The Capital Market And The Challenges Of Real Sector Financing In Nigeria.
[A STUDY OF THE PERIOD 2000-2009]

2.2.4 INTRODUCTION METHOD:

Under this arrangement, a company seeking quotation having met the listing requirements, the Exchange may permit the shares of such firm to be introduced in the market. A typical example of this is Guaranty Trust Bank which was listed in 1996 by introduction because the bank already had enough shareholders to satisfy part of the listing requirements of the Nigerian Stock Exchange.

2.2.5 GLOBAL DEPOSITORY RECEIPTS (GDRS) METHOD:

The Nigerian Stock Exchange is now disposed to encourage quoted companies to raise foreign exchange denominated capital through Global Depository Receipts. Global Depository Receipts are capital market financial instruments that are denominated in foreign currency. This instrument enable quoted companies raise foreign exchange denominated capital from foreign portfolio investors from other foreign capital markets relative to naira based capital from the domestic capital market. From the above explanation, it is thus evidenced that this market initiates and generates the liquidity that drives the capital market via direct access to foreign exchange based capital.  From the process and procedures discussed above, it is evident that the primary market initiates, generates and avail the liquidity needs by quoted companies as well as drive the capital market. Odife (1985), Whereas the function of the primary market is to create financial claims or assets, the secondary market is to provide a mechanism whereby these financial claims are not liquidated merely by the withdrawal of one of the parties.

2.3 SECONDARY MARKET

The secondary market operates after issues have been completed and the security listed on the Nigerian Stock Exchange. Secondary markets are vehicles for providing liquidity to the investors in case of need. That is, shares sold in the secondary market only provide liquidity to the investor and not the quoted firm. In Nigeria, secondary market transactions are carried out by licensed stockbrokers on the trading floor of the Nigerian Stock Exchange located in the following towns: Lagos, Kaduna, Port- Harcourt, Kano, Onitsha and Ibadan.

Adedipe (2003), the degree of effectiveness and efficiency of the capital market will determine the extent to which it will contribute to the economic growth and development in an economy. It is appropriate to note that there are two pivotal role played by the capital market in an economy;

• It signals the state of health of the economy. In this case, the Nigerian economy and the productive sector of the economy in specifics.
• It provides a measure of the responsiveness of the economy to the degree to which economic activities rely on it. In the first role, the market trend is indicative of the state of health of the economy.

It thus expresses whether the economy is headed for the right direction or not. It also reflects the level of confidence in policies, there implications and implementations. If these indicators inspire confidence in the economic system, economic agents especially productive sector targeted investors will respond accordingly. Thus, the market in view will remain positive and vibrant. In the second role, the market serves as active and effective balance at the more regulated money market. In the money market, the Central Bank of Nigeria engages in price signaling through the fixing of and adjusting of the minimum rediscount rate as at and when necessary. The Apex regulating body in the capital market plays no such role. Hence, prices determinations are mainly driven by the forces of demand and supply on the various financial securities traded in the market. To this extent, the capital market is free and provides a more dependable barometer for measuring economic health of the various sectors of the economy as well as the economy at large.

Alile (1997), The pivotal role of the Nigerian Stock Exchange in capital formation in Nigeria is highly acknowledged, by providing issuers and investors with a responsive, fair and effective stock market. It is thus expected to be achieved by the century;

• To raise market capitalization from 17% in 1997 to at least 90% of Gross Domestic Product (GDP) by the year 2010.
• To raise turnover from U $ 86 Million in 1996 to U $ 1 Billion by 2010.
• To increase the number of indigenous shareholders as a base for sustainable capital formation. An increase which should not be less than 50% of Nigerian total population, that is, 6,300,000 indigenous shareholders.
• To increase the foreign exchange inflow to Nigeria through the listing of Nigerian Stock and Securities on the floors of foreign stock exchanges. The Nigerian Stock Exchange is aiming at 15% contribution to the Nations Foreign Exchange receipts.
• These expected performance would increase capital formation that will in turn lead to development of economic activities in Nigeria most especially the productive sectors of the economy.

Further, Alile and Amao (1996) explained that the implementation of wrong economic policies by government of the day would hinder the activities of the Nigerian Stock Exchange. These policies will include the following:

a) The failure of the government to diversify the economy coupled with inadequate attention paid to certain vital sectors such as agriculture, manufacturing, building and construction, oil and gas including small and medium scale industries. The majority of these vital sectors constitute the productive sectors of the Nigerian Economy. 
b) The pursuit of an industrial policy that relied exclusively on imported raw materials and other inputs.
c) The costly delays in the commencement of basic industries such as Iron and Steel, Petrochemical Industries without which the economy could not take off and the wrong determination of products within these industries.
d) The attitude of the citizenry’s of a consumption behaviour that prefer imported goods relative to locally produced goods.

In aggregate, these wrongly implemented economic policies have had their negative effects. They include:

1) A high unemployment level together with its associated traumatic social ills.
2) An excessively high level of inflation that is both scarcities induced and cost pushed inflation.
3) A cumulative balance of payment deficit running into over U $28 Billion in external debts. However, this debt profile position has been reversed with the payment of Nigeria external debt in 2006.