THE IMPACT OF CAPITAL MARKET ON THE NIGERIAN ECONOMY
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.
Statement of the Problem
It has been observed that the abundant evidence that most Nigerian businesses lack long-term capital. According to Donwa and Odia (2010), the paucity of long-term capital has posed the greatest predicament to economic development in most African countries including Nigeria. The business sector has depended mainly on short-term financing such as overdrafts to finance even long-term capital. Based on the maturity matching concept, such financing is risky. All such firms need to raise an appropriate mix of short- and long-term capital (Kunt and Levine 2006).
This research work focus on the evaluation of the performance of Nigeris Stock Exchange in the economic development of Nigeria. Stock Exchange has not made the much desired impact on the economy. It will also evaluate the impact of the market with a view to finding solutions to the following problems: