AN EVALUATION OF THE IMPACT OF REGULATORY BODIES IN DEVELOPING A VIABLE AND SUSTAINABLE CAPITAL MARKET (A CASE STUDY OF NIGERIAN STOCK EXCHANGE)

ABSTRACT

The Nigerian Capital Market is indeed a tool for economic growth and development. Many researchers are of the opinion that the market has done well, especially in terms of return on investments. If this is true, the impact is supposed to be shown on the economy of the nation. The aim of the research is therefore to evaluate the impact of regulatory bodies in developing the capital market with particular reference to the Nigerian Stock Exchange. Data were gathered on the activities of the Nigerian capital market for a period of 5 years (i.e. 2005 – 2010) through studying existing documents and the administration of questionnaires. Descriptive research methods were used. The analysis of data was based on chi-square and the use of table and simple percentages. The findings of the study revealed that the impact of the regulatory bodies on the capital market has enhanced the listing of more companies on the floor of the Nigerian Exchange. Finally, it is recommended, among others that less stringent listing requirement be employed by the Exchange to allow more participation of intending participants in the market.

CHAPTER ONE

1.0 Introduction – – – – – – – 1

1.1 Background of the Study – – – – – 1

1.2 Statement of the Problems – – – – – 3

1.3 Objectives of the Study – – – – – 4

1.4 Research Hypothesis/Questions – – – – 5

1.5 Significance of the Study – – – – – 5

1.6 Scope of the Study – – – – – – 6

1.7 Historical Background of the Case Study – – 7

1.8 Definition of Terms – – – – – – 11

CHAPTER TWO

2.0 Introduction – – – – – – – 13

2.1 Relevant Concepts and Theories – – – – 27

2.2 Sub Heads – – – – – – – – 27

CHAPTER THREE

3.0 Introduction – – – – – – – 30

3.1 Population and Sample Size – – – – 30

3.2 Sampling Techniques – – – – – – 31

3.4 Sources and Method of Data Collection – – – 32

3.5 Methods of Data Analysis – – – – – 33

3.6 Justification for the Choice – – – – – 33

CHAPTER FOUR

4.0 Introduction – – – – – – – 36

4.1 Data Presentation – – – – – – 36

4.2 Data Analysis and Interpretation – – – 37

4.3 Testing of Hypothesis/Questions and Interpretation 43

CHAPTER FIVE

5.1 Summary – – – – – – – – 46

5.2 Limitations of the Study – – – – – 48

5.3 Conclusion – – – – – – – – 49

5.4 Recommendations – – – – – – 50

Bibliography – – – – – – – 52

Appendix – – – – – – – – 54

CHAPTER ONE

INTRODUCTION

1.1 THE BACKGROUNG OF THE STUDY

The economic growth and development of any economy largely depend on the ability to raise capital through the capital market. The Nigerian stock exchange is a place where the enormous capital which is required to operate the huge industrial and commercial cooperation today can be raised.

Osaze (1991) asserted that the emergence of the institution of the Nigerian stock exchange is a spontaneous reaction of the enterprise economies. The significance reaction of the stock exchange in an economy such as our own cannot be over emphasized, for it is the bed-rock of large scale investment. The Nigerian government hopes to create an economy which would bring about the best in its citizens, compete effectively in the global market and improves the standard of living of its people. An economy where hard work, accountability and transparency would be the cardinal principle that both foreign and local investors would be proud to participate in. once investors looses confidence as a result of market abuse, the growth and development of capital market would be adversely affected and considerable effort would be required to restore confidence.

To be globally attractive and completive, the stock market must be seen to imbibe practices which are globally acceptable. For this reason government tries to put in place adequate regulatory mechanism to prevent or at least minimize market abuse in order to uphold the integrity and confidence that is very essential for the development of a viable and sustainable capital market.

The Nigerian stock exchange is the centre point of the Nigerian capital market. However, the Securities and Exchange Commission (SEC) and the central bank of Nigeria (CBN) are the apex regulatory bodies to the capital market. The tendency of our financial structure has been to channel loans to industries of the past rather than the future (i.e. the rich third world countries). This has become invariably clear that even those external financiers are eroding, thus the need for our own structure in Nigeria to meet up with the excess demand for capital to finance gigantic projects and businesses.

The international organization such as the world bank group are very conscious of the high risk involved in venture of loan given to third world countries which will eventually evade payment of such loans.

There is every need to meet such demand and requirements for smooth and long lasting system for sourcing of such requisite finance.

The study therefore examines in order to evaluate what regulatory bodies have done to ensure the development and sustenance of a viable capital market that will meet global challenges.

1.2 STATEMENT OF THE PROBLEM

For an emerging market like Nigeria, the stringent control measures put in place to regulate the activities of the Nigerian stock exchange for the smooth running is a very huge problem that is hindering the development of the market. The researcher hopes to seek for solution(s).

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