The capital market is a market for the mobilization and utilization of long term funds for development. The instruments traded in the market include government securities, corporate bonds and share s (stocks) and mortgage loans. The market consists of an inner capital market (Market for new securities ) and the outer capital market (not directly concerned with the issue of new securities but engaged in the business of long term borrowing and lending upon which the issued of new securities depends . the capital market embraced therefore both the new
issues (primary ) market and the secondary (Seasonal securities) market.
Participants in the Nigerian capital market include the Nigerian stock exchange (NSE), discount houses, development banks, investment banks, building societies, stock broking firms, insurance and pension organizations, quoted companies, the government, individual and the Nigerian securities and exchange commission (NSEC).
The Nigerian Stock Exchange Market (NSE): A stock exchange is a highly organized market for dealing in stocks and shares. Through the stock exchange, business concerns can raise the massive financial capital by selling shares and debentures. The memorandum of association of the stock exchange in Nigeria included the following objective.
a. To provide facilities for trading in securities and supervise such trading activities.
b. Facilitate the flow of long term funds into commerce and industry
c. Maintain fair prices for securities
However, the Nigerian stock exchange (NSE) has branches in Kaduna, Abuja and Portharcourt which are fully operational. business transactions handled by the stock exchange include those involving fixed interest securities (Bonds ), private debentures and issues of shares. Also, the members of the stock exchange include:
i. Stock brokers agents, buying and selling stocks on behalf of clients
ii. Jobbers – buying and selling on their own account they use their money to buy shares and then sell some to the members of the public.
Investment Houses: They are also known as investment trusts. They sell shares of smaller denominations and help small investors to participate in share floating.
Issue House: These are institutions which assist the entrepreneurs by providing immediate resources by purchasing the shares of the issuing authority en-bloc by the sale of shares
Underwriting House: To underwrite a share means to provide guarantee for its sales. So underwriting house, issue houses purchase entire issue of shares of issuing authorities and guarantee their sales.
Also, like all stock exchange, the NSE is made up of many market for new issues (primary market), market for exiting securities (secondary market) and markets for debts securities and equities. There are in fact markets for each of the sectors of the economy.
The Primary Market: The market is concerned with the offering of new issues or the initial insurance and sales of securities in the NSE previously quoted companies can seek expansion funds through the insurance of supplementary securities in this market while “new’ companies (companies not hitherto quoted on the exchange) will have to go to public before they can issue (sell ) securities to the public through the market.
The secondary market: The existing issues or secondary market, in a strict sense, constitute the stock exchange since it is the mechanism which gives liquidity to the securities listed on the exchange.
The Second –Tire Market (SSM): The second tire securities market was establishment on the 30th April, 1985 to small and medium-sized companies that were unable to met their requirement of the first -tire market (NSE) in raising long- term capital. To encourage the development of the SSM, stringent conditions for enlistment in the first –tire market were relaxed for indigenous enterprises seeking to raise funds through the SSM.
The Nigeria Securities and Exchange Commission (NSEC): The history of the Nigerian securities and exchange commission dates back to 1962 following the establishment of the capital issues committee (an adhoc committee devoid of any legal status) whose primary function was to see to the orderly development of the capital market by regulating share prices and determining the timing of issues, the committee functioned essentially as an advisory body under the umbrella of the central bank of Nigeria (CBN) , after the civil war, however given the recognition of the important role the committee had played in the successful implementation of the 1972 Nigerian enterprises promotion Act, the capital issue Act was promulgated by the federal government in 1973, (CIC) vested with the power to determine:
a. The price at which shares or debentures of a company are to be sold to the public either through offer for sale or indirect issues
b. The timing and amount of sale
c. < /span>In the case of a quoted company, the prices, amount and time of any subsequent or supplementary offer of shares or debentures are to be sold.
However, only public companies (quoted or unquoted) fell within the sphere of the CIC. In other words, private companies were not obliged to seek the approval of the CIC before raising funds through the security market.
In 1976, following the realization of the need for an apex capital market regulatory body, the financial system review committee recommended the establishment of the securities and exchange commission. The commission was later established by the securities and exchange commission Act on 27th September, 1979 (effective retrospectively from April, 1978) with an autonomous and legal status.
In addition to the various arms of capital market mentioned above, it is common knowledge that the country’s development needs at the federal, state, and local government levels for outstrip her revenue generation capabilities. However, the finance and insurance sector is one that has experienced about the highest growth in the Nigerian economy especially since after the introduction of the structural adjustment programme (SAP) in 1986 . .Hence, this has had positive and far reaching implications on the activities of the capital market in Nigeria .
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