CHAPTER ONE1.0     INTRODUCTION

The Nigerian capital market is a long term end of the Nigeria the financial system just as the money market is its short-termed in other words, the capital market performs for the economy, at the long-term end, the functions which the money market performs at the short-term end of the spectrum. Thus, while those who are short of funds and need to borrow for short-term propose borrow from the money market, those who are short of fund and are desirous of borrowing for the long-term go to the capital market, those who are short of fund and are  desirous of borrowing for the long-term go to  the capital market.

Similarly while those who have funds surplus to their immediate requirements and wish to lend or invest these funds for short-term periods do so in the money market, those who have such funds and to lend there for long periods invest or lend these funds to  capital market.

The regulation of financial or capital market and the liberation of economies capital flows in sere veal African countries raise a number of challenging issues. Policy makers and practitioners are concerned and involved with these issues. A vast set of issues concerns the setting up and designs of capital market operation (trading structures). This employs the philosophy of capital market building, the role of capital market (stock) market in achieving the overall financial objectives (auctions and dealership) choice for the relative competitiveness of emerging stock markets, connections between innovative in trading and regulations world market.

1.1     BACKGROUND OF THE STUDY

Globally,  the  important  of  capital  market  as  an  efficient  channel  of  financial  intermediation  has  been  recognized  by  the  researchers  and  policy  makers  as  a  primary  determinant  of   economic  growth   of   any   nation   (Oluwatosin,   Adekanye   and   Yusuf,   2013). The   capital   market   is   the  segment   of   the   financial   system   which   facilitates   the   channeling   of   long-­‐‑term   funds   from
surplus   to   deficit   economic   units   thereby   stimulating   capital formation   and   socio-­‐‑economic  development.

The   introduction   of   Structural   Adjustment   Program   (SAP) in   Nigeria   resulted   in   significant  growth   of   the   financial   sector   and   the   privatization   exercise   which   exposed   investors   and  companies   to   the   significance   of   the   stock   market.   The   liberalization   of   capital   market   led  tremendous  changes  with  respect  to  volume,  number  of  deals  and  value  of  securities  traded  as  well  as  the  number  of  securities  listed  in  the  market,  yet  there  are  concerns  on  its  impact  at  the  macro-­‐‑economic  level.

Again   the   capital   market   was   instrumental   to   the   initial   twenty-­‐‑five   Banks   that   were   able   to  meet  the  minimum  capital  requirement  of  N25 billion  during  the  banking  sector  consolidation  in   2005.   The   stock   market   has   helped   government   and   corporate   entities   to   raise   long   term  capital   for   financing   new   projects,   and   expanding   and   modernizing   industrial/commercial  concerns  (Oladipo  and  Tunde,  2013) Oluwatosin,   Adekanye   and   Yusuf   (2013)   infer that   the   capital   market   has   undergone
tremendous reforms   in   recent   years.   Among   these   is   the   introduction   of   Central   Securities  Clearing   System   (CSCS),   and automated   clearing,   settlement   and   delivery   system   aimed   at  easing  transactions  and  fostering  investors’ʹ  confidence  in  the market.  

Equally  important  is  the  linking   of   performance   information   on   the   Nigerian   Stock   Exchange   to   Reuters   International
System   in   order   to   disseminate   relevant   market   information   to   subscribers.   However,   poorly  functioning  capital  markets  typically  are  illiquid  and  expensive  which  deters  foreign  investors.  Illiquid   and   high   transactions   costs   also   hinder   the   capital   raising   efforts   of   lager   domestic  enterprises  which pushed them  to  foreign  markets.
The   capital   market   effectively   started   operations   in   Nigeria   on   5th   June,   1961   under   the  provision   of   the   Lagos   Stock   Exchange   Act   1961,   which   transformed   into   the   Nigerian   Stock  Exchange   in  December   1977   as   a   result   of  the   review   of  the Nigerian  financial   system  (CBN,  2007).  The  Securities  and  Exchange  Commission  (SEC)  was  established in  1979  through  the  SEC
Act  1979,  to  regulate  the  capital  market,  but  it  commenced  actual  operation  in  1980.  It  took  over  regulatory   functions   from   Capital Issues   Commission,   which   was   established   in   1973.   Since  then,  various  forms  of  financial  instruments  have  been  issued  in  the capital  market  by  new  and  existing  business  to  finance  product  development,  new  projects  or  general  business  expansion.