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

In 1977, the Lagos Stock Exchange was transformed into Nigerian Stock Exchange. It has branches in Kaduna, Port- Harcourt, Ibadan, Kano, Onitsha and Abuja. The branches function primarily as trading floors. Membership The Stock Exchange is a private sector institution registered as a non-profit making organization limited by guarantee. It is owned by about 293 members consisting of:

I. The Foundation Members
II. Ordinary Members
III. The Council Members
IV. Dealing Members

The foundation members are the institutions and individuals who subscribed to the memorandum of the exchange at its formation stage or incorporation.
The ordinary members consist of those members admitted to membership after the establishment of the exchange in 1961 by subscribing to the shares. They can be called shareholders.
The council members or the (Board of Directors) are elected at an Annual General Meeting of the Exchange from amongst members.
The Dealing Members consist of licensed stock brokers. They are the people who buy and sell securities on behalf of investors for a commission or brokerage. Operation of the Stock Exchange The operation of the Nigeria Stock Exchange can be classified into two broad categories namely:
(i) The Primary Market of New Issues Market
(ii) The Secondary Market or Existing Issues Market.

The Primary Market This is the market for new securities issues. It operates when raising of new or additional capital takes place such as initial public offers. Thus, it offers opportunities for companies to raise fund for investment purposes or for already quoted companies’ new monies for expansion and or technological advancements and modernization. The major players in the primary market segment of the Nigerian Securities and Exchange Commission (SEC). Capital market 38 are; The Nigerian Stock Exchange (NSE), Issuing Houses and Stock Brokers. Before the deregulation of the capital market in 1993, SEC was responsible for pricing and allotment of New issues, while, Quotation Committee of the NSE is charged with the functions of approving of issues to be listed on the Exchange Official List. Issuing Houses, Stock brokers are responsible for packaging of the issues. The CBN acts as the issuing house for Federal Government stocks. All forms of fixed and floating income securities are traded on the market. Secondary Market A secondary market is a market for resale of securities. It provides marketability and liquidity for quoted stocks and shares. Buying and selling of shares and stocks are executed by brokers on behalf of their customers on the floor of the exchange. Securities transfers end with the central securities clearing system statement reflecting the transaction to the new buyer. Securities traded in the secondary market consist of federal government stocks, debentures, preference shares, state and local government bonds and ordinary shares of quoted companies. Floating Process in the Stock Exchange There are basically two methods of issuing shares in the primary or new issues market. They consist of:

(i) Private placement/issue method; and

(ii) Open for subscription method

The Private Placement/Issues Method takes the form of offer for rights private placement etc. Here individual are invited who may be existing shareholder in the case of offer for right and or non-existing shareholder in case of private placement to buy shares on offer.

Open Subscription Method: The general public is allowed to buy the shares in the form of initial public offer, offer for subscription, offer for sale, a stock exchange introduction. The overall management of the exchange is headed by the Director General and a team of management staff who head 40 strategic departments. They are charged with the day to day running of the exchange.

Role of the Nigerian Stock Exchange

1. Formation of Capital: By facilitating primary market activities, it thus facilitates efficient resource allocation and improved liquidity of securities and eventual capital formation.

2. Determination of Value of Shares: The Stock Exchange provides a platform for shares value determination using market forces and set standard pricing criteria.

3. Source for Government to Raise Capital: The Stock Exchange is a source of raising capital for federal, state and local governments. It thus provides a viable source for development capital sourcing.

4. Encourages Indigenous Investment in Stocks and Shares: By making shares liquid and easily exchangeable, they therefore attract indigenous investors and people is attitude to investment in the capital market also changed and improved.

5. By enforcing rules and regulations amongst members, it thus encourages fair dealings.

6. They set operational standard for participant in the market.

7. It creates an easy source through which firms can raise capital for expansion and modernization.

8. They provide data and information on the capital market and thus encourage capital market education and information gathering and dissemination.

9. They ensure prudence and probity by quoted companies. This they do by insuring that quoted companies provide all the necessary information on their activities to the general public. Thus, from the above discussions on the Nigerian Stock Exchange, we can therefore describe a stock exchange as a market that provides the platform, institutional arrangement as well as location for the trading (that is, buying and selling) of shares, stocks, debentures, bonds and other securities. It is essentially a secondary market for trading on existing securities. It also facilitates new securities trade.