THE ROLE OF STOCK
BROKERS IN THE ECONOMIC DEVELOPMENT OF NIGERIA
In any economy there is a financial system that is responsible for regulating the financial environment of the society
determining the types and use of funds
to be issued, source of funds to be put. The financial system is really
made up of two major markets, namely
money and capital stock market. The many market is the market for short term
funds and securities including treasury bills, treasury certificate negligence
of deposits, commercial paper and other funds of which are less than a year duration.
Thus the aim of the
regulating bodies composed of Nigerian stock
exchange commission (SEC) is to promote development of orderly capital market to have authority over its members
(stock broking firms) to whom it set rules
of ethics are made to guide their
professional behaviour in the course of carrying out its functions and create awareness of the
general public. Stocks exist to enable companies in need of long term financing
to sell pieces of the business stock equity securities in exchange for cash.
This is the principal method of raising business capital other than issuing bonds. When the stocks of these
corporations, which all which corporations
must issue, are owned by the public at large, including both private
investors and institutions, they are said to be publicly held. These publicly
held shares can be easily traded (sold) to other investors in the stock market
and are thus said to be liquid, or
readily conversed to cash. Stock breakage firms usually, serve as
intermediaries in the transactions, buying the new securities at wholesale
prices from the issuer and then reselling them to the investing public at retail prices
1.1 HISTORICAL DEVELOPMENT OF CASE STUDY IN NIGERIA STOCK EXCHANGE
The dealing members of the Nigeria stock exchange are institutions
who are licensed by the exchange as
stockbrokers to buy and sell securities
quoted on the exchange on behalf of the
In 1960, Nigeria
stock Exchange was established with branch
in 1978. Prior to the establishment of the Nigeria stock exchange the were not
equipped enough with the information of stock broking and its importance to an
individual, groups, organizations and global economic development.
In essence the awareness
was low but from 1936 to date a considerable number of stock broking
firms sprang up in Nigeria and in Kaduna
particularly the first stock broking
firm served as an eye opener to investors and the potential ones, with a
highly experienced board and a crop of seasoned and dedicated
professionals positioned to tackle the challenges of this new
millennium. The branch is situated in Kaduna to exploit the
immense untapped natural resources and economic potentials of the country in
There are today 226 dealing
members of the Nigeria
stock exchange. Many of them are affiliates of bank and other reportable
financials institutions. Dealing members of
stock exchange can now accommodate
foreign shareholders in their equity capital or go into any form of partnership
with foreign stock brokerage firms.
Application from foreign stock brokers as members of the nigeran stock exchange can now be
enter anted within the rules and
regulations of the inorganic stock exhcnage, as well as registration with securities and
exchange commission and corporate afiars
commission following the abrogation of the exchange control Act 1962 and
Nigeria promotion Decree of 1982 as
stated in the Nigerian stock exchange fact exchange book 2004 page 334.
Finally, the existence
of stock broking firms as members of
stock exchange has helped to create a wealthy tomorrow for clients and
increase the wealth of shareholders and
job creation for the unemployed.
Capital market are generally expected to produce the
institutional arrangement through which funds from the surplus sector of the
economy. The allocation of funds are mainly for industrial, commercial and
agricultural development. The capital market growth rate is very slow and not developing to meet
the international standard. There is lack of awareness on the part of the public and potential investors.
Poor management for the operation and affairs of a business
is one the major factors leading to incompetence,
inefficiency and dishonesty in managing organization in Nigeria and in
the global which has not been in the
best interest of the shareholders and the general public. However, the need in
that over-centralization of the
stock exchange which might not bring the
benefit of market operation nearer to a greater section of the country’s citizenry and this will not enhance the particularly of the
Dishonesty from both
the stock broking firms and the
investors are among the general problems facing
stock shares investment in the country and the world at large.
However, the need in that of over
centralization of stock exchange which might not bring the benefit of
market operation nearer to a greater
section of the country citizenry and this will not enhance the
performance of the market functions.
Hypothesis is a tentative proposition suggested as a solution
to a problem or an explanation of phenomenon. It is also a set of generalized
statement concerning the problem under study.
The formulation of
which led to the structuring of
questionnaires to assess the validity of the hypothesis by sampling various of
stock brokers and customers of firms in Kaduna
The hypothesis is given below (1) Ho that there are
inefficient stock marketing services
from stock broking firms to the development of a meaningful economy (2)
Hi that there are efficient stock
marketing services from stock broking firms to the development of a meaningful
AND OBJECTIVES OF THE STUDY
The aim of this research is to undertake incentive
investigation and to highlight the role stock broking firms have played in the
development of Nigerian economy. To determine whether or not there are lapses
in their contributions to the economy growth, however, in the event of any
lapses suggestion which be made. The primary objectives of the research are to
a basis for contribution to the development of Nigerian economy. And to provide
a material for further studies.
OF THE STUDY
The significance of this study less in the benefit that the
findings would provide to any individual group and organizations. Considering
the importance of capital markets in
the development of the Nigerian economy and the role of stock broking firms and both the Nigerian
stock exchange commission in regulation
the operational activities in the market, this research, this research work is
intended to bring to line light the contribution
of the bodies to assist the capital
markets for it to achieve the desire optimum results. Also this study is in
practical fulfillment for the award of
diploma in accountancy.
AND LIMITATIONS OF THE STUDY
Due to financial constraints and limited time at the researchers disposal, the
researcher should limit this study in the following areas.
Buying and selling of shares
The regulatory bodies i.e. Nigerian
stock exchange and securities and exchange commission.
The functions of stock broking firms
these are stock and share that are
traded in stock exhcnage market.
adimixture of shares and bonds laid by
an individual or institutions.
on the exchange are regulated by the Nigerian stock exchange as a self
regulatory organization (SRO), and the securities and exchange commission (SEC)
which administers the investment and securities Act 1999.
of new issues are determines by issuing houses/stock brokers which on the
secondary market prices are made stock broker only.
intermediaries are the financial institutions and dealers that facilitates the borrowing and lending of
short term money.
stick/bonds are long dated loans stocks, issued by the federal government of
Nigeria and state governments, the federal government e.g. treasury bill are
usually regarded as gilt-edge securities with no attendant risks. Because of
the superior risk rating, their yields are usually lower than other similar
Preference Stock: Stock on which dividend payment must be made before
profits are distributed to holders of ordinary stock.
of share of profit, to shareholders in a
business company, or assets to creditors
(e.g. of an investment company) or to a policy
holder in a mutual insurance company, to pa a dividend of
10 percent, dividend warrant, order on a bank to pay a dividend.
extra dividend to stock holders of a shareholders.
Brokers commission for services.
ordinary stocks and shares not bearing fixed interest.
when a stock is purchased at a given price. Then subsequently at a higher
price, the resultant profit is known as a capital gain.
trying for such “buy low, Sell high” profits over a short time span known as
short term trading.
: When stocks that have been held for more than
a year are sold at a profit.