The Nigerian Capital Market is the long term end of the Nigeria financial system just as the money market is its short term end. The Capital Market performs for the economy, at the long term end, the functions which the money market performs at the short term end.
The reasons for the establishment of Nigerian Capital Market are similar to the reasons for the establishment of the Nigerian Money Market. The reasons are:
(a) to provide local opportunities for borrowing and lending for long term purposes;
(b) to enable the authorities to mobilise long term capital for the economic development of the country,
(c) to provide facilities for quotation and ready marketability of shares and stocks; and opportunities and facilities to raise fresh capital and mutually acceptable environment for participation and co-operation of indigenous and expatriate capital in the joint effort
(e) To introduce a code of conduct, check abuses and regulate the develop the Nigerian economy to the much advantage of both parties in the market activities of the operators in the market and;
(f) finally through participation and ownership, to provide a healthy
The Composition of the Nigerian Capital Market
The Nigerian Capital Market is comprised the following institutions,
(a) The Nigeria Stock Exchange.
(b) The Nigerian Industrial Development Bank (NIDB).
(c) The Nigerian Bank for Commerce and Industry (NBCI).
(d) The Nigerian Agricultural Bank Limited (NAB).
(e) The Federal Mortgage Bank.
(f) The Securities and Exchange Commission.
(g) The Nigerian Insurance Market.
The Nigerian Stock Exchange
The Nigerian Stock Exchange first started in Lagos in 1960 as a non- profit making organisation. The Lagos State Exchange Act of 1961 legalised it and transformed it to the Nigerian Stock Exchange with
branches in Lagos, Kaduna and Portharcourt in 1977.
The growth of the NSE can be noted from the existence of 19 securities
worth N80 million in 1969 with three dealing members to 186 securities
with market capitalisation of over N7 billion with 23 stock brokers as dealing members. The capitalisation was made up of 57 government stocks valued at $3.2 billion, one State bond of N20 million and 95 equities of N3.0 million.
The indigenisation decree of 1977 played a significant role in the development of the NSE as many foreigners were forced to surrender part or all of their holding in various companies in Nigeria. The Decree resulted in 106 companies seeking public issues through the NSE. Out of these 106 companies, 59 were primary issues.
Also, the Insurance Act of 1976 required insurance companies to invest 25% of their portfolios in government securities. The remaining 75% would then be in equities and loan stocks.