ABSTRACT
This study was carried out to investigate the relevance of capital market to growth and development of enterprises on Nigerian Economy.
The finding was based on the following. How does capital market promotes Enterprises in Nigeria Economy. What are the roles and performances of capital market in the Economic development of Nigeria. To what extent has capital market influence the growth and development of enterprises in Nigeria. What problem does enterprises in Nigeria encounter in approaching the capital market.
During the course of this study, a similar questionnaire of twenty items was administered in fifty to the respondent and the bankers and entrepreneurs.
The method of data analysis used in this study was simple percentage and frequency counts. Then the percentage was used in comparing the various responses and the result of the study led to some contusion which are as follows:
1) The capital market promotes enterprises in Nigeria anomy through the following
a) By regulating and financial company
b) By providing a mechanism through stock and share for mobilizing private and public savings
c) Capital markets enable comprise to mobilize and allocate fund to incitement
2) The roles and performances of capital market include the following:
Provision of long and medium term loans to industry consulting services and export finance. Capital market promotes financing to meet the domination liquidity and maturity risk. Capital market provides an investment avenue for people who wish to invest and resources for a long period of time.
3) These are the extent in which capital market influence the growth and development of enterprises.
It increases the profit of firm or an organization It helps in ensuring the efficient and sustainable finding of capital market project or long term project. Promotes public-private sector partnership to encourage participation of private sector in the productive investments.
4) These are problems facing enterprises in Nigeria in approaching the capital market
Small business lack access to capital and money profit
Entrepreneur faces some challenges when applying for the loan.
There is misunderstanding of the product and the market by many investors.
As a result of these findings, useful recommendations were made on the Relevance of Capital Market to growth and development of Enterprises on Nigerian Economy which include that:
(1) The achievement of the capital market or the Nigerian stock exchange does not preclude reaching implicating of their ability to live up to public expectation therefore in order to prevent this unwanted effects, the capital market frame works (SEC and NSE) should remain a self regulatory organization (SRO).
(2) The government should pursue investor friendly policies which are consistent with the industrial development objectives of the nation.
(3) Since exploration of the NSE depend significantly on the level of awareness, all institutions of learning from the senor secondary school to the tertiary curriculum as a general requirement regardless of the field of study. This will further enlighten the young prospective entrepreneurs of the available benefit of the capital market.
(4) The NSE should set-up a monitoring and supervising unit, responsible to identify quotable company/enterprises and encourage entrepreneurs of the available benefits of the capital market.
(5) It is recommended that further study should be carried out in the areas of strategies for enhancing a strong capital market; improving the market “product” and ways of broadening the geographical (average of the market activities)
CHAPTER ONE
1.0 INTRODUCTION
Technological changes in the world today makes every society strives to enhances standard of living by pursuing developmental programmes that improve infrastructural facilities which in turn stimulates economic advancement.
The availability and accessibility of resources proof that a source exists and the source of financial resources can be easily accessed in Nigeria, which can be grouped into two, the money market and the capital market. The capital market was developed as a corrective mechanism of the disequilibrium between the saving/surplus unit of an economy and the investment/deficit unit.
Without the capital market, the cost of funds would be higher and the efficient allocation of funds to the best users at lowest cost could not take place. The capital market brings economic unit requiring funds to meet the economic unit desirous of parting with their movies for relatively long period of time.
Funds held for less than five years, but for more than two years are regarded as medium term funds. Anywhere in the world, the capital market had three main elements. The market is represented by the stock exchange that are allocated to all round the economy. The participants are the investors through issuing houses, registrars and advisers e.t.c. The financial instruments are the financial assets also known as a security, which represents either debt or ownership (equity).
1.1 BACKGROUND OF THE STUDY
There are two important elements that lead to the early development of the capital market. The first element was the coming together of financial institutions such as banks and insurance houses, which were in need of finance for their operations and sought to source for it through sales of securities, to cope with the expanding volume of trade and commerce.
The second elements was the increasing complexity of government who were in need of funds to meet its public obligations. The Nigeria capital market began in 1964 with the issuance of the first Nigerian Government Registered Stock 1956/61 by the colonial government and managed by the accountant general. This was followed by the federal government of Nigeria (FGN).
Development stock in 1959 and the floatation of the second development stock in 1961. The management of the federal government, development stock was transferred to the central bank of Nigeria (CBN) in 1959 and later to the Lagos Stock Exchange (LSE) when it was opened in June 1961.
Consequently, a committee was set up under profession Barbade, then Director of the Nigeria institute of special and economic research, in 1958 to look into the way and means of enhancing share market in Nigeria. The recommendations of the committee were as follows:
i. The creation of facilities for dealing in share
ii. The formulation of rules and regulation for transfers
iii. Embark on measures to encourage saving and issues of government securities and other organization.
The favourable submission led to the registration under section entity name “the Lagos state exchange” in march 1960 which was later followed by its in corporation under section central bank of Nigeria, the business community and the investment company of Nigeria limited (ICON) New Nigeria Industrial Development Bank (NIDB). The memorandum and articles of association were subscribed by six subscribes originally they were:
i. Alhaji Shehu Bakar
ii. Mr. R.C. Powell representing the investment co-op. Nigeria
iii. Mr. Akintola Williams
iv. RSV Scott, representing C.T. Browsing and Co-Nigeria Limited.
v. Chief Theophilus Adebayo D.
vi. Sir. Odumegwo Ojukwu
The Lagos state exchange operations started on 15th June 1966 at the Central Bank Building as a self regulatory organization (SRO). The need to grant it protection under the law and to place some of its activities under control of the government lead to the passing of the Lagos State exchange Act in 1961.
1.2 HISTORICAL REVIEW
The bank is managed and staffed by people of integrity, with cognate skill and excellent track records in their respective fields. It operates strictly as a business concern with prime consideration for good returns to it shareholders.
Its lending and other activities are thoroughly scrutinized to ensure that only people with visible projects and adequate entrepreneurial skills are founded.
The relevance of capital market to the growth and development of business enterprises include the following:
To improve quality microfinance services to small and medium scale business entrepreneurs using the services of highly skilled and motivated staff and robust management information system thereby superior returns to shareholders.
It plays in the short term end of the market by providing short term mortgage, leases and lease rentals for customers. The bank also engages in stock broking business on behalf of its customers through trusted and reliable stock brokers in the business.
In some cases, (microfinance banks) provide facilities for our clients to buy into some selected stock after providing their equity contribution of 25%. The bank maintains a professional indemnity with a reputable insurance company serve as brokers for our going insurance business.
1.3 STATEMENT OF THE PROBLEMS.
Most of the business owners failed to realize the fact that cash divided affects shareholders equity in the business activities. In a situation where there is no effective communication between the business owners and capital market, the lending and borrowing of money tends to be difficult.
Moreover, lack of information about the capital market which make the business owners not to be aware of the benefits/gains involved in borrowing money for the expansion of their business. The percentages to be charged on the money borrowed from the capital market may serves as hindrance for an entrepreneur to obtain the loan.
1.4 PURPOSE OF THE STUDY
The following are the purpose of the study:
i. To evaluate the contributions of the Nigerian capital market to the growth and development of business enterprises in Nigeria.
ii. To enlighten the reader on the existence, operations and the benefits of the capital market especially as it related to sourcing long-term finance for smooth running and expansion of such business.
iii. To analyze the roles and performance of the Nigerian capital markets in economic development
iv. To examine the roles and performance of microfinance banks to the growth and development of business enterprises in Nigeria.
v. This research work will also undertake critical appraisal of the capital market (microfinance banks) in a relation to an economic dynamics of a modern society.
1.5 SIGNIFICANCE OF THE STUDY
The socio-economic setting is very dynamic in nature. Therefore, this up dated research will aid the understanding of the place of capital market in the capital formation, accumulation, allocation and transfer of fund in the changing society.
The finding of this research will also enlighten the money and capital market operations and other financial intermediaries of the important of their roles in financial intermediation.
This study will also be useful to future researches financial institutions, educational institutions, potential investors, policy makers, player in capital market and the immediate public.
1.6 RESEARCH QUESTION
This study wants to provide answer to the following questions:
i. How does capital market promote enterprises in Nigeria economy ?
ii. What problem do enterprises in Nigeria encounter in approaching the capital market?
iii. To what extent has capital market influence the growth and development of enterprises in Nigeria?
iv. What are the role and performance of capital market in the economic development of Nigeria?
1.7 LIMITATION OF THE STUDY
There are three limitations to this research work:
First, there is insufficient database from which a complete analysis can be made and appropriate conclusion drawn Book written by the specialist in this area were hard to come about and even when available are very expensive. This study is limited by time. Despite these constraints, the study has to be carried out. Also it should be noted that this study is limited to the level of information gathered from investors.
1.8 DELIMINATION OF THE STUDY
This project work focus on the relevance of capital market to growth and development of enterprises in Nigeria economy in a solid rock of microfinance Bank.
1.9 DEFINITION OF TERMS
BROKER: A number of a stock exchange firm or any exchange numbers who handles order to buy and sell securities and for a commission is called broke rage.
CAPITALIZATION: (Also known as market value). It is the share price times the number of shares outstanding.
EARNINGANDDIVIDENDFORSHARE: These are calculated base on the project after tax but before extra ordinary items and have seen calculated on the basis of issued shares.
FIXED ASSETS: These are properties of a business that can last for long period of time.
LISTING: A stock or bond admission to trading rights on a stock exchange based on it size, profitability share handles e.t.c.
TURNOVER: This present the net value of goods sold to third parties, rent and interest receivable, income from facilities provided for affiliated companies and income from other source.
STOCK: Raw materials out of which something is manufactured. It is a local capital of a corporation divided into the shares.
SHARE: Share is a unit of capital or ownership of a limited liability company. It is the division of the company’s ownership into numerous equal parts i.e. the interest which a shareholder has in the company.
EXCHANGEFLOOR: Centre when stock broker and other dealers coverage to transact in stock share and equities.
UNDERWRITER: Assuming the risk of purchasing a new issue of securities from of issuing firm or government entity and later resulting them to the public either through dealers or directly.