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AN EVALUATION OF THE PERFORMANCE OF NIGERIAN STOCK EXCHANGE IN THE ECONOMIC DEVELOPMENT OF NIGERIA (A CASE STUDY OF NSE KADUNA BRANCH)
The purpose of this project is to evaluation of the performance of the Nigerian stock exchange (NSE) in Nigeria and to the over all financial development of the economy. It would be noted that the success of an industry of firm depends largely on the capital recourses available to the industry and this will also be reflected in the development of the economy. It has been noted that with the cost importance of the capital market a lot has been achieved by the nation. It can be noted that capital investment is what is needed for Nigerian firms to break into the big economics this work. It contends that the capital market needed to be enhanced so as to effectively channel those resources to industries and firm. The methodology used in achieving the findings include gathering information from annual publications and fast books of the stock exchange business journals, annual publication from the central bank of Nigeria e.t.c A good capital market wit have a positive influence or effect I industrial financing. Industrial development in the country can be a determination of the financial resources available to it. This relationship between the capital market and the financing is a visual circle. If capital is made available for financing projects more fires and organizations will be listed on the stock exchange and this will enhance resources available both to a country and the living populace.
However, some recommendations have been given in the work to the operations of the market to help in overcoming the present problems faced by the stock exchange.
TABLE OF CONTENT
Table of content
1.1 background of the study
1.2 Statement of the problem
1.3 Objectives of the study
1.4 Scope of the study
1.5 Research questions
1.6 Significance of the study
1.7 Historical background of the Nigeria Stock Exchange in the Economic Development
1.8 Definition of terms
2.2 Stock exchange of other countries
2.3 The role of Nigeria stock exchange in Nigeria economy
2.4 Government role in the operating of the stock market
2.5 The general management and control of the Nigeria Stock Exchange.
2.6 Capital Formation in Nigeria Stock Exchange
2.7 The Concept of economic Development in the Nigeria Stock Exchange
2.8 Transition of Lagos Stock Exchange to Nigeria Stock Exchange
3.1 Method of data collection and Sources
3.2 Population and sample size
3.3 Sampling Techniques and Limitation
3.4 Method of Data Analysis
3.5 Justification for the choice
Data presentation, analysis and interpretation
4.2 Data presentation and analysis
4.3 Testing of hypothesis
4.4 Summary of findings
Summary, conclusion, Limitation and recommendations
5.3 Limitation of the study
1.1 BACKGROUND OF THE STUDY
A buoyant and dynamic economy is the one built upon a sound financial system. Such finical system should be stimulated and maintained by the effective activities of an efficient capital market, which is the head of the “Stock Exchange”.
The stock exchange therefore is the market where companies, raise capital on a short term and long term basis. This role of mobilization and allocation of funds to every sector of the economy which made it (Stock Exchange), the toast of investors has given it a pride of plan in every economy. There is no doubt, that the success or failure of every sector in the economy rests to every large extent on its stock exchange market. This is because for any sector in the economy to grow an efficient means of capital formation must not be ignored considering the importance of capital in any organization setting.
Since the establishment of the Nigerian stock exchange (NSE) some forty two years back (42) elements of stagnation, dormancy and unproductiveness in the economy is being experienced despite the tremendous development in the exchange systems. This situation has taken a worrisome dimension in which many questions are being raised on the relevance of the Nigerian stock exchange in facilitating investments in the Nigerian economy.
1.1 AN OVERVIEW OF THE BACKGROUND OF THE STUDY
There was no organized financial market or institution in Nigeria prior to the establishment of the central bank of Nigeria (CBN) by the Act of parliament in 1958. Consequently, surplus funds of the financial system were invested abroad there by starving the economy of the mush – needed capital for general development. But immediately the central bank of Nigeria came into existence, the banks started pioneering the development of Nigerian financial market comprising the money market for short-term funds.
The development of the Nigerian money market for short term funds started in 1960 with the issue of the first Central Bank of Nigeria Treasury Bills. Subsequently, other short-term debt instruments such as Treasury certificates, commercial Bills, certificate of Deposits e.t.c were introduced by Central Bank to increase the volume and depth of the money market.
The first attempt of developing the Nigeria capital market can be traced to the year 1959, when the Central Bank of Nigeria floated the First Nigerian Development loan stock on behalf of the Federal Government of Nigeria. The capital market was divided into two (2) categories. The primary market which deals in new issues and the secondary market which deals in old securities, all in the stock exchange. In Nigeria, capital market is regarded as the stock exchange because of the integral part it plays in the stock exchange market. It is involved in many financial activities around which all other operators in the capital market revolve one the other hand, the capital market comprises of various participants and they are broadly divided into four (4) categories, namely.
As can be seen above the provider of funds essentially comprises of individual and companies, while the users of the funds issuer of securities are expected to be government and corporate bodies. in other words, individual may not be able to raise money from capital market as they can do in money market.
However, the stock exchange is one of the key institutions in the capital market which is a network of individual institutions and instruments involve in efficient channel of funds from the surplus economic unit to deficit economy unit. It plays a central and indispensable role in the market because the opportunity offers for subsequent trading in the existing securities has made it a decisive factor in the success or otherwise the efficiency. Thus, the availability of a secondary market engenders formation and social economic development.
Hence, the Nigeria Stock Exchange (NSE), which constitutes the hallmark of the Nigerian capital market, plays an important part in the economic life of the nation. Through its functions, the stock exchange enables government and industry to raise long term capital and finance developmental project and expansion and modernization of individual and or commercial concern.
It is sad to note that despite the various functions it performance in our economy, its performance as well as its contributions to the development of the economy is not adequate when compared with the investment made in the Nigerian stock exchange.
It is widely reported that the Nigerian Stock Exchange (NSE) has not contributed adequately as desired to the development of the economy especially with regard to investment in Nigeria this is due to certain reasons:
It is along these that efforts will be made in this study to bring to notice the validity of these and other allegations leveled against the Nigerian Stock Exchange over the years.
1.3 OBJECTIVE OF THE STUDY
The study is being undertaken with various specific objectives in mind, some of which includes:
The findings from the study is hoped to assist policy markets to take appropriate action or decision towards improving the activities of the stock exchange as well as in curbing the problem facing the exchange.
Basically, this study will cover the activities and performance of the Nigeria stock exchange (NSE) ideal with such aspect as the historical background or evolution of the stock exchange, capital formation as well as the role of the Nigerian Stock Exchange others areas will include legal framework, members and governance operations, listings requirement and instrument listed on the stock exchange.
This study will examine the activities and performance of the Nigerian stock exchange with the aim of finding out the extent to which it has contributed to the development of the Nigerian economy especially in facilitating investments opportunities. The following questions are therefore raised to guide the study.
It is a widely held view among economists and financial scholars that the economic growth and development of any economy depends on the level of capital formation of that economy. Nigeria’s low level of economic advancement has largely been attributed to the inability of the Nigerian Stock Exchange to mobilize and allocate the much needed investiables capital efficiently.
Therefore, any research efforts in these directions will contribute immensely in addressing the country’s economic problems. The findings of this research could be of tremendous benefit to policy maker particularly in the current effort to sensitize the capital market support it and make it viable as well as international standard.
The economy and the investing public could also benefit significantly from the result of the investigation, large number of Nigerians even though having large sum of investigable funds, are either completely ignorant or are not well informed about the operation of the stock exchange. This unfortunate state of affairs is responsible for the large size of money outside the financial system and consequently, the low level of investment in the economy, on the other hand many Nigerians who are ready to operating their own enterprises they do no know were and how to obtain additional funds to increase their operations.
The research work is also intent to help reverse the trend by providing necessary information about the activities of the Stock
Exchange to the public especially the investing public.
The need to mobilize financial resources by government can not be over emphasized as the country development need for outstripped
Its revenue generation capacity. Experience in Nigerian has shown that revenue from taxation and statutory allocation alone are not sufficient to finance the current and capital expenditure of most government of the federation. It is therefore imperative for them to look for other sources of capital inflows to close their resources gaps.
As a matter of fact the need to finance growing budgets deficits from 1958 and the deteriorating balance of payment form the year 1950
Were some of the consideration for government support of the business community in setting up the lagos stock exchange in 1977 the stock exchange was also inspired by government due to the understanding that a viable capital market could be relied upon to finance industrial development in particular and nation economic growth in general on the other hand the money market represent the short-term end of the nation. Financial market comprising essentially
Short-term loans and obligations with maturely of about a year it is an institutional arrangement through which individuals and institution with temporary surplus funds meets borrowers who have temporary funds shortages. The money market to manage liquidity. Therefore, one of the working capital needs of companies and to provide government with short-term funds in lice of tax collection.
The capital market on the other hands is the section of the financial statement which provides medium of business and government. Reusing of funds in the capital market makes the construction of factories, office building, highway, bridges and acquisition of machine possible an efficient capital market they are mobilizes the nations capital resources and allocate them for the overall growth of the economy. If capital resources are not provided to these economic arrears, especially industries, where demand is growing and which are capable of increasing production and productivity the rate of expansion of the economy will definitely suffer.
1.8 DEFINITION OF TERMS
The relevant terms which are used in this research work that may be new to the reader are defined or explained below.
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