CAPITAL MARKET STRUCTURE AND DEVELOPMENT BUSINESS ADMINISTRATION

CAPITAL MARKET STRUCTURE AND DEVELOPMENT BUSINESS ADMINISTRATION

CHAPTER ONE

INTRODUCTION

1.1    BACKGROUND OF THE STUDY

The Nigerian capital market is the long-term end of the Nigerian financial system, just as the money market is the short-term end. In other words, the capital market performs for the economy at the long-term end of the spectrum the functions that the money market performs at the short-term end. Those who are short of funds and need to borrow in the short term propose borrowing from the money market; those who are short of funds and need to borrow in the long term propose borrowing from the capital market; and those who are short of funds and need to borrow in the long term propose borrowing from the capital market.

Similarly, while those who have funds surplus to their immediate needs and want to lend or invest them for short periods do so in the money market, those who have such funds and want to invest or lend them for long periods do so in the capital market.

The regulation of financial markets and the liberalization of capital flows in a number of African countries raise a number of difficult issues. These issues are of concern to policymakers and practitioners. A wide range of issues concern the establishment and design of capital market operations (trading structures). This employs the capital market building philosophy, as well as the role of the capital market (stock) market in achieving overall financial objectives (auctions and dealership).

1.2     STATEMENT OF THE PROBLEM

Over the years, the Nigerian stock exchange has undergone a massive transformation. The Nigerian stock exchange has been in operation for approximately 38 years, which allows for a thorough examination of its structure and development. The stock exchange has been open long enough for a capitalist to examine its structure and development. The stock exchange or its establishment was expected to provide appropriate machinery to facilitate further offering of stock and shares to the general public in the private sector of the economy, as well as to encourage savings investment as soon as it was clear that stocks and shares were readily available.

However, the experience of most countries since the 1980s should have dispelled any doubts about the importance of domestic capital markets in ensuring balanced economic growth. The long-term problems of national and corporate indebtedness have driven the futility of combining too much short-term debt with too little long-term equity.

Things have not been as “smooth” for the Nigerian capital market as they were intended to be when it was established. This industry has some constraints. Some economists believe that the Nigerian capital market is underdeveloped and has not grown significantly since independence. Furthermore, shares are rarely traded, and prices do not reflect the trading characteristics of the listed companies.

1.3     OBJECTIVES OF THE STUDY

The goal of this research project is to highlight the structure and development of the Nigerian capital market. It examines capital market operations, key participants in the Nigeria capital market, and capital market structure in order to aid the development of the Nigerian economy.

In view of this, capital market operations, the need for stock exhcnage and the Nigerian capital make and capital structure and development thoroughly dealt with for analytic purpose

1.4     SIGNIFICANCE OF THE STUDY

This study will educate and expose ignorant businessmen and students to the NSE’s operations, thus broadening the general public’s horizon of knowledge, particularly the operations and policymakers of capital market recommendations.

1.5     STATEMENT OF HYPOTHESIS

A hypothesis is a speculative statement about the relationship of two or more variables. They are always declarative sentences that refer to either a general or specific variable to variable.

As a result, the following invalid and alternative hypotheses may assist us in reaching a more reasonable and unbiased conclusion:

Ho: The Nigerian Stock Exchange has not played a significant role in the development of the Nigerian economy.

Hi: The NSE has played an important role in the economic development of Nigeria.

1.6     SCOPE OF THE STUDY

This project is limited to a case study of the Nigerian stock exchange in Lagos. And spanned the years 2005 to 2007.

1.7     DEFINITION OF TERMS

NSE stands for Nigeria Stock Exchange.

SEC stands for Securities and Exchange Commission.

SECURITIES – These are written on printed financial documents that secure the claims of holders in specialized accounts. On a stock exchange, they could be stock, shares, bonds, or debentures.

STOCK EXCHANGE – A market for securities that is organized.

SHARE HOLDING – The number of shares owned by a single payer.

ISSUING HOUSE – A dealing member who assists in the preparation of prospectuses for the sale of new securities offered to the public by companies and governments.

EQUITY – Ordinary shares of a company that retain ownership of the firm’s assets.

DIVIDEND – A portion of a company’s profits allocated to shareholders.

DEBENTURE – A document containing an acknowledgement of your debt.

JOBS – Those who assist in mapping out all surplus stock and releasing it to the market as demand allows.

STOCK BROKERS – A company or individual who buys and sells securities on behalf of investors for a fee known as brokerage.

INVESTORS – A person or an institution who uses his savings or borrowing to buy securities.

BROKERAGE – This is a commission that stock broker charge for service rendered.

RIGHT ISSUE – these are funds obtained by issue of share for cash ordinary share holders in proportion to their existing holdings unless shareholders in general meeting agreed otherwise.

PRICE EARING: – this is the current market price of share of ratio (PIE) dividend by it’s earning per share. The ratio indicates investor’s confidence in the stock as well as pay back

BOND – A security with a nominal value that entitles the holder to interest payments from the issuer at regular intervals until the bond is redeemed.

BOND HOLDER – the person or entity who owns a bond.

CAPITAL MARKET – A market for the provision of capital to businesses.

ECONOMIC DEVELOPMENT – This is a sustained improvement in material well-being that is reflected in an increasing flow of goods and services.

OFFER FOR SALE – A public offer of shares in a company which is made by an issuing house and in which the shares being sold are not new shares but have been sold by the existing share holders.