THE ROLE OF NIGERIAN STOCK EXCHANGE IN

INDUSTRIAL DEVELOPMENT

BY

CHIKEZIE NWACHI
BAM/H2003/322

DEPARTMENT OF BUSINESS ADMINISTRATION AND

MANAGEMENT (BAM).
SCHOOL OF BUSINESS STUDIES

INSTITUTE OF MANAGEMENT AND TECHNOLOGY

(IMT) ENUGU.

AUGUST 2005

TITLE PAGE

THE ROLE OF NIGERIAN STOCK EXCHANGE IN

INDUSTRIAL DEVELOPMENT

BY
CHIKEZIE NWECHI

BAM/H2003/322

IN PARTIAL FULFILMENT FOR THE REQUIREMENT FOR

THE AWARD OF HIGHER NATIONAL DIPLOMA (HND) IN
BUSINESS ADMINISTRATION AND MANAGEMENT (BAM).
SCHOOL OF BUSINESS STUDIES
INSTITUTE OF MANAGEMENT AND TECHNOLOGY
(IMT) ENUGU.

AUGUST 2005
ii

APPROVAL PAGE

This project work has been approved by the under singed behalf of the
department of business administration and management, school of business
study as a partial fulfillment for the award of a higher national diploma in
business administration and management (HND).

Sign --------------

Sign ---------------

Supervisor

Head of dep. (BAM)

Mrs. Joy Ugwu

Mr, G. Ojemba.

iii

DEDICATION

This project is dedicated to God Almighty who gave me this change and made
it possible for me to succeed. The almighty through

whom infinite mercies,

has been the source of my inspiration throughout my academic, pursuit and all
lovers of knowledge. Also for my mother, brothers and sister who sacrificed
almost every thing for me to be happy many thanks.

iv

ACKNOWLEDGEMENT

I wish to express my sincere gratitude to my project supervisor Mrs. Joy Ugwu

for her understanding advice and assistance and my lecturers for their advice
on this project work.
My special regard and appreciation goes to my mother Mrs. Helen Chikezie,
John Chikezie in their own little ways. Also I acknowledge to my friends and
every members of chikezie family.
The author will never fail grateful mention the help and information provided
by the various areas where some of the research work were carried out some of
these include the general securities and the Nigerian stock exchange.
Above all my hearty praise goes to my creator for sparing my life and seeing
me through this programm.
To him be the glory.

PROPOSAL

This project research study whose subject matter is on the role of Nigerian
stock exchange in industrial development is stated to be presented in the
normal fine chapter of a project work.
For a general insight and a fair understanding of the intended course of action
and various form of presentation evaluation and analysis of data collection
from successive interview questionnaires administration as well as other source
of data collection like news letters, security market journal and business times.
It is proposed to briefly run of short preview of the expected contents of each
chapter and preliminary pages of the enter work.
The work started with the preliminary page which include the title page
approval page, proposal, dedication, acknowledgment and table of content.
The first chapter which fellows the preliminary page starts with the general
introduction. This means paging attention to the exposure of the topic under
research. Therefore a background of the study and statement of problem will be
use to achieve this aim. Also the objective and significance of the study will be
revealed along side with hypothetical statement and research question. The

vi

chapter finally ends up with the disclosure of the scope and limitation of the
study.
Chapter two carries a general review of available relevant literature hence
books text book are the expected literature re-reviewed for general searching
and support of existing information about the stocks exchanges .
Chapter there covers the research design and methodology. Here the general
features of the research procedure, development of research material and
treatment of data will be given therefore the modes and series of tasks under
taken to ensure a successful research and data collection will form the basic
discussion under this chapter.
The preservation and analysis of data from the main subject matter of chapter
four the data collected therefore are presented analyzed and concluded upon.
The last chapter which is chapter fine will discuss the findings of the research
works. This will be followed by necessary conclusion and recommendation.
Also this project work will end with the information which includes definition
of terms. Bibliography, appendix and questionnaires.
Finally, therefore the research have decided to take up this study on the role of
Nigerian stock exchange in industrial development just because of her interest
on the benefit of the stock exchange and the effects it has on the industry
development.

vii

ABSTRACT

The Nigerian stock exchange (NSE) has been created to serve various function
such as often of business guideline to top business management concerning
cost of capital for the Nigerian stock exchange provides avenues for long term
investment. These function credited to the stock exchange is expected to create
positive effect on the general business and industrial growth of the country.
However, this research work is determined to evaluate the effect of the stock.
Exchange

on the general business growth especially in recent years. In

carrying out the research work with the above aim in mind efforts will be made
to disclose relevant findings thus drawing necessary solutions and
recommendations to alleviate some anticipated problem on the Nigerian stock
exchange to be disclosed during the research work.

viii

TABLE OF CONTENTS

Title page
Approval page
Dedication
Acknowledgment
Proposal
Abstract
Table of content

CHAPTER ONE
1.0

Introduction

1.1

Background of the study

1.2

Statement of study

1.3

Objective of study

1.4

Research question

1.5

Hypothesis formulation

1.6

Significance of the study

ix

1.7

Scope of the study

1.8

Limitation of

1.9

Definition of term

1.10

Reference

CHAPTER TWO
2.0

Literature review

2.1

Evolution of the stock exchange

2.2

Historical development of the Nigerian stock

2.3

General relationship of the stock exchange and the economy

2.4

Advantage of the stock exchange as a source fund to the industry

2.5

Functions of the stock exchange in influencing the development

parameters

CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.0

Introduction to the study

3.1

Research design

3.2

Area of study

3.3

Population of the study

3.4

Sample size determination

3.5

Instrument for data collection

3.6

Validation of instrument

3.7

Reliability of the instrument

3.8

Method of data collection

3.9

Method of data analysis

3.10 Reference

CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1

Presentation and analysis of data

4.2

Testing of hypothesis

4.3

Summary of result.

xi

CHAPTER FIVE
DISCUSSION RECOMMENDATION AND CONCLUSION
5.1

Discussion of result findings

5.2

Conclusion

5.3

Recommendation

5.4

Suggestion for further study

5.5

Bibliography

5.6

Appendix.

xii

CHAPTER ONE

1.0

INTRODUCTION

1.1

BNACKGROUND OF THE STUDY

Industrial growth forms the basis for industrial development is not only needed
for its ability to improve living standard. It also acts as a weapon for building
national strength and prestige. Therefore industrial development implies the
increase of industrial, expansion of quality and quality of output and the
institutionalization of industrial growth process. It also involve

technical

activities of a own routine nature concerned with translating research findings

or other with translating research findings or other scientific knowledge into
products or process.
With the concept of investment as a central factor in the acceleration of
industrial

growth

and

development

and

the

prominence

given

to

industrialization, steps have the establishment of the Nigerian stock exchange

(NSE) the evolution of continued existence of the Nigeria stock exchange has
always been small lots of shares to e parceled into lumbs large enough to be

xiii

bought by institutions provide vast numbers of different shares to be trades

and providing a

broad market in government securities its economic

significance depends on its ability to mop up financial capital for investment

purpose these include providing liquidity and enhancing these marketability of
new issues of stock thus reducing the real costs to business firm by expanding
the scope for obtaining fund.
Other functions of the stock exchange include the offer of guidance to the
business management in relation to the present cost of capital so that the
business man can determine his level of investment appropriate to the firm.
Access to the vast number of capital that are in very small amount of money
that in their aggregate have s commend over vast quantities of wealth. It also
make it possible for the transfer of funds that imposes only a minimum of
administrative efforts he lender. By this activity the stock exchange is able to
provide an avenue for long term investment to be financed by funds provided
by individuals many of whom to make it available for a short term or with
draw it at will.
The competitive nature of the stock exchange makes it possible to allocate
funds efficiently which is achieved by the market ability to available

xiv

companies securities in a manner based on the capitalized value of the

companys expected future earnings.
Apparently, only if stock are valued in this way will funds be provided most
abundantly

and at most reasonable terms to the most promising innovation

who accounting to the classical economic theory has the greatest use for them
and who is the one that can obtain the profits which will serve as the investors
rewards. And it in when shares are valued in relation to the

expected

capitalized value of the firm that effective disciplinary advice which punishes
management whose operation are inefficient or unprofitable.
Therefore a reliable rate which results from investment in new factories,
machinery, equipment and material to increase the physical capital stock of the
nation. The stock exchange market plays an important role in propping up
financial capital and provision of market for quoted stock so as to chance the
fulfillment of these economic growth parameters. This investing so as to
actualize the economic growth.

xv

1.2

STATEMENT OF PROBLEM

The ignorance of the stock exchange has brought about how participation of
firm and individual engaging in the stock exchange and this has also limited
the availability of stocks and shares that could be traded on the stock market.
The stock market is faced with the problem of valley in delivering and
settlement of stock transaction.
For the fact that the number of quoted security is small and the total
capitalization is about 335 billion which is nothing when compared with some
companies abroad that have more than that amount of money as its capital is
not encouraging. And for the fact that the government is get to privatize most
of the companies in making the stock market not to have financial strength.
Also affecting the market is the fact that most of the operators ie the
issuing, the stock brokers auditors etc. are not connected on line and as a result
of this information does not come handy. The worst of it all is the political
climate, which will not allow foreigners to invest in our securities because of
unforeseen circumstances.

xvi

1.3

OBJECTIVE OF THE STUDY

1.

One of the objectives is to examine the extent to which the Nigerian

stock exchange has helped in the growth and development of the
industrial sector.

2.

The stock exchange has contributed positively to the industrial

development of the economy in providing market for quoted securities.

3.

The role of stock exchange to industrial development encourage firms

and individuals to invest in the stock exchange venture, the
recommendations from this write up can also help to as large extent to
improve stock exchange and it show the important of the stock market.

4.

This research work could also be guide to subsequent research work

similar to this.

1.4

RESEARCH QUESTION

1.

Why are stock market facing the problem of delay in delivering and
settlement of stock transaction?

2.

What cause low participation in firm and individual engaging in the

stock exchange?

xvii

3.

How can our political climate not allow foreigners to invest in our
country?
4. Why do government delay to privatize most of the companies in order to
have financial strength in the stock market?

1.5

HYPOTHESIS FORMULATION

To facilitate the expansion of the claims on the stock exchange role in

industrial development these hypothesis have been formulated to know if the
Nigeria stock exchange has made positive contribution to the industrial growth
and development in Nigeria.
1.

H0:

Quoted firm do not perform significantly better then they did prior

to such quotation
H0:

Quoted firm do not perform significantly better then they did prior

to such quotation
2.

H0:

There is no positive relationship between operational efficiency

and pricing of securities.

H0:

There is no positive relationship between operational efficiency

and pricing of securities.

xviii

3.

H0:

Increase in quotation does not lead to increase in the investible

fund.
H0:

Increase in quotation does not lead to increase in the investible

fund.

1.6

SIGNIFICANCE OF THE STUDY

The role of stock exchange and a catalyst in the development of the economy
has not been a question of debtor. The stock exchange exist as a sources of
fund to the industrial development and also for the channeling of personal
savings stock into industrial place for trading companys stock. It also creates
room for capital widening stock rather than deeping it. The benefit of stock
exchange quotation is the result of lower cost of capital when raising fund
through the market as stock exchange helps to allocate funds between
industries and also makes funds available to the most productive industries
which hence develop the nation.

xix

1.7

SCOPE OF THE STUDY

The scope of this study covers only the role the stock exchange as a marketing
floor for quoted share and stock thereby providing liquidity for the shares and
stock helps in the moping of units of inevitable funds which on the aggregate
dorm large enough capital.

1.8

LIMITATION

These proposition are not easily established with out some constraints here and
there. Some of the problems associated with the study is the lack of data and
stick confidence exclusive to the market. Problem into salient areas were not
allowed rather an exclusive reservation of the market and all information
relating to such area were preserved for the market use only.
Although some members of the exchange assisted with some data information
and oral explanation but not without restriction and limitations.
Another problem is the time allocation in this research work which is not
enough to make a thorough investigation which the topic deservers. The
financial restrictions cannot be left out which also made it impossible to visit
the exchange regularly.

xx

1.9

DEFINITION OF TERM

INDUSTRIAL DEVELOPMENT: The increase of industrial expansion of

quantity and quality of output in industrial growth process.
STOCK:

The ability to mop-up financial capital for investment purpose.

xxi

REFERENCE

1.

Professor E.V Morgan:

The Stock Exchange its History and Functions

Elect Book.
2.

George C. (1974) Introduction to Investments New York: MC Grow

Book Company.

3.

Cottrell P.T (1980) Industrial Finance Methuen London.

4.

Fanning D. (1973) Marketing Company Shares Grower House Hants.

xxii

CHAPTER TWO

2.0

LITERATURE REVIEW

Different opinions have been expressed about what stock exchange (S.E) is, it
has form time been referred to as the source of capital for business expansion.
During the war between France and England, there was much devastation of
the British economy that it couldnt finance Merchant trade. As a result of this
and the intention to spread the risk arising from the attack of British ships by
pirates, there was need to mobilize capital to finance trade since direct
financing was not enough to sustain the trade levels , and the remedy was the
creation of a formal market. The market on which money is provided.
The stock exchange does exist for the purpose of channeling personal savings
into industrial place for trading company shares.
Since there was the potentials polices of capital widening rather than capital
deepening.
Kenneth Midgley said that the stock is the prime institution in the stock
market and it is a specialist market place. It also provides the mechanism for
the exchange of shares which already exist. But the encyclopedia of banking

xxiii

and finance expressed the view that the exchange themselves do not trade in
the listed securities they merely provide the facilities for trade.
Other opinions such as Christy et al look at stock exchange as an associate of
broker formed to provide improved facilities for the execution of customers
order and the Nigeria stock exchange in her pamphlet question and answer
meant for distribution to the public for enlighten purpose define the market as
A stock exchange is a market where large and small investors alike buy and
sell through stock brokers the stock (or shares) of companies and government
agencies the stock exchange provides the essential facilities for business
expansion and development

projects through investors who share in

cooperation for the ultimate economic benefit of all Nigerians.

From the various opinions and views as stock exchange, they have
portrayed the market as a medium of raising capital, through the stock market
does not participate the actual fund creation but offer facilities for raising fund
(capital formation) and this is crucial to the economic growth of any economy.
To participate in the activities of the stock exchange, the firm has to become a
member before benefit can accrue to her.

xxiv

Perhaps its exclusion policy the prestige it enjoys in all the stock market may
be defined as a market creating form for registered companies who to raise
additional fund for expansion modernization. Purpose by using the facilities
provided in the stock market. It has the ability to bringing together potential
sellers and buyers.
Therefore the prior conception of the stock exchange, as a provider of fund for
the formation of new enterprises is an illusion. Realistically, it could be
properly referred to as a provider of fund for expansion for listed companies
and a market creating forum for the sale of the shares of existing quoted firms.

2.1

EVOLUTION OF THE STOCK EXCHANGE

Event keep reminding us of the strong dependence of any economic policy on

the flow of capital. Historically, the development of any economic activity
depends on the situation prevailing at that time and the corresponding
development of any economic activity will meet the demands of the time.
Stock exchange like any other economic activity grew out of the these factors.
The stock market developed during the year of commercial and intellectual
dermal between the restoration and death of Anne.

xxv

Before this there must obviously be as considerable volume of securities, the

ownership of which in fairly widely distributed, there must be a sufficient
number of wealthy men and women who wish to hold some of them possession
in financial assets rather than in business or real properly, the development of
the market will also be procedures for the transfer of titles and fairly small
denomination and if there is a banking system to provide a simple means of
payment. England fulfilled all these primary condition at the end of the 17 th
century.
The formation of the stock depend strongly on the availability of securities and
supply by the formation of font stock companies and during the beginning of
the permanent natural department.
This was possible because of the fusion of the partnership and cooperation in
the middle of the 16th century and this was provided the basis feature of the
modern joint stock companys.
The first set of stock exchange developed by 218 merchant who wanted to
open up trade with the India and East Indies pulled their resources together and
signed into charter on December 31st 1600 after a prolonged negotiation, this
early voyages of the east India company market the beginning of a transition to

xxvi

more modern practice, the share were generally of fixed though still large
amount of subscription list were kept open until the total sum required had
been raised.
Another landmark in company history accrued in 1962, when an act of
parliament gave limited liability to share holders in the East India, Africa and
fishery companys.
The prolonged war of England and France brought the government into
borrowing in large scale hitherto unprecedented, and there was a wide spread
inflation, which was fed by a rising supply of coins and notes.
Prices rose sharply between 1990 and 1995 and there was great commercial
activity and speculation. It was thin period that produced the first real boom in
company floatation and which brought. The profession of stock broking for the
first time into limelight.
As a result of the prevailing situation then was

wide spread holding of

government short-term depts. And was normally with people whose market
was obviously wanted, and the uncertainty of payment gave by opportunities to
speculation.

xxvii

It can be safety said that the foundation of modern stock market started from
the tally broken who death with government short-term dept to that turned
their attention to longer term dept and to company stocks and shares in the
seventeenth century. During this periods, the dealing in stock and share were
haphazard and unorganized before 1860 but in the mid-nineties there was
highly developed market.
The whole process of stock exchange evolution was as a result of economic
situation existing at that time accompanied by

government in public

department. This takes us to the peculiar nature of the development of stock

exchanges in Nigeria.

2.2

HISTORICAL DEVELOPMENT OF THE NIGERIA STOCK

EXCHANGE.

The Nigerian stock exchange evolve purely out of the act of parliament and
speculation of future business expansion. During the late 50 s when it was
becoming eminent that there was to be independents state and growth of
commercial activities, some Nigerians in collaboration with their foreign
partners (British) wanted a local source of fund for enterprise promotion. As a

xxviii

result of the desire for the establishment of an institution in the country to be

used as an avenue for funds mobilization and development of local capital
formulation. The federal government had interest and took the initiative to
establish a formal market for trading in stock and shares. The economic
situation at that time brought many consequences and there was a retardation
of business activities and basically the government initiatives were based on.
1.

The need to finance growing budget deficit as from 1958 by the issue of
money capital market instrument.

2.

The deteriorating balance of payment position as from the government

desire to facilitate the repatriation of funds invested abroad.

3.

The need to mobilize finance to embark upon development programme.

Consequently in 1853 the government set up a committee under bar back to

advice on way and means of fostering a share market in Nigeria. The report of
the bar back committee was in 1959 and it recommended among other things.
1.

The creation of facilities in dealing in the shares.

2.

The establishment of rules regulations transfer and

3.

Measures to encourage savings and issue of securities of government

and other organization.

xxix

As a follow up of bar back committee the Lagos state exchange now Nigerian
stock exchange was established on the 1861 under the Lagos stock exchange
act 1961 no 1 the act states that.
An act to prohibit the carrying of the business of stock broking in relations to
stocks bearers and other securities granted in 1979, there was another
movement in Lagos for the provision of the necessary facilities to handle the
work forested on it by the countrys economic

circumstance. Today the

Nigerian stock exchange occupies her permanent building at 2/4 customer

street Lagos, directly opposite the central bank.
As the economy grew it is accompanied by an expansion of business activities
and the need to spread out into other parts of the country so as to after an
opportunity for equal participation, the stock exchange opened trading floors
in Port-Harcourt and Kaduna in 1977 further more, it could also mean the
reflection of federal character.
The additional two floors in Port-Harcourt and Kaduna brings to three the
number of trading floors while the national consist of the exchange retains the
overall responsibility for quotation and the enforcement of regulations in the
capital market.

xxx

Further development led to the setting up of Nigerian financial system review

committee in 1976.
On he recommendation of the Nigerian financial system review committee in
1976, there was the transformation of the Lagos stock exchange into the
Nigerian stock exchange.
Its operational guidelines are as stated at the formation period of the Lagos
state exchange with minor amendments made to suit the changing needs of the
time.

2.3

GENERAL RELATIONSHIP OF THE STOCK EXCHANGE AND

THE ECONOMY.

The stock exchange follows the rhythm of the economy, always fluctuating
according to the events in the economy and the absence of the stock exchange
restricts the amount of investment that take place in a country and makes
investment more difficult. It is the investment capacity of any nation that
determine the rate of her economic growth and the level of the peoples
welfare. It is that role of the stock exchange in mopping up money capital for
investment purpose that forms its relationship with the economy.

xxxi

Baumol has this to say that the market for stock and bond perform many
essential and useful function in the limited state economy. This statement was
further buttressed by Christy who said that bulk of American securities (about
one half) of the new savings of the country for investment being raised in the
capital market.
Every economy aims art improving the welfare situation of her inhabitants by
providing quantitative and qualitative consumer product in sufficient amount
and this can only be achieved via investment process. In a well developed
economy the bulk of her inventible fund pass through the stock exchange and
this could be explained by the diagram below.
Stock exchange
Investment
G.N.P
Economy
Market
Increases
Grows
The mopped up capital is invested in the production sector of the economy to
stipulate production and increase the output levels thereby improving the gross
national product (G.N.P) and by making more goods available to the people for
more consumption and improvement of their welfare. This relationship
between the stock exchange and the economy makes the economy and the
stock exchange to often more in the same direction particularly on the
monetary policy influence via its impact on the stock market if the expansion
xxxii

of the money supply reduce yields the discount factors to the future return from
stocks will work to increase stock values.
As the economy improve so also is the stock exchange trade performance
improve this pari-passu movement of stock exchange and the economy
confirms the claim that stock exchange pay close attention to the economys
health. Having being able to always run ahead of anticipated events and the
events when they happen; being so discounted have less effect if any effect at
all.
Therefore, in the strict sense there is close relationship between the stock
exchange and the economy. The stability of any economy and confidence in the
ruling class depends on its ability to improve the welfare situation of the
inhabitants and one way of doing this is by an increase in consumable items
which always come as a result of investment.
For this reason a health stock market is an important ingredient in the capital
formation and economic growth process.

2.4

ADVANTAGES OF THE STOCK EXCHANGE

xxxiii

As a sources of fund to the industry. scarcity and dearness of capital are a

common place complaint whenever men of business are gathered together. It
is where a company has succeeded in joining the big companies on the stock
exchange that it will be assumed as having derived and when admitted it offers
the company easier means of raising money than was the previous case.
Raising money on the stock exchange usually implies that there is a public
limited liability company that required new capital and make an offer of this
capital generally to the public and simultaneously an application is made to the
stock exchange for permission to deal in the share.
It is the public given to the stock exchange that widens interest in the stock,
the prestige of the market enhance its collateral value and supervision of
exchange and regulatory agencies usually brings good corporate and trading
practices.
This prestige offer quoted firms the advantages of better prices for their shares
fairly determined financing is facilitated and added value is imparted by listing.
Further advantage is its quality of liquidity which makes companies shares and
debentures more attractive to investors

who would like to associate

xxxiv

themselves with companies quoted on the stock exchange and to provide the
need capital for expansion.

2.5

FUNCTION OF THE STOCK EXCHANGE.

In influencing the development parameters the propelling factor of any

development parameter in her productive sector so as to enhance a growth,
expansion of the industry Nigeria stock exchange is central in the investible
fund mobilization act. Having said this we shall examine how the stock
exchange has influenced the development of these parameters, namely.
1.

Growth in industry

2.

Cost of capital

3.

Efficient allocation of funds between industries

4.

Availability of funds

5.

The stock market and problem in indigenous enterprise.

1.

GROWTH INDUSTRY:

Firms need funds to expand, it is this

desire that the government created and maintained an ordinary market

for the issue of trading in securities, thereby facilitating the providing of

xxxv

industrial finance, its benefits as regards the financing of industrial

development to ensure expansion and growth reflected the common
optimistic conviction that the presence of special primary and secondary
market in securities would solve the problem of growing needs for
industrial finance and thereby promote economic development. The
stock exchange form an avenue from which the saving of the problem
can be mobilized and channeled into financial development in both the
public and private sector of the economy.

2.

COST OF CAPITAL:

The benefit from the stock exchange quotation

is the result of lower cost of finance when raising fund through the
market as against the utilization of alternative source and the relation
case of rising found through the market. A high stock price will
exchange for relatively generously quantities of resources, and this is
generously referred to as lower cost of capital. But in reality the cost of
living makes it higher in raising fund through the stock market and
where there are no artificial constraints or the existence of any rigid and

xxxvi

baseless financial tradition, the bank and other financial institution can
provide the needed fund without much difficulties.

3.

EFFICIENT ALLOCATION: Of funds if the stock market is to save as

a efficient allocation of fund, it must device a means whereby it values
the shares of a company on the bases of its expected capitalization
earning when stock market closely correspond to perfect competition
ideas the more efficient is the market as allocation of resources. Thus if
the stock market is to serve as an efficient allocation of capital in the
economy at large, it must some how expect influence in the capital
market over which it has no approach I direct control.

4.

AVAILABILITY OF FUNDS: By the manner of valuation whereby the

share of progressive companies are increased and non-profitable are
penalized, it has succeed in allocating funds to the most productive
sector of economy thereby enhancing the rate of growth of the nation.

5.

The stock market and problem in indigenous enterprises with the number
of listed securities in the Nigeria stock market slow that the stock market

xxxvii

is still to witness the listing of a company wholly promoted by Nigerian

entrepreneurs go this reluctant attitude of Nigeria enterprises to go
public and get listed has been a ca se of concern on the management of
the Nigerian stock exchange. If the market is to grow, strenuous must be
made to persuade and encourage indigenous business to make public
issues and raise fund from the Nigerian capital market for this reason,
Nigeria stock exchange has to conduct seminars, and adopt other
advertisement media to activate and stimulate public awareness about
activities on the capital market and the benefit accuning to public
quotation of companies.
Therefore, the apparent reluctance of Nigerian promoted companies to
avail themselves of the services of the Nigerian stock exchange can be
attributed at least in part to the failure of the exchange to persuade them
to do so.

xxxviii

REFERENCES

Kenneth M. (1977) Market and Its Nature and Significance Macmillan Press
limited.
Kuotsyiannis A. (1982) Non-Price Decision the Firm in Modern Context. The
Macmillan Press limited.
Madadilan D.I.L (1977) Guide to Share Investment Long man London.
Mc Rac H. (1974) Capital City London As A Financial center France Caun
cross Eyre Methuen London.
Peter R. (1976) Capital formation Success Investment.

xxxix

CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

3.0

INTRODUCTION TO THE STUDY

Industrial development implies the increase of industrial expansion of quality

and quality of output, it also involved technical activities of a non routine
nature concerned with

translating research findings or other scientific

knowledge into products or process.

3.1

RESEARCH DESIGN.

This chapter is basically concerned with the design sources of data collection,
population of the study, sample size determination.
These are discussed below.

3.2

AREA OF STUDY

The areas of study was the Nigeria stock exchange market. Generally securities
exchange market and business time.

xl

3.3

POPULATION OF THE STUDY

The population of this research study is summed up to a total 470 include the
senior and junior staff as a result of the members of staff. It was not possible
reach the entire population, therefore the population was reduce to a reachable
size.

3.4

SAMPLE SIZE DETERMINATION

The population was reduce to a reachable size using the Yero-Yameni Formula
and statistical1
N=

where

N
1 + N (e)2
n = sample size
N = Population size
e = margin of error (5%)
I = constant.

n=

N
1 + N (e)2

xli

470N
1 +470 (0.05)2

470N
1 +470 (0.0025)

470N
1 +1.175

470N
2.175

n = 216
QUESTIONNAIRES DISTRIBUTION AND RETRIEVAL
216 questionnaire were distributed and 213 were returned properly filled while
3 question were not properly filled and was rejected.

3.5

INSTRUMENT FOR DATA COLLECTION

The research made use of questionnaire for data collection. Also directed
observation on was employed sourcing information questionnaire was
constructed in such a way that staff of Nigeria stock

exchange would

understand easily.

xlii

3.6

METHOD OF DATA COLLECTION

The research should sourced her date. Through primary and secondary source.
The primary data was collected through the distribution of questionnaire and
direct observation. Also data was collected from post research work journals,
Magazine annual publication. These form part of secondary sources.

3.7

VALIDATION

After the preparation of the questionnaire it was sent to student project

supervisor for validation. After series of secretary, some errors was detected
and the questionnaire was sent back to the researcher for correction. Having
made the necessary correction, the questionnaire was then sent back to project
supervisor for the final correction having satisfied with the corrected. The
questionnaire was proved to be valid and approval for the final was given.

3.8

RELIABILITY

The reliability of the questionnaire be lest retest method that is last with a
controlled group after two weeks of initial distribution and retrieval

of the

xliii

question. The instrument was administered again to the same group and they
consistency and reliability.

3.9

METHOD OF DATA ANALYSIS

The use of complex statically and mathematical method of data analysis was
not involved expect the use of sample statically method ie trend and regression
techniques which were used to text some of the hypothesis.

xliv

REFERENCE

Kenneth M. (1977) Business Finance and Capital Market. Mac Million Press
Limited.
Rostow W.W (1968) British Economy of the Nineteenth Century Oxford
University Press Ely House London.
George C (1974) Introduction to Investment New York mc. Grow Hill Book
Company.
Thomas Uyold B J R Money Banking and Economic Activity 3rd Edition.
William Baumol. The Stock Market and Economic Efficiency.
Professor E Morgan The Stock Exchange its History and Function.
R. B Aveago. Ngena Stock Exchange Genesis Organization and Operation

xlv

CHAPTER FOUR

4.1

DATA PRESENTATION

This chapter will be used to present and analysis various data gathered during
the course of this work. This will be accomplished by the use of tables and
percentages.
Question 1
Why are stock market exchange facing the problem of delay in delivering and
settlement of stock transaction?
Variables
No of respondents
Percentage of respondent
Yes
116
53.7%
No
100
46.3%
Total
216
100
From the table 116 respondents said ye to the above question with
corresponding 53.7% while 100 respondent said No to above question with
corresponding 46.3% this means the problem of stock is properly confronted.
Question 2
What cause low participation in firm and individual engaging in the stock
exchanged?
Variables

No of respondents

Percentage of respondent
xlvi

Yes
No
Total

110
106
216

50.9%
49.1%
100

In the table below 100 representing 50.9% of respondents that said Yes which
106 representing 49.1% that said No.
Question 3
How can our political climate not allow foreigners to invest in our country?
Variables
No of respondents
Yes
116
No
100
Total
216
In the table respondent said Yes to the above

Percentage of respondent
53.7%
46.3%
100
question with corresponding

53.7% while 180 said No to above question with corresponding 46.3%.

Question 4
Why do government delay to privates most of the companies in order to have
financial strength in the stock market?
Variables
Yes
No
Total

No of respondents
200
16
216

Percentage of respondent
92.5%
07.4%
100

xlvii

From the above 200 representing 92.5% said yes while 16 representing 07.4%
of responds that said No that.
Question 5
Does Nigeria stock exchange face the problem of environment?
Variables
Yes
No
Total

No of respondents
206
10
216

Percentage of respondent
95.4%
04.6%
100

In the table 206 representing 95.4% that said Yes while to representing 04.6%
of respondent that said No this means the problem of stock is properly
confronted.
Question 6
What units of your organization is responsible for environmental factors?
Variables
Yes
No
Total

No of respondents
106
10
216

Percentage of respondent
49.1%
50.9%
100

Here 106 respondents said Yes to the above question with 49.1% while 110
said 10 to the above question with corresponding 50.9%. It also shows that the
problem of stock exchange is properly confronted.
xlviii

Question 7
What are the factors militating against the contract of business environment
factor in your firm?
Variables
No of respondents
Percentage of respondent
Yes
106
49.1%
No
100
50.9%
Total
216
100
From the table 106 representing 49.1% that said Yes while 100 representing
50.9% of respondents that said No.
Question 8
How will you rant the impact of complicity and dynamism of business
environment on you company performance?
Variables
Yes
No
Total

No of respondents
100
116
216

Percentage of respondent
53.7%
46.3%
100

xlix

From the table below 100 respondents said Yes to the above questions with
responding of 53.7% while 116 said No to above question with responding
46.3%. it means that the organization is still facing the problem of dynamism
and environment performing in their company.

CHAPTER FIVE

DISCUSSION, RECOMMENDATION AND CONCLUSION

5.1

DISCUSSION OF RESULT FINDING.

From our tested hypothesis in chapter four and going by the history of sample
firms; it was observed that the firms.
1.

Perform significantly better when quoted.

2.

Quoted firms have a faster rate of growth than unquoted firms.

Merchantile Bank of Nigeria Ltd (sample firm) started on a good note but was
operating on a marginal profit level until 1978 when quotation offered for sale
her shares thereby expanding the capital base and offered the bank more fund
to operate with. Subsequently the profit have improved and by 1983 the
authorized shares of the company rose to b25 Million and the paid up capital
was N13.4 million. The growth rate for the 3 tested operational years is put at
14.10% per annum.
But our second sample firm (unquoted) is characterized by low level capital
base with one time profit and series of losses within the tested period. Through
it managed to maintain a growth rate of 6.7% with as dividends declared.

li

Comparing the two sample firms, it was established that greater advantage
abound in quotations on the Nigerian stock exchange particularly with the
expansion of the capital base and improvement in profit making propensity.
Additional test were carried out to ascertain if.
1.

As facilities expend does it lead to growth in investible fund.

2.

The increase in quotation lead to the growth in investible fund.

Both tests proved a positive result which all point at growth in investible fund
when facilities and improved or quotation increased.
Perhaps these indications of public awareness of the stock exchange operations
and the expression of their willingness to hold their money in security raised
via the stock exchange. Therefore stock exchange help in raising up scattered
funds and stimulate individual interests in investment.

5.2

CONCLUSION

The whole exercise has been tedious particularly to a person working with
limited data and distance of research center. Efforts were made to clench some
thing from the individual limited sources. However, going through the work, it
will be realized that Nigeria stock exchange has played its role as a source of

lii

fund for industrial development and expansion. Our tested hypothesis have
proved this.
Therefore I can on all business men irrespective of tribe religion, race, colour
to pool their resources together to have an enlarged enterprises capable of
enlistment. On the Nigeria stock exchange, it is when we are able to do this
that we can place the economy on a viable development path.
Self identification in the form pride of ownership or organization of business
along the family line may not provide the needed capital and the manpower
requirement for effective and efficient operation of their firm.

5.3

RECOMMENDATION

In my opinion and with the present economic crunch in view, efforts should be
made on listing some of the Nigerian firms on foreign stock exchange. This
will help to bring in more foreign currency into the economy. But the fear of
domination by foreign investors might till the idea but the quoted firm should
not be carried whole some to overseas. The percentage of foreign participation
should be clearly specified.
2.

transaction should we allowed to operate party on market forces.

liii

3.

Government should reduce influence on the Nigerian stock exchange.

4.

Adequate publicity should be given to Nigerian stock exchange and the

public educated on the activities of the stock exchange to induce more
participation.

5.

Facilities should be improve more trading floors should established to

raise up additional capital for investment purpose commercial centers
such as Aba and Kano should have quick access to the stock exchange
dealings.

5.4

SUGGESTIONS FOR FURTHER STUDY

Studies can be carried out using different types of foreign investors method of
bring in more foreign currency into the economy it is when we are able to do
this that we can place the economy on a viable development path.

liv

BIBLIOGRAPHY

Baumol W.J (1965) The Stock Market and Economic: Efficiency for Diham
University Press New York.
Bickster J.L (1979) Capital Market Equilibrium and Efficiency Implication for
Accounting Financial and Port Folio Decision
Toronto.
Cottrel P.T (1980) industrial Finance 1830-1914 Methuen London.
George C. (1974) Introduction to Investment Mc. Grew Hill Book Company
New York.
Ryder F.R (1974) Thomsons Dictionary of Banking Pitman Publishing N.Y
U.S.A
Rostow W.W (1968) British Economy of the Nineteenth Century Oxford
University Press Ely House London.
Salvatore D. (1977) Development Economics: Mc Grew Hill Book Company
New York.
Solink Brunoh (1973) European Capital Market Lexington Book D .C Health
and Company London.

lv

Thompson A (1975) The Dynamics of the Industrial Revolution Edward

Armold London.
Todaw M.P (1982) Economic for a Developing World 2nd Ed Long Man
Group Limited U.K.

lvi

APPENDIX
QUESTIONNAIRE
Institution of management and technology
IMT Enugu
Enugu State
Dear Sir/Madam
I am a student of Institution of management and technology, in the department
of business administration and management. This questionnaires is for a
research work being conducted on strategy for managing environmental factors
in Nigeria business organization with particular reference to manufacturing
firms in Aba.
A an employer/member of top management board of this organization your
participation is important for the success of this research work.
I request, you kindly complete this questionnaire as objected as possible so
feel free to express your opinion.

lvii

QUESTIONNAIRE
Please kindly tick () in the option that appropriately represent your response,
do not tick more than one in one question
1.

2.

3.

Specify the number of people who can establish a business?

Yes (

No (

Determine place for location of business

Yes (

No (

Registration of a business name as a necessary prerequisite for starting

business operation ?

4.

Yes (

No (

Does business environment affect you business.

Yes (

No (

Do you ensure provision of soft loan to business through development

bank ?
lviii

7.

8.

9.

10.

11.

Yes (

No (

Limit ability to raise adequate capital?

Yes (

No (

Demand high collateral security for procurement of loan?

Yes (

No (

How is the price control of commodities?

Yes (

No (

Ensure exemption of excise duties on exportation?

Yes (

No (

Are there strategies adopted by your company for managing

environmental uncertainty?
Yes (

No (

lix

12.

Does complicity and rapidity of change of environment center any

problem for your firm?

13.

Yes (

No (

How will you rank the impact of complexity and dynamism of business
environment on your company performances?

14.

Yes (

No (

What are the factors militating against the contract of business

environment factor in your firm?

15.

16.

Yes (

No (

Does your firm embark on environmental scanning?

Yes (

No (

Does business uncertainty lead to strategies planning?

Yes (

No (

lx

17.

Are goals/objective of the organization affected by the level of

environmental uncertainty management?
Yes (

No (

lxi