H. I. “The Impact of Nigeria Stock Exchange in the Economic Development
of Nigeria”, A Paper Presented at a Seminar Organized by the Lagos Chamber of Commerce. Vanguard Newspapers (1988) Pp. 28.
Agbana G. (2009), “Foot Path to Capital Market Competitiveness Engages
Stakeholders”. The Guardian Newspapers, Sept 19, 2009 P. 14. Central Bank of Nigeria Statistical Bulletin (1995) Volume 6 No. 1 (June). Emekekwue, Patrick (1996:25), “Corporate Financial Management” Enugu.
African Bureau of Education Sciences. Falegan, S. B. (1981:241), “Nigeria Financial System” Lagos. Okigbo P. N. C. (1981:90), “Nigeria Financial System Structure and Growth”
Essex U. K. Longman Group Ltd. Onyiuke Ndi Okereke J. (2010), “Overview of the Nigerian Capital Market” A
Seminar Paper Presented in UNEC, Enugu. Onosede, G. O. (1983) “Developing an Active Capital Market”, Journal of the
Stock Exchange Commission. Pp. 50. The Nigeria Stock Exchange Fact Book. 2002, Pp. 15 Vol. 14. http://www.nigeriabusinessinfo.com/cbn.htm. http://www.nigeriabusienssinfo.com/capitalmarket.htmlstructure. http://www.nigeriabusinesinfo.com/sec.htm.
SAMPLE QUESTIONNAIRE
School of Postgraduate Studies Faculty of Business Administration Department of Accountancy University of Nigeria Enugu Campus. 10th May, 2011.
Dear Respondent,
A PLEA FOR QUESTIONNAIRE RESPONSE
I am an MBA student of the above named institution carrying out a research
on the topic “The Impact of The Capital Market on the Nigerian Economy with
emphasis on the Roles of the Nigerian Stock Exchange”.
This questionnaire is designed to elicit information on the topic under study.
It is purely an academic exercise and any information disclosed will be treated with
strict confidentiality.
Thanks for your most anticipated co-operation and remain blessed!
Mbah Emannuel C.
Researcher
QUESTIONNAIRE FORM INSTRUCTION
In each of the questions below, please tick (X) in the box beside the option
you consider most appropriate against each question.
1. Identify your Sex:
(a) Male [ ] (b) Female [ ]
2. What is your occupation?
(a) Civil/Public Servant [ ]
(b) Businessmen [ ]
(c) Banker [ ]
3. Are you aware of the existence of the Nigerian Stock Exchange?
(a) Yes [ ] (b) No [ ]
4. How familiar are you with the operations of the Nigerian Stock Exchange?
(a) Very familiar [ ] (b) Fairly Familiar [ ]
(c) Not Familiar [ ]
5. Are you aware of the aims and functions of the Nigerian Stock Exchange?
(a) Yes [ ] (b) No [ ]
6. If Number 5 is Yes, do you make use of the Exchange?
(a) Yes [ ] (b) No [ ]
7. Where do you raise your funds?
(a) Banks [ ] (b) Friends [ ]
(c) Family Members [ ] (d) NSE [ ]
8. If your answer is banks, why do you prefer this option?
(a) Convenience [ ] (b) Cost Effective [ ]
(c) Only outlet known [ ].
9. Has the Nigeria Stock Exchange contributed significantly to the
development of the economy?
(a) Yes [ ] (b) No [ ]
10. Are you satisfied with the level of development in this market?
(a) Yes [ ] (b) No [ ]
11. What are your reasons for dissatisfaction if your Number 10 option is No?
----------------------------------------------------------------------
12. Can these problems be overcome in the near future?
(a) Yes [ ] (b) No [ ]
13. Are you satisfied with the pricing policy existing at the exchange?
(a) Yes [ ] (b) No [ ]
14. If your answer to Number 13 is No, what are your reasons?
----------------------------------------------------------------------
15. Are you aware of the introduction of the computerized system of clearing
settlement and delivery of trade transaction (CSCS)?
(a) Yes [ ] (b) No [ ]
16. What is the movement of share price like since the introduction of central
security clearing system?
(a) Stable [ ] (b) Unstable [ ] (c) the same { }
17. Are you aware of the introduction of the Automated Training System (ATS)
under which stockbrokers can trade from their offices and home?
(a) Yes [ ] (b) No [ ]
18. If your response to Number 17 is Yes, do you think the Automated Trading
System (ATS) is beneficial to the Stock Exchange?
(a) Yes [ ] (b) No [ ]
19. How has the imbroglio in the Nigerian Stock Exchange impacted on the
capital market?
(a) Negative [ ] (b) Positively [ ] (c) Both [ ]
20. How can you assess the impact of information technology (internet services
stock on the operations of the Nigeria Stock Exchange?
(a) Very Satisfactory [ ] (b) Satisfactory [ ]
(c) Not satisfactorily [ ]
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