AN ANALYSIS OF THE OPERATION OF THE NIGERIAN CAPITAL MARKET

1.1 Introduction

The emerging capital markets all over the world have a history and Nigeria is not in any way different. The Nigerian capital market represents a small but growing proportion of the nation’s economy. This study on the development of the capital market institution in an emerging economy like Nigeria seeks to examine not only how it came to be established but also how this institution has evolved to impact upon the Nigerian economy. The Nigerian capital market is principally a market for long-term investments where corporate equities and long-term debt securities are issued and traded. It is a market that is regulated by the Securities and Exchange Commission (SEC), which is the apex regulatory body of the Nigerian Capital Market. The capital market is so vital to the development of any economy that no country can risk its existence without putting in place measures to regulate the activities of the market (Ajol, 2021).

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.

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1.2 Background of Study

The capital market as a subsection of financial market, deals in long term and short term, as well as operating stock. It may not involve the issue of negotiation instrument but, cash flow from operators and direct negotiation or re-capitalization. These are done through organization such as:

1. Development Bank, NIDB, NBC
2. The Nigerian Stock Exchange
3. The Issues Houses
4. The Unit Trust which is largely the government owned and therefore, has their capital subscribed by government. It also involves Insurance Company which also have their capital issued subscribed direct also have owner i.e. government or private owned. They rightly be called the market for direct negotiation long term (NDLF) that is the arm of capital market.

The other arm of capital market is the securities market that deal in the issue of sales of long term securities like the money market. Securities market involves the lending of money in one form or the other unlike the money market however, the securities trade in long term debt are bonds issue by the government on agency which when bought by individual or institution grants loan to what ever organization that issued it. It is thus a promissory note or (100) whichever issue promissory to repay at certain date in the future and pay by the buyer as a guaranteed rate of interest.

For any economy to remain afloat in its bid for survival today's globalization, deregulation and liberalization of markets, it needs to have an efficient financial system to direct the allocation of its resources capital markets and institutions, of which the stock exchange is an integral part of and have become of, paramount importance in a dynamic economy as Nigeria. The capital market is a sub-set of financial system that provides the accelerated growth of the economy. This is done by efficiently channeling fund from investors into productive sectors of the economy. It serves as an avenue for government and companies to raise long-term funds to finance their activities (Nwankwo, 2000).

The equities on the other hand are purchase share or stock issued by company or institutions by individual, group or financial intermediaries. The purchased of share or stock does not become a creditors as the case of bond or under bond issue, rather he became an owner of the company. The capital market consists of a network of institutions and individuals comprised of regulators and operators who, together, facilitate the smooth operation of the market. In other words, the capital market comprises providers of funds (investors), users of funds, intermediaries (stock brokers, issuing houses, registrars) and regulators. The securities market can be newly issued securities board or equities that primary segment of the capital market or in securities that have already been issued. That is the secondary market for outstanding securities that has also been issued.

Osuagwu, (2006) describes buyer behaviour as the behavior customer's or client's will display in searching for, buying, using, evaluating and disposing-off products, services and ideas which they expect will satisfy their needs and wants. This makes buyer behavior a study of how individuals make decisions to spend their resources on consumption - related items and their evaluation of such purchase decisions.

Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Operation of the Nigerian Capital Market.

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1.3 Statement of Problems

Investigation revealed that the position of the capital market to the following economic development of any economy as very great and therefore, business managers are very conscious of its operation. It’s on this basis that the study is paramount in order to understand the working of the Nigerian Stock Exchange and how it’s positively engineering the growth of the Nigeria economy through the provision of capital to individual and organization to either expand their business or capitalize.

This study would attempt to look at how the growth of business organization positively or negatively and the way forward. It would attempt to look at how the growth of business organization it would also assess the difficulties organization faces in an attempt to their re-capitalized their business through the Nigerian Stock Exchange. It is also hope to mute solution on the way forward solving some of the problems organization faces in order to acquire capital through the Nigerian Stock Exchange.

A new era in life of the Nigerian Capital Market began on Monday July, 31st 1978, with the opening in Kaduna a branch of Nigerian Stock Exchange. The branch serves million of Nigerian Investors. The idea of having the branch is to assist in spreading the benefits of stock market operation to the northern part of the country.

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1.4 Aim and Objectives of Study

The aim of the study is to analyze the Operation of the Nigerian Capital Market using Nigerian Stock Exchange as a case study. In achieving this aim, the following specific objectives were laid out as follows:

1. To examine the operations of the Nigerian Stock Exchange and how its positively engineering the growth of the Nigeria economy;
2. To assess the difficulties organization faces in an attempt to expand or re-capitalized their business through the Nigerian Stock Exchange;
3. To investigate the how the growth of business organization positively or negatively affect Nigeria Capital Market; and
4. To proffer solution towards solving some of the organizational problems in order to acquire capital through the Nigerian Stock Exchange.

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1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

• What are the operations of the Nigerian Stock Exchange and how its positively engineering the growth of the Nigeria economy?
• What is the difficulties organization faces in an attempt to expand or re-capitalized their business through the Nigerian Stock Exchange?
• How does the growth of business organization positively or negatively affect Nigeria Capital Market?
• What are the solutions towards solving some of the organizational problems in order to acquire capital through the Nigerian Stock Exchange?

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1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

Hypothesis One

• H0: The operations of the Capital Market did not satisfy the demand of Nigerian’s economy.
• H1: The Operation of the Capital Market satisfies the demand of Nigerian’s economy.

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1.7 Significance of Study

This research is of utmost important in the light of the fact that brings an additional understanding of the Nigerian Capital Market in terms of its operation as it affect organization. It will also help to create awareness of the general public particularly investors to appreciate the opportunities that exist in the capital market. This study will secure as reference to student studying financial market to understand the operation of the capital market easily.

This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.

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1.8 Scope of Study

The scope of the research is focused on the Analysis of the Operation of the Nigerian Capital Market using Nigerian Stock Exchange as a case study.