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

Based on the above facts, the Nigerian Stock Market has formulated measures to expand the market role in these regards. Some of the areas requiring further review and updating are detailed below:

•  Pricing of New Securities: The pricing of new securities on the Nigerian Stock Exchange is centrally determined. Most of the argument in favour of a central pricing arrangement centre around the fact that government own majority of the quoted companies. However, this argument will become invalid as soon as transfer of ownership of companies devolve to private shareholders and financial literacy of the Nigerian investors raised to a tolerable position. Also, there is popular view that low prices obtained for securities quoted on the Nigerian Stock Exchange are fixed by The Securities And Exchange Commission, applying central securities pricing system. The central securities pricing system has resulted to under pricing of securities and therefore, has resulted to unwillingness on the part of unquoted companies to access quotation and listing on the Nigerian Stock Exchange. It is therefore essential that the practice of central pricing of securities be reviewed to allow for market liberalization in the long run.

2.4 GROWTH RECORDS OF NIGERIAN CAPITAL MARKET By certain measures and standard such as market capitalization, transaction volume as well as information, communication and computer based transaction; the Nigerian capital market is one of the most developed and attractive on the African Continent and compares favourabley with some emerging markets outside the African region. Nigerian has one stock exchange that is, The Nigerian Stock Exchange. As at the last quarter of year 2009, the Nigerian Stock Exchange had on its trading list 276 securities of which 183 were equities. But, as at 2003, total trading was 264, while 199 were listed as equities. This covers virtually all sector of the economy as follows: Productive Sectors: Agriculture/Agro-allied, Automobile and Tyre, Breweries; Building Materials; Chemical and Paints; Conglomerates Construction; Engineering Technology Food Beverages and 26 Tobacco; Healthcare; Industrial and Domestic Products Services Sector. Services Sectors Airline Services; Banking; Commercial/Services; Computer and Office Equipment; Hotel and Tourism; Information and Communication Technology; Insurance; Leasing; Maritime; Media; Mortgage Companies; other Financial Institutions; Packaging; Petroleum Marketing; Printing and Publishing; Real Estate; Road Transportation. The market also prides itself with some of the most reputable and profitable companies in the country, having strong links or subsidiary relationship with well known multinational corporations. In the period 2000, the number of quoted companies or equities of the Nigerian Stock Exchange was 195. This figure surpassed equities listing on emerging markets such as Portugal (169); Poland (65); Jordan (99); Russia (170); Argentina (149); Venezuela (90) and also matured markets such as Australia (109); Belgium (143); Norway (152) and Finland (73). 27 The analysis above reveals that the Nigerian capital market has the highest number of traded equities than most other capital markets in Africa with the exception of South Africa and Egypt. It therefore means that the Nigerian capital market provides greater options to investors in terms of choice of equities than most other African markets do. For example, Ghana had only 24 companies listed on their exchange, Botswana (18), Kenya (56), Tunisia 26, Cote-devoir 38, and Zimbabwe 64 as at year 2002. (Source: Securities Market Journal, 12th Edition).

For the Nigerian Capital Market, the growth of equity listed on the Nigerian Stock Exchange in the year 2000 and beyond is primarily as a result of the polices of privatization of enterprises as well as Banks recapitalization directives of the Central Bank of Nigeria. The above policy directives brought about 28 new companies into the floor of the Nigerian Stock Exchange SEC (2007), whereas there are presently 202 companies listed on the Stock Exchange, less than half can be said to be operating directly in the real sector. The economic reforms of the federal government, particularly those that have taken place in the 28 financial sector among other objectives to impact positively on real sector financing.

2.5 CAPITAL MARKET PERFORMANCE REVIEW 2000 TO 2009

The capital market within the period under study and applying available performance indicators within period 2000 to 2009 shows relative well performance.

2.5.1 NEW ISSUES INDICATORS

An aggregate of N1.76 Trillion was raised from the market between 1999 and 2006. Equities accounted for N983.64 Billion or 55.78 percent, while debt issues accounted for N779.76 Billion or 44.22 percent of total new issues. In 1999, the total value of new issues was N12.0 Billion. By 2000 it has risen to N7.2 Billion and by 2003, it was N180.1 Billion. It arose to N552.8 Billion in 2005 and N707.4 Billion by 2006. The banking recapitalization exercise, aggressive public enlightenment and improved market infrastructure can be the major reasons for the growth of new issues. In the debt segment, the Federal Government revenue bond of N150 Billion issued in 2003 formed the major portion of funds 29 raised in the debt segment of the new issues market during the period under review. The other new issues by Federal Government via revenue bond are N140 Billion in 2005, N411.76 Billion in 2006, N765.84 Billion in 2007 and N493.1 Billion in 2008. Also, during this period, a total of N37.5 Billion was raised through the market by seven state Governments. Corporate organization did not future is the debt segment of the market. Thus, the choices of investors in the market were restricted to equities and government debt instruments.