SS3 Commerce Lesson Note on Nigerian Capital Market

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TOPIC: HISTORY OF THE NIGERIAN CAPITAL MARKET

CONTENT:

1. Historical development 1946 : development of loan stock
2. 1960 Lagos stock exchange act
3. 1962 capital issue committee
4. 1979 security exchange commission
5. 1985 second tier security market
6. 1999 investment and security act

DEFINITION OF CAPITAL MARKET:

The Capital market is a financial market where medium and long term funds for industrial development are mobilized and traded. The traders (players) in this market are known as operators. The operators act as intermediaries between the fund raisers and fund users (buyers).

EXAMPLES OF OPERATORS

These include: Securities Exchanges, Brokers, Dealers, Issuing Houses, Registrars and Insurance Advisors.

HISTORICAL DEVELOPMENT OF CAPITAL MARKET:

DEVELOPMENT OF LOAN STOCK 1946:

The origins of Nigerians Capital Market date back to colonial times when the British Government ruling Nigeria at that time sought for funds for running the local administration. Most of these funds are derived from agriculture, produce marketing and solid mineral mining. Discovering that these sources were inadequate to meet its growing financial obligation, the colonial administration decided to expand its revenue base by reforming the system of revenue mobilization, taxation and other payments. This was achieved in 1946 with the issuance of Nigeria’s first development loan stock. The Nigerian Capital Market was born in 1946.

 1960 LAGOS STOCK EXCHANGE ACT:

The development loan stock achieved maturity with the establishment of the IAGOS STOCK EXCHANGE in 1960. On September 15, 1960, the Lagos Stock Exchange was incorporated as a private limited liability company, limited by guarantee under the provisions of the Lagos Stock Exchange.

1962 CAPITAL ISSUE COMMITTEE:

In order to mobilize funds for economic development, a capital issue committee was established in s1962 and upgraded to Capital Issue Commission in 1979.

1979 SECURITY EXCHANGE COMMISSION:

Securities and Exchange Commission Decree was promulgated on April 1, 1979 to replace the Capital Issue Commission and expand the scope of its activities following the recommendations of the Financial System Review Committee (OKIGBO COMMITTEE) of 1976.

1985 SECOND TIER SECURITY MARKET.

With the success so far achieved and the need to expand the capital market further, the Second Tier Securities Market (SSM) was established on April 5, 1985. It was established to carter for the requirements of small and medium scale enterprise. It essentially diluted the listing requirements of this category of companies to encourage them to seek quotation and thereby further broaden and deepen the market.  The Decree was re-enacted in 1988 as Securities and Exchange Commission Decree NO. 29, so as to make provision for developing the capital market further and also for protecting investors.

1999 INVESTMENT AND SECURITIES ACT:

The Stock Exchange Decree of 1988 was replaced with the Investment Securities Act (ISA) No.54 of 1999 to provide for a more efficient and viable capital market that could meet Nigeria’s economic development needs better. The ISA of 1999 re-established the Securities and Exchange Commission (SEC) as a body corporate with perpetual successor and common seal, which can sue and be sued in its corporate name.

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