1.0 Introduction
1.1 Background of the Study
Both the developed and the underdeveloped countries of the world operate a stock exchange market where securities of various categories are visited for trading. These could be government stocks, industrial loans (debenture /preference stocks) or Equity/ordinary shares.
Nigeria, one of the undeveloped, sub-Saharan African economics, is not an exception. She owns and operates a stock exchange called the Nigerian Stock Exchange (NSE) the main focus of this research work. The hitherto, Lagos Stock Exchange (LSE) established in 1960 later became the Nigerian Stock Exchange (NSE) in December 1977, with branches in some of the major commercial cities of the country.
Most of the listed companies in the Nigerian Stock Exchange have foreign/multinational affiliations and represent a cross section of the economy, ranging from agriculture through manufacturing to services thus; the Nigerian stock Exchange is directly hinged to the Nigerian economy. To this end, this research work consolidates and brings to the open, the Nigerian Stock Exchanges in the following areas:
- Meaning,
- History,
- Objectives and function,
- Integrity,
- Trading and pricing,
- Clearing, delivery and settlement,
- Stock Market Legislations and regulation,
- Internationalization of the stock market,
- The All —share index and the Impact so far on the economy of the country.
It is no doubt that the Nigerian Stock Exchange fared well in the past decades until the recent global financial crisis hitting adversely on the countries of the world, especially the sub — Saharan African economies including Nigeria; the hitherto stable and smooth operations of the NSE have been slightly shaken, relative to other sub —Saharan African economies such as the democratic Republic of Congo, Angola, Botswana and others, by the worldwide financial crisis since late last year (March 11, 2009 Reuters).
Nigeria has been clouded by falling prices for energy exports on which the government relies for other 80 percent of revenue, the Naira has fallen about 20 percent since the start of the December Last year and the budget foresees, an increase in spending that will take the deficit to at least 3 percent of gross domestic product (GDP) Growth has been forecast at 8 to 9 percent (Reuters), but continued how oil prices through 2009 could reduce that rate. Efforts to defend the currency and capital markets, such as the reimposition of currency controls have raised concerns over where Nigeria is headed. Based on the foregoing global financial crisis, this research work also among other related matters, covered extensively the impact of the global financial crisis on the NSE and the Nigerian economy as well as efforts so far made to withstand and survive the tumbling world prices.
1.2 Statement of Problem
The Nigerian Stock Exchange like other stock markets worldwide is expected to work in synergy for efficiency and reliability in achieving set goals mostly in times of economic challenges. Therefore, the extent to which the Nigerian stock market put in place a network of intermediating organizations that can effectively and creditably meet the challenges and growing needs of both local and foreign investors and subscribers, mostly in this period of global financial crisis and economic recession is a major problem that prompted this research work.
1.3 Objective of the Study
The Objectives of this research work is to bring to the student community and the public at large reliable information on the Nigerian stock exchange and the impact of the recent global financial crisis on its operations.
1.4 Statement of Hypothesis
- Ho: The recent global financial crisis affects the operations of the Nigerian Stock Exchange.
- HI: The recent global financial crisis did not affect the operations of the Nigerian Stock Exchange.
1.5 Research Questions
- Is the Nigerian Stock Exchange really affected by recent global financial crisis?
- Did the global financial crisis have impact on the operations of the Nigerian Stock Exchange?
- Should one have trust in the Nigeria Stock Exchange (NSE)?
- Has the internalization of the NSE been a welcomed development?
1.6 Significance of the Study
This study is desirable because it will be a source of information to the student community, business organizations and various individuals who wish to have knowledge of what is happening in the Nigerian Stock Exchange (NSE) within the period covered by the study, and how NSE and Nigerian economy coped with the global financial crisis characterised by tumbling world prices which slashed oil revenues and reduced the value of the Naira.
1.7 Limitation of the Study
The major limitations to this research work are inadequate finance, time factor, locations of the Nigerian Stock Exchange branches relative to my institution and others.
1.8 Scope of the Study
The scope of this study is limited to the structure and operations of the Nigerian Stock Exchange (NSE), and the impact of the recent global financial crisis on the NSE and the economy as well as efforts made towards meeting up with the attendant challenges.
This research work covers a five year analysis of the operations of the Nigerian Stock Exchange (2004-2008).
1.9. Definition of Terms
Stock:
— These are shares in the capital of the company. The holders of these shares received dividends. It is also the bundle of shares.
Bond:
—This is a credit instrument and the holder of it is a creditor who receives a specified amount of interest on the principal amount together with the principal.
Debenture:
— This is a document which contains an acknowledgment of indebtedness
Stock Exchange:
— This is market where securities are bought and sold. It provides facilities for company's and government to raise money from the citizens for business and project development.
Broker:
— This is a person on firm authorized by law to deal with all bonds and stock quoted in the floor of Nigeria Stock Exchange.
Investor:
— A person or institution that uses his savings or borrowings to buy securities.
Securities:
— These are written or printed documents by which the claims of holders in specified property are secured.
Issuing House:
— As a member of stock exchange, it is a firm that help to prepare prospectus and to sell shares offered to the public by company's and government.
Right issues:
— These are shares offered to the existing shareholders in proportion to the number of shares held and usually at below market prices to make the offer attractive.
Private Placing:
— This is a system of raising funds from the market whereby the stocks of a company are placed with a stockbroker who then seeks out prospective purchasers.
Shares:
— A share is a security evidencing part ownership in a company. It is a unit of ownership interest which a holder has in a business unit translated into financial terms.
Public Placing:
— This is describes as where a firms shares are quoted on the stock exchanged.
Offer For Sale:
— This is a system where by existing share holders offer their shareholding as part of them for public subscription.
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