An Evaluation of Capital Market Reform and Its Impact on the Performance of the Nigerian Stock Exchange
Chapter One
OBJECTIVE OF THE STUDY
The broad objective of this study is to determine the impact of capital market reforms on the performance of the Nigerian Stock Exchange.
This study specifically designed:
- To compare the pre and post reform performance of the stock market using the market capitalization.
- To compare the pre and post reform performance of the stock market using the trading volume.
- To compare the pre and post reform performance of the stock market using the value of stocks.
- To compare the pre and post reform performance of the stock market using the share market index
Based on the findings, to make policy recommendations on how to improve the overall performance of the Nigerian Stock Exchange.
CHAPTER TWO
REVIEWED OD RELATED LITERATURE
This chapter reviews the past work done on the subject matter by other researchers and highlights the gap (if any) identified in their work. It will also review the past government reforms towards the effective performance of the stock exchange and the status of such reforms presently.
The chapter is divided into the following sub-headings
- The structure and organization of the Nigerian Capital Market
- Instruments traded on the Nigerian Stock Exchange
- Nigerian Stock Market performance indices
- Investments Regulation in the Nigerian Capital Market
- Impact of economic meltdown on Nigerian Stock Market
- Developments in Nigerian Stock Exchange
THE STRUCTURE AND ORGANIZATION OF THE NIGERIAN
According to Ndi Okereke-Onyiuke (2008), Nigeria has a formal and active capital market. Before 1961, almost all formal savings and deposits went through the banking system while the then colonial master invested major capital balances for the country on the London Stock Exchange. However, following the establishment of CBN in 1959, it was logical to have a Stock Exchange; hence the incorporation of the then Lagos Stock Exchange in 1960, which commenced operations in 1961.Thus, the foundation was laid for the operation of the Nigerian Capital Market. Earlier in 1959, the CBN 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 Capital Market is the most vibrant in Africa after that of South Africa. (Mgboji 2009)
The Nigerian Stock Exchange which was founded in 1960. It is 2nd most active exchange in Africa after the Johannesburg Exchange with securities listed as at 1990 on the daily official list of the Exchange. (Onosode 1990)
THE NIGERIAN STOCK EXCHANGE
The Nigerian Stock Exchange is a private, non-profit making organization. It was incorporated under the companies’ ordinance as an association limited by guarantee. It was incorporated via the inspiration and support of businessmen and the Federal Government through the CBN. The Lagos Stock Exchange was given initial financial backing by Central Bank of Nigeria (CBN) in the form of annual subvention. In 1977, following the recommendation of the Government Financial System Review Committee of 1976 the Lagos Stock Exchange was renamed and reconstituted into the Nigerian Stock Exchange. Additional trading floors were also opened in the same year in Port Harcourt and Kaduna.
The Nigerian Stock Exchange (NSE) is the center point of the Nigerian Capital Market, while the Securities and Exchange Commission (SEC) serves as the apex regulatory body. The NSE provides a mechanism for mobilizing private and public savings, and makes such funds available for productive purposes. The Exchange also provides a means for trading on existing securities. It also encourages large-scale enterprises to gain access to public listing. The NSE operates the main exchange for relatively large enterprises as well the Second tier Securities Market (SSM) where listing requirement are less stringent for small and medium scale enterprises.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.
This study was carried to examine An evaluation of capital market reform and its impact on the performance of the Nigerian stock exchange. Nigeria stock exchange, Abuja form the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain An evaluation of capital market reform and its impact on the performance of the Nigerian stock exchange. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing an evaluation of capital market reform and its impact on the performance of the Nigerian stock exchange.
Summary
This study was on an evaluation of capital market reform and its impact on the performance of the Nigerian stock exchange.. Three objectives were raised which included: To compare the pre and post reform performance of the stock market using the market capitalization, to compare the pre and post reform performance of the stock market using the trading volume, to compare the pre and post reform performance of the stock market using the value of stocks and to compare the pre and post reform performance of the stock market using the share market index. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from Nigeria Stock Exchange. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
As long as reform in the Nigerian economy is taken to be a continuous exercise, so will the NSE continue to expand through reaping from such reforms in terms of increased volume of stocks traded, market capitalization, value of stocks etc. Conclusively, based on the findings there is a significant difference in the performance of the Nigerian Capital Market before and after the reforms.
Recommendation
- Nigerian government (under the global economic meltdown) should put in place a good bailout package to assist the ailing banks, stockbrokers etc, as this will not allow the fund withdrawal by the foreign investors to negatively affect the capital market.
- The NSE should find means of cutting down cost of raising fund on the exchange so as to allow more companies the opportunity of accessing funds from the exchange.
- Companies should be encouraged to engage in buy back options as a way of stabilizing their share price thereby stemming the negative effects of the global economic crises. In addition continue to enhance confidence on the side of both the stakeholders and investing public.
References
- Adelegan, O. J. (2001) “The Role of Operators in Securities Market Development in Nigeria”. The Nigerian Accountant, Vol. 34 (4), ICAN Lagos.
- Alabede, J. O. (2004) Stock Market Theory and Practice, Unpublished Material, ATBU, Bauchi.
- Alabede, J. O. (2005) “An Evaluation of the Performance of the Nigerian Stock Exchange between 2000 – 2003” The Gubi Journal, Vol. 1, ASUP, Bauchi.
- Alabede, J. and Dada, D. (2009), “The Impact of Economic Reforms on the Performance of the Nigerian Capital Market,” The Nigerian Accountant.
- Alile H. I. (1984) “The Nigerian Stock Exchange: Historical Perspective,
- Operations and Contributions to Economic Development” Central Bank of Nigeria Bullion, Silver Jubilee edition Vol. II.
- Alile, H. I. (1997) “The Stock Exchange and Capital Formation in Nigeria”, being paper presented at a Workshop Organized by SEC in Lagos.
- Anyanwu J. C. (1993) Monetary Economics Theory, Policy and Institutions, Hybrid Publishers Ltd Onitsha.
