The Role of Capital Market in the Development of Small Scale Businesses in Nigeria – PDF

The Role of Capital Market in the Development of Small Scale Businesses in Nigeria

TABLE OF CONTENTS

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

1.2 Significance of the Study

1.3 Statement of the Problems

1.4 Objectives of the Study

1.5 Research Hypotheses

1.6 Research Questions

1.7 Method of Data Collections

1.8 Method of Data Analysis

1.9 Scope and Limitation of the Study

1.10 Definition of Terms

1.11 Brief History Of Cadbury Nigeria Plc (Case Study)

CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

2.2 History of the Nigerian Capital Market

2.3 Structure of the Nigeria Capital Market

2.4 Meaning of Capital Market:

2.5 Importance and Functions of Capital Market

2.6 Classification of Capital Market

2.7 Securities and Exchange Commission

2.8 The Control over the Nigeria Stock Exchange by the Commission

2.9 Functions of the Nigeria Securities and Exchange Commission

2.10 The Nigerian Stock Exchange (Nse)

2.10.1Clearing, Delivering and Settlement:

2.11 Function of the Nigerian Stock Exchange

2.11.1Membership of Nigerian Stock Exchange

2.11.2The Market Levels of Nigeria Stock Exchange

2.11.3Techniques of Going Public or Bringing Securities to the Stock Exchange (SSM)

2.11.4Benefits of Public Quotation

2.12 Definitions of Small Scale Businesses

2.13 Small Scale Businesses in Nigeria

2.14 Operational Definition of Small Scale Businesses

2.15 Social Desirable Effects of Small Scale Businesses

2.15.1 Socio-Economic Contribution of Small Business Firms to Development Process

2.16 Problems of Small Scale Business

2.17 Involvement of Small Scale Business In Nigerian Stock Exchange (NSE)

2.18 Relevance of Nigerian Stock Exchange to Small Scale Businesses

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

3.2 Research Design

3.3 Population of the Study

3.4 Sample and Sampling Techniques

3.5 Method of Data Collection

3.6 Method of Data Analysis

3.7 Scope and Limitation to the Study

3.8 Validity and Reliability of Data Collection Instruments.

CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATION

4.1 Introduction

4.2 Bio – Statistical Data of Cadbury Nigeria Plc

4.3 Test of Hypotheses

4.4 Summary

CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary of Findings

5.2 Conclusion

5.3 Recommendations

5.4 Suggestion for Further Studies

Bibliography

Appendix: Questionnaire

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

For any economy to remain afloat in its bid for survival in today’s globalization, deregulation and liberalization of markets, it needs to have an efficient business financial to direct the allocation of its resources, capital markets and institutions, of which the development of an integral part of paramount importance in a dynamic economy as Nigeria.

A capital market is a market for securities (equity or debt), where business enterprises and government can raise long-term funds. It is also defined as a market in which money is provided for a period of longer than a year, as the raising of short term funds take place on the market e.g. Money market. The capital market includes the stock market (equity securities and bond market, debt). Securities and Exchange Commission (SEC) oversees the capital market in their designated jurisdiction to ensure the investors are protected against fraud among other duties.

Nigeria is still grappling with the problems of low earnings with its attendant balance of payment problems, weak technological industries base resulting in massive importation of machinery and raw material, high rate of unemployment.

The economic turndown which started in 1978 is very much with us. The decline in Gross Domestic Product (GDP) from N26.9 billion in 1984 to N3.6 billion in 1985 marked the beginning of importation of the world’s castaway goods into our country making Nigeria a dumping ground.

Small scale business is the only way to boost export and redress the gloomy of the balance of payment deficit.

Nigeria government recognized this fact in 1971; small scale industries credited scheme was introduced and followed up with the establishment of Nigeria Bank for commerce and industry in 1978. The Central Bank of Nigeria also introduced its small scale business.

Despite all these measures, it is still obvious that a small scale business problem is funding. And the fact, the growth of the small scale business still centres on proper funding which is missing today.

The capital market seems like an alternative way of raising funds. The enhancement of an advance and vibrant capital market can lead to the utilization of financial resources. The developed capital market also provides access to foreign capital for domestic industry. In this way, the capital market plays a constructive role in the overall development of an economy generally.

1.2 SIGNIFICANCE OF THE STUDY

The capital market has a great interest to the researcher which will help in increasing g my knowledge and skills. Also, this sector of the economy is one of the important factors and also plays a significant role in the natural economy.

A developed, dynamic and vibrant capital market can immensely contribute to speedy and economic growth and development.

1.3 STATEMENT OF THE PROBLEMS

Nigeria small scale business is faced with the problems of inadequate and low working capital. This aspect of small has slowed down their growth and development of small scale business to be at a small-pace consequently.

Mostly they depend mainly on self-finance (saving and borrowing from friends and family) and loans from willing providers (bank) who are always reluctant of providing loans for them due to weak financial background or history. Small scale businesses in Nigeria also face the challenges of concentrating risk in the hand of the owner. Thus, such risk can be spread by bringing their business to the stock exchange.

The capital market is also having a fair share of the problems because of an adequate supply of securities and a fall in the stock exchange market. Most companies especially the indigenous ones are still reluctant in raising funds through the capital market.

1.4OBJECTIVES OF STUDY

a. To inquire about the development of the Nigeria Capital Market in the small scale businesses

b. To determine the trend/development of Capital Market

c. To inquire the factors that solely determines the Capital Market.

d. To make appropriate recommendations on the development of the Nigerian Capital Market.

1.5 RESEARCH HYPOTHESES

The following will be formulated and tested for the study.

Ho: Small Scale businesses methods are not used in the Nigerian Capital Market for the development of the firm

Hi: Small Scale businesses methods are used in the Nigerian Capital Market for the development of the firm?

Ho: Shareholders do not place reliance on small scale business in the Capital Market

Hi: Shareholdersdo place reliance on small scale business in the Capital Market

Note: H0= NULL HYPOTHESIS

Hi = ALTERNATIVE HYPOTHESIS

1.6 RESEARCH QUESTIONS

This research work will attempt to answer the following questions:

1. How does the development of small scale businesses related to the Capital Market?

2. How relevant are the method of small scale business used in the Nigeria Capital Market?

3. To what extent do shareholders place reliance on small scale businesses in the Capital Market?

4. To what level the role of the capital market motivate the growth and development of the small scale business have been met?

1.7 METHOD OF DATA COLLECTIONS

Both primary and secondary sources of data collection will be applicable for this study.

PRIMARY DATA

This data will be obtained through interview investigation and questionnaires and face to face discussion

SECONDARY DATA

This data will be obtained mainly from the literature review or the ready-made materials like written down documents which include textbooks, bulletins and write-up by experts in this field and also from the internet.

1.8 METHOD OF DATA ANALYSIS

This chapter aim at breaking down fully how the data collection are used in the research work gathered, the data gathered is not an end itself rather it stands to be analyzed into meaningful and useful information. The purpose of this chapter is to analyze and evaluate.

The statistical tool to be used is the chi-square (x2) technique. This will enable the following to be formed and its validity verified by the presentation of findings to test the two hypotheses stated above which will be explained better in chapter four.

1.9 SCOPE AND LIMITATION OF THE STUDY

The scope of the study will be limited to the role of the capital market in the development of small scale businesses in Nigeria on the capital market and how the efficient utilization of available domestic capital resources could evolve positive changes in their performance.

As the topic suggests, this study focuses on the capital market in the development of small scale businesses in Nigeria.

1.12 DEFINITION OF TERMS

Capital Market

This is the market for long term capital i.e. long term financing assets. It is a market where long term financing assets are traded including preference and common stock debentures and bonds.

Primary Market

This refers to the new issues market when a firm issues new security either bonds or common stock, the securities are sold in the primary market since they are new issues. Once the securities have been sold, any future sales occur in the secondary market. The primary market also exists in the money market.

Secondary Market

This is the market that exists as a result of the future sale of securities that had initially been traded upon in the primary market.

The Securities Market

This refers to the market where the purchase and sale of securities take place. It has three dimensions. e. the capital market, money market, and secondary market.

Right Issues

This is the raising of more funds by quoted companies through special issues of shares to existing shareholders of the issuing company. It is typified by the ongoing privatization exercise.

Allotment

Is a part of stock issued, appointed or assigned by an investment company to purchase or subscriber of its shares, stock or securities.

Dividend

A portion of the net profit that has been officially declared by the board of directors of a company for distribution to the ordinary shareholders of the company and approved by them at the company’s general meeting.

Equity

This is used to describe the ordinary share capital of a company.

Stock Broker

Is a regulated professional broker who buys and sells shares and other securities through market sells shares and other securities through market makers or agency only firms on behalf of investors?

Listing

This is a stock or bond’s admission to trading right on the stock exchange based on its size, profitability and number of shareholders.

Quotation

The highest bid to buy and the lowest offer to sell a security in a given market and at a particular time.

Issuing House

Is a financial institution such as a merchant bank that provides its services to launch the shares of new companies on a stock exchange? It also ensures that the listing of such issues complies with exchange regulation.

Shares

A unit of equity ownership in a company.

Share Price

Is the price of a single share of a number of a saleable stock of a company.

Shareholder:

Is a person who buys shares/shares of any company and by acquiring shares or shares in the company becomes one of the owners of the company?

Ordinary Share

Representing part of the capital issued by a company and entitling their holders to a dividend that varies according to the prosperity of the company to vote at all meetings of members and to a claim on the assets of the company after the holders to preference shares.

Share Certificate

Is a written document signed on behalf of a company and serves as legal proof of ownership of the number of shares indicated.

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