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

2.5.2 MARKET CAPITALIZATION INDICATORS

Total market capitalization of listed securities on The Nigerian Stock Exchange appreciated geometrically from the period 1999 to early 2008, following the global economic meltdown and crash in the prices of stock especially banking sector stocks, the market capitalization of the Stock Exchange dropped to about 70% of its highest capitalization value.

An overview of the market capitalization of the Nigerian Stock Exchange in the period shows:

1999 - N300 Billion

2002 - N764.9 Billion

2003 - N1.4 Trillion

2004 - N2.1 Trillion

2005 - N2.94.65 Trillion (Source: SEC Quarterly Journal, October, December 2008)

The percentage of market stock capitalization to GDP in these periods were; 1999 (9.4%); 2000 (9.6%); 2001 (19.8%); 2002 (19.8%), 2003 (19.8%), 2004 (19.8%), 2005 (20.5%), 2006 (28.3%). By this figures, it shows that the stock market is increasingly becoming more relevant to the economy.

2.5.3 TRADIGN VOLUME AND VALUE INDICATORS

A review of trading activities in terms of volume and value in this period shows that:

Year               Volume of Shares          Value of Shares

1999                    4.0 Billion                      N14.1 Billion

2003                   13.1 Billion                      N113.8 Billion

2005                  26.5 Billion                       N254.7 Billion

2006                   36.7 Billion                       N468.6 Billion

2007                  53.21 Billion                     N679.40 Billion

2008                  66.51 Billion                      N781.31 Billion 

2009                  68.54 Billion                         N424.4 Billion (Source: SEC Statistical Bulletin, 2009).

NOTE: The reason for the drop in the value of shares in year 2009 to N424.4 Billion is as a result of crash in the prices of shares of some quoted companies especially banking sector shares.

2.5.4 STOCK INDEX INDICATOR

The Nigerian Stock Exchange All-share Index appreciated remarkably from 5,266.4 points in 1999 to 20,128.9 points in 2003, 24,085.8 points in 2005 and 33,189.3 points in 2006. This means that the level of economic activities in the various sectors of the economy was on an upward movement.

2.5.5 LISTED SECURITIES INDICATORS

In 1999, there were 268 listed securities in the market. However, this number dropped to 258 in 2002 as a result of the delisting of some of the securities during this period. As at end of 2008 listed securities were 288.

2.6 CAPITAL MARKET INSTITUTIONS The main institutions in the Nigerian capital market are:

I. The Securities and Exchange Commission (SEC) 

II. The Nigeria Stock Exchange (NSE)

III. The Registrars IV. Stock Brokers V. Registrars

VI. Second Tier Securities Market.

2.6.1 THE SECURITIES AND EXCHANGE COMMISSION (SEC) The Securities and Exchange Commission (SEC) is the apex regulating and monitoring institution of the Nigeria Capital Market. The legal instrument that established SEC is the Securities and Exchange Commission Act 1979. Before the establishment of Securities and Exchange Commission, the Capital Issues Committee and the Capital Issue Commission were responsible for the monitoring and control of the capital market. It must be noted however that the function of the Capital Issues Committee was more or less advisory and thus could not enforce control on the market. For the Capital Issues Commission, their activities were limited to the supervision of public limited liability companies and thus 33 could not exercise supervision over the Nigerian Stock Exchange.

Functions of the Securities and Exchange Commission

1. Monitoring Function SEC monitors the activities of the Nigerian Stock Exchange on the trading floor in order to enlist orderly, smooth and equitable dealings in securities. This also ensures prevention of insider dealings.

2. Registration Function The SEC is involved in the registration of:
          (i) All securities on offer either by public offer or by private placement
          (ii) Persons and institutions as brokers, registrars, issuing houses, investment advisers, fund manager, subbrokers and agents etc.
         (iii) All stock exchange and their branches.
          (iv) Traded securities, that is, shares, debenture bonds etc. 

3. Price Determination and Timing of Issues Function: SEC determines the price, amount and time at which securities offered by companies should be sold either via offer for sale or by subscription.

4. Allotment Function: SEC determines the basis of allotment of Securities of a public offer to ensure adequate spread of ownership.

5. Ethics, Standard and Integrity of Capital Market
        (i) Uplifting and sustaining the integrity and standard of the security market.
        (ii) Protect the investing public against misleading and false information by deceitful institutions.

6. Development Function Ensures growth and development of the capital market.

7. Ownership Spread: Ensures ownership spread thus reducing monopoly or concentration of shares tendencies.

2.6.2 THE NIGERIANSTOCK EXCHANGE

Before the formation of the Nigerian Stock Exchange, all formal savings and deposits were passed through the banking system. 35 Also, major capital balances were managed and invested by the colonial masters with the London Stock Exchange. In 1959, the Central Bank of Nigeria was established and following the advent of the CBN was the need for a stock exchange in Nigeria. In 1958, the Barback Commission was set up by the Federal Government and in their report they recommended amongst others:

(i) The creation of facilities for dealing in shares.
(ii) The establishment of rules regulating transfer of shares
(iii) Measures to encourage saving by issuing some securities of government and other organizations.

Following this recommendation, on the 15th September 1960, the Lagos Stock Exchange was incorporated as a limited liability company. Its ownership was made up of; the Central Bank of Nigeria (CBN). Investment Company of Nigeria (ICON), few interested Nigerian citizens formed the initial seven subscribers to the stock exchange memorandum In 1961, the Lagos Stock Exchange Act was passed and in June 1961 the Lagos Stock Exchange commenced business.