The Stock Exchange Market in Nigeria
The Stock Exchange Market in Nigeria- As history puts it, the stock exchange market seen as an apex institutions charged with the responsibility of monitoring the securities trading activities of the non-bank financial institutions in Nigerian was first incorporated an 15th September, 1960 as lagers stock exchange with the aim of a non-profit organization. Under the any is of the government, the business community the central bank and the Nigerian industrial development bank. How ever, it began operation on 5th June 1961. than by 2nd December, 1977 the lagers stock exchange was transformed into the Nigeria stock exchange with its branches in port-Harcourt, Ibadan, kaduna and Onitsha.
In recent times, the stock exchange relied mainly on two sources of fund for its operations quotation fee which at present is N7.2 billion yearly for each company quoted on the institutor market and N2 billion yearly fro each second-tier securities market company, and still other sources of revenue are incomes from investment, subscription fees of dealing members, annual fees payable by issuing houses, registered agents. Cloaks and proceeds from sale of publication.
The memorandum and Articles of association of the Nigerian stock exchange permit the admission of three categories of membership Viz founder members, ordinary members and dealing members or stockbrokers. Membership is open to partnership companies and in exceptional case to individual perhaps, a series of public policy measures introduced to strengthen the stock exchange and create a market for government securities found expression in a number of legislations enacted between 1963 and 1976 inclusive first was the lagers stock exchange act 1961 which formalized the official status of the exchange. During the period 1963 and 1972 the central bank and the industrial development bank provided annual subornation’s of some N38000 to the exchange. The exchange reports on its activities quarterly to the bank to keep it abreast of development in the capital market and for guidance of the federal government in policy formulation second were the income management act 1961 and the national provident act 1961. The formed conferred tare exemption privilege on pension and provident funds, provided government securities constitute one-third of their total investments. The latter restrict investment of the resources of the provide fund to government securities and debenture. Listed on the exchange.
Third was the trustee investment Act 1962 which permits trustees subject to the terms of tier trust to invest in quoted securities on the exchange in addition to government securities.
Moreover, in that year, regional government and other institutions as mentioned earlier were directed to repatriate their overseas assets for investment in local securities. Finally there was the insurances (Miscellaneous) Act 1964 whose provision in suspect of investment of insurance funds have since been up-dated and incorporated in the insurance Decree 1976. all those effective measures has expensed the volume and value of government securities.
STRUCTURE OF THE STOCK EXCHANGE MARKET (SEM)
Each branch of the exchange has a council (Branch council) consisting of some prominent individuals and also of stock broking firms as dealing members. The director of the branch exchange is a member of the branch council. The structure of the Nigerian stock exchange providers for representation f each brunch council the national council. The national council provides overall direction for the exchange.
The president and council members are Elected at the exchange annual general meeting by members of the exchange the tenure of office rotates every year at the and of which elected offer may office themselves for re-election. However the presidency of the exchange is limited to a maximum of three terms.
BRANCH COUNCIL
Each of the branches in port-Harcourt Kaduna, Onitsha, Lagers and Ibadan elects its own governing officers in like manna. However, they are referred to as branch chairman and branch council members accordingly.
ROLE AND POWERS OF THE COUNCIL
The National council of the exchange is the highest policy making body of the stock exchange just as is the board of directions of any company. The powers and functions of the council.
a. Enforcement of the Articles as well as rules and regulations of the exchange
b. Taking disciplinary measures against erring members and policing the market.
- Investigating and settling disputers and complaints from inventions against brokers of from one member.
- Making, altering or revoking regulations or fees for effective operations of the exchange.
- Granting of quotation to companies and decision delist suspend or withdraw quotation from any quotation company as it may deem fit.
- Appointment of committees.
COUNCIL COMMITTEES
The council, in order to facilitate its functions has created committees drawn from its members as follows:
THE QUOTATIONS COMMITTEES
This committee is responsible for scrutinizing all application for listing securities as well as delisting recommended to council by the management of the exchange.
THE DISCIPLINARY COMMITTEES
INTEGRITY as the watch word of the exchange and “my word is my bond” is the binding ethic of every member operating on the stock market.
THE FINANCE AND MANAGEMENT COMMITTEES
This committee is vested with the power of administering the financial resources of this non-profit-making organization. It is also responsible for the welfare of the staff and the hiring and termination of executives of the exchange.
THE MERIT AND PUBLICATION COMMITTEE
The selection of winners of the prestigious stock exchanges annual merit award via recommendation of management is the responsibility of this committers. Publication and statements issued by authority of council are retted by this committee.
MANAGEMENT OF THE EXCHANGE
The director general
The day-to-day offense of the exchange are administered by the director-general and his director general and his team of executives (Heads of Department and branch Directors)
Article 17 of the Nigerian stock Exchange stipulates that;
“The council shall appoint an officer of the exchange to be know as director general who as chief executive shall be answerable to the council for super intending the general working of the exchange”.
The Director general is therefore, at the helm of affairs directing the operations of the exchange. He .. this with the assistance of Four department hands and Two branch executive who report direct to him. The four departments of the exchange are:
a. Administration and securities department this department handles personnel
management and finance and accounts and provides secretariat services to the nation council of the exchange.
b. Second-tier securities market department.
This department arrases all aspect of the promotion, quotation and dealings in the securities of companies which are quoted on the second-tier market of the exchange.
c. Research and information system department
The responsibility of the production and publication of the stock exchange daily official list and the stock market price index is vested in this department. It researches monitors and documents every transaction or deal struck on the trading floor of the exchange the department is the … central between the exchange and the press, the public and other corporate bodies.
d. QUOTATION DEPARTMENT
This department is responsible for the analysis and securing of application from companies sacking quotation on the exchange. It also ensues that quotated companies comply with the disclosure requirement of the exchange and adhere to accept accounting standard in the preparation of their annual accounts.
THE ROLE OF THE STOCK EXCHANGE MARKET
OBJECTIVES
The major objective of the SEM currently defined, remain the same as when the ideal of a stock exchange market was first conceived. Specifically, the principal objectives of the stock exchange are:
- To provide facilities for trading in securities.
- To supervise activities associated with dealing in securities.
- To facilitate the flow of long-term capital into commerce and industry
- To maintain fair prices for securities
- Liquidity creation
- Enhancement of economic efficiency.
To achieve those objective under the companies act 1968 and its memorandum and articles of association. They perform staying function to control and regulate the activities in the exchange, during transactions. However those functions are discussed below.
a. The stock exchange act as a central meeting point for the buying and selling of existing stock shares and for granting quotations to the new issues through the provision of opportunities for razing new fresh capital.
b. Efficient and effective mobilization of cup capital fund by provision of machinery through stocks and shares for mobilizing private and public saving and making those available for productive investment.
c. Facilitating the purchase and sales of securities thereby reducing the risk of liquidity stock. As stock can now be repurchase and resold.
d. The exchange acts as the centrifugal institution for the implementation of the Nigeria indigerization programme by providing facilities to foreign business to offer their shares to Nigerian investors.
e. Sourcing of capital development funds by the various tier of government such as federal government develop Municipal government through the issue of public debt instrument such as federal government development stock, state and municipal bond.
f. By reducing the cost and conditional sties of sourcing fund for small firms the stock exchange created the second.
Tier securities market thus increasing the member of firm that utilizes its facilities to acquire large pools of equity and debt fund.
SYSTEM OF OPERATION IN THE EXCHANGE
Because of the limited volume of trading in the exchange, the call-over system of trading is used. This system requires that transactions in called up. The system differs from the tick system whereby the brokers more around the floor of the exchange, from one stand to another and deal with jobbers who specialize in particular types of securities. At a specified time the listed securities are called out by the call-over clerk. As the securities are being called out, an interested dealer quotes two prices for each security.
He done not say whether he wants to buy or sell but simply quotes two priers, for instance, “52k-53k.” The higher price represent the price at which he is prepared to sell. The lower price is the price is the price at which he is prepared to buy the security. The price at which the last deal on a security was concluded remains in force until a new deal at a different price on the security is recorded. Only price changes that result from large or round lot” transactions are recorded on the price board of the exchange and reported in its publication.
Transactions involving more than 500 units of a given security are “parcel” deals and dealers are required to disclose the number of units of the security they quote for because as mentioned earlier, the securities exchange commission determines the price for securities in deals exceeding 50,000 shares.
LISTING REQUIREMENT IN THE EXCHANGE
Formal listing of securities on the exchange is a privilege extended to the issuing corporation after its application has been passed by the stock exchange council. The listing requirements are intended to ensure that the exchange facilities are open only to those companies with sound financial position and satisfactory record of profit performance.
In its effort to keep off dubious companies from the exchange, the listing requirements have been loaded with rather sever and restrictive provisions for instance, the exchange requires that a minimum of 25 percent of the issued share capital with a nominal value of a least N250, 000 must be held by a minimum of 500 shareholders excluding the directions, principal shareholders and employees of the company. Second, the audited balance sheets and earnings statements of fine fiscal years preceding the application with notes on accounting bases used in ascertainment of revenues and cost.
PROBLEMS OF THE STOCK EXCHANGE MARKET
Due the NSEM play some vital rows in building up the economic through the issuing of varying type of securities, there are still some problem seen as the bottle-neck in the Nigerian stock exchange market which brings a downward movement in the institution. However, those problems are listed and discussed below.
a. Lack of interest
Rather than the public investing in the stock exchange market on securities the public prefers to invest on other sections. Due to the fact that the returns are normally low.
b. Low Investment funds
The rate and level of accumulation investment fund in Nigeria is low. Due the low level of saving in the country is accompanied with low per capital income of the country.
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The Stock Exchange Market in Nigeria
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