THE IMPACT OF THE NIGERIAN STOCK EXCHANGE ONBUSINESS PERFORMANCE IN THE NIGERIAN ECONOMY.(A CASE STUDY OF FLOUR MILLS OF NIGERIA PLC)

BY

AKPAGHORO, ETHEL OGHENETEJIRIMATRIC NO: 081319122

A RESEARCH PROJECT SUBMITTED TO THE DEPARTMENT OF ARTS ANDSOCIAL SCIENCES EDUCATION

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS, FOR THE AWARD OFBACHELOR OF SCIENCE IN EDUCATION (B.SC ED.), DEGREE IN

BUSINESS EDUCATIONFACULTY OF EDUCATION, UNIVERSITY OF LAGOS,

AKOKA – LAGOS, NIGERIA

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AUGUST 2013. CERTIFICATION

This is to certify that this research project was carriedout by AKPAGHORO, ETHEL OGHENETEJIRI with the matriculationnumber 081319122 of the Department of Arts and SocialSciences Education, Faculty of Education, University ofLagos, Lagos , Nigeria.

____________________________________

DR. (MRS.) C.I AKINOLA DATESUPERVISOR

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____________________________________

PROF. (MRS.) C.C. OPARA DATEHEAD OF DEPARTMENT

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DEDICATION

This research work is dedicated to my loving parents Mr. and

Mrs. R.O. Akpaghoro, for their loving support, both

emotionally and financially with their encouragement and

generosity. May Jehovah the Almighty God continue to bless and

reward them super-abundantly.

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ACKNOWLEDGEMENTS

My utmost appreciation goes to Jehovah the Almighty God that

has guided me throughout my course, giving me wisdom and

understanding to cope with each year in school. May His name

be praised forever.

I also want to express my warm and sincere appreciation to my

supervisor Dr. (Mrs.) C.I. Akinola, who took the pains to go

through this work ‘word for word’ and for her efforts in

making sure that this project work is presentable. May God

continue to bless you for your patience.

To my parents Mr. and Mrs. R.O Akpaghoro, may Jehovah continue

to bless you both for your support and encouragement.

I also want to appreciate Mr. and Mrs. G. Nwaze for their

concern and support both spiritually and their words of

encouragement throughout this research project. May Jehovah

continue to strengthen you.

I will also not forget Mr. and Mrs. Amos Odugala who always

gave advice and show concern on the progress of the project.

May God also show you His mercy and bless you.

To my beloved sister, brothers and sweet niece Vinitha Owolo,

who never left me without ideas, May Jehovah continue to

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supply to you all more ideas, wisdom, knowledge and

understanding to succeed in all your endeavours.

With sincere and open mind, I also appreciate all my

lecturers, my boss Mrs. Anthonia Onuaju and Mrs. Obianuju

Ewulu; thank you all for your understanding and love in

granting me permission to attend classes.

Finally to all my friends and colleagues: Adeyemi Adeola,

Adebayo Oluronke, Salvador Kikelomo, Ogoro Victoria, Ibrahim

Victoria, Memeh Clementina, Edward Eyo Inyang, Aunty Bukky,

Nweke Augustina, Oderele Augustina, Ezeikpe Bethel, Onyeche

Nkechi and a host of others, thank you all for been there for

me.

May my good God Jehovah, continue to bless you all for your

support and love in Jesus name. Amen.

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ABSTRACT

This project is an investigation of the impact of Nigerian

Stock Exchange on Business performance on the economic growth

of Nigeria. To accomplish these objectives, percentage

methodology was adopted as a tool for testing the hypotheses.

A sample size of 200 staff from Flour mills of Nigeria Plc was

selected and administered questionnaires, structured to elicit

relevant information needed for statistical analysis and

hypotheses testing. This study is also motivated primarily by

the need to enhance capital accumulation from the stock

market, being the long term end of the financial system.

Expansion and efficiency of the Nigerian Stock Market would

also be realizable, if the recommendations in this project are

considered. Government is, therefore, advised to put up

measures to stem up investors’ confidence and activities in

the market and more foreign investors should be encouraged to

participate in the market for improvement in the declining

market capitalization so that, it could contribute

significantly to the Nigerian economic growth.

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TABLE OF CONTENTS

Title Page…………………………………………………………………...... i

Certification………………………………………………………………...... ii

Dedication………………………………………………………………...... iii

Acknowledgments……………………………………………………….... iv-v

Abstract……………………………………………………………………….…. vi

Table of Contents…………………………………………………………….. vii-viii

CHAPTER 1: INTRODUCTION

1.1 Historical Background of the case study ..

…………...................2

1.2 Statement of the

Problem................................................

.........3

1.3 Objective of the Study………………………………………............. 4

1.4 Research Questions……………………………………………………. 4

1.5 Research hypothesis…………………………………………………. 5

1.6 Significance of the study……………………………………………... 6

1.7 Scope and Limitation of the study………………………………..… 7

1.8 Definition of terms………………………………………………………. 8

1.9 Summary of subsequent chapter…………………………………… 9

CHAPTER 2: REVIEW OF RELATED LITERATURE

2.1.1 The Nigerian Capital Market………………………………………. 11

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2.1.1 Need for efficient Capital Market in Nigeria…………………………15

2.1.2 Factors affecting activities of the Capital Market…………………16

2.2 Overview of the Nigerian Stock Exchange (NSE) History and Development ……………………………..………………18

2.2.1 Historical Background of the NSE……………………………..... 19

2.2.2 Legal frame work for the NSE………………………………….... 23

2.2.3 Organization and the Growth of the NSE………………………...24

2.3 Overview of the NSE II-Roles and functions……………………….26

2.3.1 Function and Role of the NSE…………………………………… 26

2.3.2 Operation of the Nigerian Stock Exchange (NSE)………………..29

2.4 Capital C. Mobilization .…………………………………………….... 30

2.4.1 Accessibility to savers and users of the funds……………………31

2.4.2 Allocation Efficiency………………………………………………... 32

2.4.3 Investors Protection………………………………………………….32

2.5 Flour Mills and the Nigerian Stock exchange………………………. 33

CHAPTER 3: RESEARCH METHODOLOGY

3.0 Research Methodology………………………………………………… 35

3.1 Research Design……………………………………………………… 35

3.2 Population of the study…………………………………………….. 35

3.3 Sampling Techniques and Sample size……………………………36

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3.4 Research Instrument…………………………………………………... 36

3.5 Validation and Reliability of Research Instrument……………… 37

3.6 Method of Data Collection...…………………………………………. 38

3.7 Data Analysis Technique……………………………………………… 38

CHAPTER 4: DATA PRESENTATION AND ANALYSIS

4.0 Introduction…………………………………………………………… 39

4.1 Analysis of Personal Data………………………………………….. 40

4.2 Testing of hypothesis…………………………………………… 42

CHAPTER 5: SUMMARY, CONCLUSION, AND RECOMMENDATIONS

5.1 Summary………………………………………………………………. 55

5.2 Conclusion……………………………………………………. 55

5.3 Recommendations………………………………………………. 5 96

References……………………………………………………………….. 58

Appendices……………………………………………………..…. …… 59

CHAPTER ONE

1.0 INTRODUCTION

The development of the financial market is a feature of a

modern economy. It pre-supposes the absence of complete

financial autonomy. There must be some economic unit whose

receipt exceed their expenditure (financial surplus unit)

and of course, there will be those whose expenditure exceeds

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their receipt (financial deficit unit). The closure of this

gaps leads to the existence of financial market from where

deficits units (borrowers) and the surplus units (lenders)

are all centred, through the process of financial

intermediation by he financial Intermediation like the

stock exchange, banks, insurance companies etc. Essentially,

an efficient capital market mobilizes the nations capital

resources and resources and allocates them among the

productive for optimal output. Individual companies and

government require funds for consumption or investment.

Financial markets provide such funds either for short term,

medium or long term. Financial market consist of money

markets where banks and other financial institution provide

short term credits and capital market which brings together

suppliers and users of capital for medium and long term.

For the purpose of this presentation, the focal point is the

capital market in general and the stock market in particular.

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1.1 HISTORICAL BACKGROUND OF THE CASE STUDY

Flour Mills of Nigerian Plc, was incorporated on September

29,1960 as a Private Limited Liabilities Companies and

Commenced Operations in 1962. The Companies is located close

to Apapa Port which is the bigger in West Africa with staff

strength of over 3000 employees.

Flour Mills Plc, is the Second largest flour milling company

in the world, with a total production capacity of 6000

tonnes. The Company was converted to a Public Limited Company

in 1978 and it's shares were subsequently listed on the

Nigerian Stock Exchange. The chairman of the company is Mr.

G.S Coumantaros. The turnover of the group for 2009 is over

180 billion. The company has maintained its position with its

cutting edges technology in Nigeria for 50 years now.

In it's 50-year history, Flour Mills has remained at the

forefront of Wheat Milling in Nigeria. The Company's Flagship

brand, Golden Penny, remains one of the best known brands

preferred brands amongst bakers, confectioneries and

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consumers in Nigeria. It was the winner of the Nigeria stock

exchange merit award for 1999 and 2005. The company has also

successfully raised 37.5 billion in the Nigerian capital

market in 2010, via corporate Bond, and is a Recipient o f

several NIS(SON) & certifications in quality consistency with

the recent Gold award in 2010. Its products ranges from

Golden penny flour, semovita, spaghetti, macaroni, and other

pasta products, Burham cement, fertilizer, BANGO super sacks

and shopping bags, Morpack's flexible and packing products.

1.2 STATEMENT OF THE PROBLEM

The major decision that lies here is with the lender, who

decides whether to use the surplus funds to improve his

current living standards or to invest it in order to earn

more income or to use, it to build capital for the future.

The onus here is that, whilst the stock exchange should serve

the role of financial inter mediation between surplus and

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deflect factors, its ability to mobilize these funds is a

question that is of utmost importance.

Consequently, the stock exchange in faced with many problem

ranging from investors reluctance to release capital,

reduction of indigenous companies to seek quotation

incorporate pricing methods by the authorities that regulates

the stock exchange e.t.c. This study is therefore out, to

study how the stock exchange in the midst of these problem it

face, have an impact on business performance in the Nigeria

economy with a focus on Flour Mills Nigeria plc. The

statement of the problem could thus be stated as ,''DOES THE

NIGERIAN STOCK EXCHANGE HAVE AN IMPACT IN ANY WAY ON THE

BUSINESS PERFORMANCE IN THE NIGERIA ECONOMY?

1.3 OBJECTIVE OF THE STUDY

1. To ascertain if the stock has in any had an impact on the

performance of business in the Nigerian Economy.

2. To carry out critical review of the problem being faced

by the stock exchange.

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3. To carry out a detailed evaluation of the activities of

the stock exchange as the main medium through which

activities in the capital market are carried out.

4. To ascertain and evaluate how important the activities of

the stock exchange are in assisting entrepreneurs.

5. To review and examine the various policies of the

regulatory authorities of the Nigerian Stock Exchange.

6. To identify the loop-holes that hinders effective

implementation of government policies on the stock

exchange.

1.4 RESEARCH QUESTIONS

1. To what extent have the activities of Nigerian Stock

Exchange had an impact on the business performance in the

Nigerian economy.

2. Does the business culture of the average Nigeria

entrepreneur have a relationship with his dealings on the

stock exchange?

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3. Does government have a role to play in ensuring that the

stock exchanges have impact on business performance and

business activities?

4. Does the current economic condition have an effect on the

operations of the stock exchange.

1.5 RESEARCH HYPOTHESES

HYPOTHESIS I

HO: The activities of the Nigerian Stock Exchange have not

had any impact on business performance in the Nigerian

economy.

H1: The activities of the Nigerian Stock Exchange have had a

significant impact on business performance in the

Nigerian economy.

HYPOTHESIS II

HO: The business culture of the average Nigeria entrepreneur

doesn't have any relationship with his clearing with the

Exchange.

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H1: The business culture of the average Nigeria

entrepreneur has a relationship with his dealing with the

exchange.

HYPOTHESIS III

HO: The government does not have any role to play in

ensuring the exchange impacts on business performance

and business activities.

H1: The government has a role to play in ensuring the

exchange impact on business performance and business

activities.

HYPOTHESIS IV

HO: The current economic conditions do not have any effect

on the operations of the stock exchange.

H1: The current economic have an effect on the operations of

the stock exchange.

1.6 SIGNIFICANCE OF THE STUDY17

The study is of importance to different categories of people.

First, it is a topic that arouses public interest. This is

because, the activities of the stock exchange are pivotal to

the growth and growth and development of any economy. This

study will also help educate the public on the various ways

in which they can interact with the Exchange.

More specifically, the study will be of interest to

entrepreneurs. It would enable them understand the different

way in ways in which they can interact, benefit and do

business with the Exchange.

It also avails them the opportunity to understand how they

can obtain capital funds from the exchange for their

businesses. It will also be of importance to the relevant

government authorities’ officials. It will help identify area

that need closer monitoring and control in order to enhance

the efficiency and effectiveness of the exchange.

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This study will also be useful to other academics or

researchers who wish to carry out further research in areas

related to this study. International organization, foreign

institutions etc would find this study very useful. It would

enable them understand and appraise the operation of the

capital market when the need arises.

1.7 SCOPE AND LIMITATION OF THE STUDY

The Nigerian Stock Exchange has Lagos as it's headquarter and

operates branches as Kaduna, Kano, Abuja, Port-Harcourt,

Onitsha, and Ibadan. The work of the study shall be

restricted to Lagos due to it's nearness and it being a good

representation of the entire activities of the Nigerian Stock

Exchange. Also, this study shall use Flour Mills of Nigeria

Plc as it's case study.

The limitations that this study will encounter are that of

finance, time and scope. Nonetheless, the researcher will

try to conduct the research in an effective and efficient

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manner, so that the results are relevant and their research

useful to all who make use of it.

1.8 DEFINITION OF TERMS

In order to aid the understanding of the terms that will be

used in this write up, adequate definitions are given to the

following terms:

BLUE CHIP: A listed company which, because of it's large

size, long level history of profitable trading and good

management, commands a high level of confidence from stock

market investor.

BOND: A security that has a nominal value and which

entitle its' holder to the payment of interest by the issue

of regular intervals unit, the issuer redeems the bond.

BROKER: A person who buys and sell goods or assets for others

and receives a commission usually a percentage of the value

of the transaction for doing so.

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DEBENTURE: A long-term security yielding a fixed rate of

interest, issue by a company and secured against assets.

DIVIDEND: A sum of money that is divided among a number of

people, such as the part of a company's profit paid to its

shareholders.

GEARING: The ratio of a company's loan capital (debt) to the

value of its ordinary shares (equity).

OFFER FOR SALE: A public offer shares in a company which is

made by an issuing house and in which the shares being sold

are not new shares but are been sold by existing shareholder.

OFFER FOR SUBCRIPTION: This is also known as initial public

offer where the share being sold are new ones and the money

used by the company to finance expansion.

1.9 SUMMARY OF SUBSEQUENT CHAPTERS

The study comprises of five chapters. Chapter one is about

the introduction to study as a whole. It will discuss briefly

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the historical background of the study. The statement of the

problem will also be stated and the objective for carrying

out the study. The researcher also pose research questions

and subsequently formulate hypothesis. The significance,

scope are limitation of the study will highlighted, words

that have ambiguous and technical meanings will also be

defined in simply terms.

Chapter two of the study will entail review of different

literature that have been gathered and studied. Journals,

textbooks, gazettes, website, annual reports, anniversary

booklet, newspapers etc will form the source were information

relating specifically and generally to the study will be

gathered from.

Chapter three consists mainly of the method used in

conducting the research. The research methodology, sampling

techniques, research instruments, method of data collection

and analysis etc will be stated in this chapter.

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Chapter four of this project is basically the presentation

and analysis of the data collected in chapter three of the

project. The researcher intends to make use of percentage

technique as the statistical tool for data analysis and

interpretation.

Chapter is the five is the final part of the study which is

simply a review of the study work in addition to the

conclusion drawn from the study's findings. The researcher

will also make recommendations based on the conclusions. Any

additional information relating to the project work will be

found in the appendices section at the end of the project.

References will also be found at the end of the study.

CHAPTER TWO

2.0 REVIEW OF RELATED LITERATURE

This of chapter will deal with the most theoretical aspect of

the research project. Literature reviewed in this chapter,

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will afford all stakeholders of this report the opportunity of

getting knowledge about the subject matter. It basically

involves the comprehensive examination of works of the

authors, scholars and researchers as contained in texts,

journals, annual report, websites etc. At the end this

chapter, the average reader should be able to have should be

able to have enough information to reasonably conclude on the

'' IMPACT OF THE NIGERIAN STOCK EXCHANGE ON BUSINESS

PERFORMANCE ''.

2.1 THE NIGERIAN CAPITAL MARKET

In reviewing the Nigerian Stock Exchange (NSE), it is

important that one fully discuss the Nigerian Capital Market

because the NSE is an integral part of the capital market.

To a laymen, a market could simply mean ANYWHERE items can be

sold and bought. In reality this is a fact, but it involves

more than merchandising. A market helps in channelling surplus

items to areas that are lacking. This is evident in the fact

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that one cannot buy what one already has. In the context of

the capital market where long term financial instruments are

traded with the major objective of diverting funds from

surplus sectors to the deficient sectors.

The Nigerian Capital Market is an integral part of an overall

financial market system. This simply means that, there is a

Nigerian Financial Market which is made up of the money

markets and the capital market.

Generally, the financial system provides finance for all the

sectors of the economy without significant synergy to

facilitate the transfer of funds between economic units. Major

players in the financial system includes Universal Banks,

Development banks, Nigerian Stock Exchange, Central bank of

Nigeria, Securities and Exchange Commission and other

financial Institutions. Alternatively, the financial market

could be said to consist of two(2) sectors namely Primary and

Secondary market. Primary markets are for trading in new

financial claims and issues while secondary markets for

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exiting securities, that is, securities already in issues and

changing hands among investors. The distinction between

primary and secondary markets are clearing concept but

difficult to distinguish in practice.

At this point, it is important that commercial banks and the

NSE feature pre-dominantly in financial market transactions as

they constitute major holders of money market and capital

market instrument respectively. Some of these include:

MONEY MARKET ( SHORT TERM

INSTRUMENT )

* TRESURY BILLS * TRESURY

CERTIFICATION

* COMMERCIAL PAPERS * BILL OF ACCEPTANCE

CAPITAL MARKET ( LONG TERM

INSTRUMENT )

* GOVERNMENT SECURITIES * BONDS

* CORPORATE SHARES * MORTGAGE LOANS.

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In line with the topic, the essence of creating a capital

market is as a result of the need of the corporate world to

acquire local funds for expansion problems as well as

liquidity problems. This offers a forum whereby the supplies

of the capital can easily restore their liquidity. The capital

market also mobilize and allocate the nations capital

resources among numerous competitive users. This role could be

very crucial in determining the growth and efficiency of the

national economy.

An efficient capital market will be able to channel funds into

these industries or sectors that are growing and needs funds.

Different scholars have been given a variety of definitions

for the terms capital market: Ekweme (2005) defines capital

market as the '' framework of institutions that arrange for

the trade of financial assets such as shares, debentures,

stocks and mortgages ''. By this, he meant institutions such

as the issuing houses, stock exchange etc.

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DONGALL AND GAUMITY (1975) says the capital market is a

complexity of institution and mechanisms through which

intermediate funds and long term funds are pooled and made

available to individuals' businesses and government. However,

SAMEETZ (1997) gives a more appropriate definition, he says:

"the capital market augment the flow of funds", this

definition explains that the capital market increases both

income and value.

By and large, a good capital market fulfils the following

within the economy:

> It provides a means for raising funds to assist companies

to expand and modernize.

> It provides liquidity for investment of funds from the

individual's standpoint.

> It provides a means for allocating the nation's real and

financial resources between industries and companies.

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> It can act as a medium for broadening ownership base of

business especially private companies.

> Through its pricing mechanism, it provides company

management with idea of current cost of capital and this

can be important in determining the level of investment.

2. 1.1 NEED FOR EFFICIENT CAPITAL MARKET IN NIGERIA .

Every country has the drive for the drive for the promotion of

an active capital market and Nigeria is no exception. The

following could be given as reasons for need for

efficient capital market:

< Mobilization of savings for numerous economic units for

economic growth and development.

< Encouragement of efficient income allocation from

investments through its price mechanism.

< Broadening the ownership base of assets and creation of

healthy private sectors.

< The provision of alternative source of funds other

taxation for the government.

< The Promotion of Capital market.

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< Provision of sufficient liquidity for investor or group

of investors.

< Encouragement of efficient allocation of fund through

changes in wealth and composition.

2.1.2 FACTORS AFFECTING ACTIVITIES OF THE CAPITAL MARKET

Over the years, a number of factors have influenced the

operations and overall growth of the Nigerian Capital Market.

These include:

• GOVERNMENT BORROWING: Government borrows frequently from

the capital market majorly as a requirement for financing

a deficit budget or just raising alternatives funds.

Government borrowing happens to be a prime mover of

activities in the capital market.

• LEGISLATION: There have been statutory requirements for

some institutions to invest a certain portion of their

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funds in the government sectors, for example the

Insurance Act of 2004 provides that, Insurance Companies

are statutorily bound to invest a defined minimum

proportion of their premium in the capital funds, the

same goes for pension funds administration under the

Pension Act of 2004. These have contributed to boost the

activities of the Nigerian Capital Market.

• NIGERIAN ENTERPRISE DECREE: This decree was promulgated

in 1972 and it managed to attract a good number of

indigenous companies to the market. This helped to

stimulate the activities of the stock market.

• ESTABLISMENT OF SECOND TIER SECURITY MARKET (SSM): The

setting up of the SSM, enhanced activities of the market

as it allowed small and medium sized enterprise gain

access to the resources of the market for expansion,

diversification and modernization.SSM facilitates the

overall growth of the market particularly by expanding

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the number and range of securities available for

transactions.

• PRIVATIZATION AND COMMERCIALIZATION PROGRAMME : By

privatizing or commercializing certain companies of which

the Federal Government hitherto, had equity interest, the

share will be offered to the public. This offer is mainly

carried out through the NSE in the Capital Market.

• DEREGULATION OF THE CAPITAL MARKET: Deregulation of the

market took off in 1998 with the major objectives of

infusing a higher degree of efficiency into the operation

of capital market, it is expected that in the long run

the operations would be freed from official restrictions

which had impeded its growth and development over the

years. Also, it is through that, increased competition

will improve the quality of general operations of the

capital market.

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• ESTABLISHMENT OF SECURITIES AND EXCHANGE COMMISION(SEC)

This is probably the most important and significant

factor that has impacted on the activities of the capital

market SEC was established in 1999 by the securities and

Exchange Commission Act. It basically takes the role of

regulating the operations of the capital market, it is a

regulatory agency on behalf of the government.

Interaction with investors- individual and companies

alike, see the as a reference point for issues in the

capital market. It is responsible for creating the

necessary atmosphere for the order by conduct of the

capital market.

In Conclusion of this section, having looked at the

capital market, it is obvious that the major engine for

the smooth operation of the Nigerian Capital market is

the Nigerian Stock Exchange.

2.2. OVERVIEW OF THE NIGERIAN STOCK EXCHANGE (NSE) HISTORY ANDDEVELOPMENT

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Virtually all countries in the world have a stock exchange.

The stock exchange of developed countries happen to be very

much advanced and organized. The New York Stock Exchange in

the USA and the London Stock Exchange of Britain are typical

examples of advanced stock exchange markets. In Nigeria, the

stock exchange is the Nigeria Stock Exchange.

Essentially, the stock exchange is a highly specialized and

organized market which deals in the trading of securities such

as share, stocks and bonds. The NSE trades securities on

behalf of a wide number of individual and companies as well as

the government. The NSE is a link between "financial supplies

" and " financial seekers ", therefore, it is of necessity

that a critical overview of the NSE carried out for proper

execution of this project.

2.2.1 HISTORICAL BACKGROUND OF THE NSE

Various incidents in Nigerian pre-independence era helped in

the forming of NSE. One of such incidents happened in 1946,

when the year plan of local loan ordinance was put in place.

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The ordinance provided for the floatation of

£300,000(#600,000) local loan stock bearing interest as 3.25%,

the loan stock was issued in writs of £10 (#20) and had a

maturity of 10-15 years. However, the bulk of the issue was

subscribed by citizens of the United Kingdom even though the

issue was subscribed by over £500,000(#1,000,000).

Another attempt at capital accumulation in the public sector

was made possible in 1951, through the creation of a loan

funds for financing some public utilities. The scheme was to

be funded from publicly collected revenues and from soft loan

for the development of relevant corporations. This was

considered the first serious significant attempt made

opportunities to Nigerians. Although, the above events could

not have been said to translate in resounding success they

however spurned the nationalists to agitate for a truly

Nigerian identity. In April 1952, a Nigerian law maker in the

House of Representatives Hon. Dr. R.O Mbadiwe proposed that

Central Bank of Nigerian should be established. However, the

35

financial secretary to the Central Bank will not be able to

regulate credit in the absence of a highly organized money

market. He observed that there were no securities in which the

Commercial Banks would utilize their funds for buying

government securities, noting that a loan of #300,000 had

failed to attract a single indigenous bank.

In the late 1950's, there was an upsurge of private industrial

investments channelled towards industrial projects and

expansion of local commercial undertakings. A number of

developments that took place encouraged the government into

taking initiative in establishing formal financial markets.

Among these are:

<> The need for government to finance the growing deficit

budget as from 1958.

<> The deteriorating balance of payment from the late

1950's.

<> Increasing pressure from nationalists.

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<> The need to mobilize finance to embark upon development

programmes in May 1958.

The then Federal Minister of Commerce and Industry

constituted a social and economic research team to consider

may and means of positioning a share market in Nigeria. The

report of the committee recommended:

* The creation of facilities for dealing in share.

* The establishment of rules regulating translates and,

* Measures to encourage savings and issues of securities of

government and other organizations.

A year later, the already established Central Bank of Nigerian

promoted the development of a capital market by floating

the first Federation of Nigerian Development loan of #4

million on behalf of the government. Since a formal

stock market had been in place the Central Bank had to

do a lot to ensure the market ability of the stock.

37

The favourable report of the Bank Committee in 1958 led to the

registration of a business name "THE LAGOS STOCK EXCHANGE" in

March 1960 and has incorporate under section 2 caps 30 on

September 15, 1960 through the efforts of the Central Bank,

the business committee and the Investment Company of Nigeria

Limited.

The original subscribers to the memorandum and articles of

incorporation of company were:

Alhaji Shehu Abubakar

Sir Odimegu Ojukwu

Chief Theophilous Doherty

C.T. Bowing and Co. Ltd.

The Investment Company of Nigerian Limited

John Holt Nigeria Limited, Lagos.

By the middle of 1970, a vocal section of the enlightened

citizenry had begun to express dissatisfaction with the

nation's financial systems and in response to this public poll

a commission headed by Dr. Pius Okigbo was set up by the38

Federal Government in 1976 to study the structure of the

nation's financial system and make recommendations for

improvement.

When the Commission presented its report, it recommended that

the stock exchange be decentralized mainly so as to cover the

entire country and take the benefits of capital operation

nearer to a greater section of the citizenry. The Commission

proposed that the exchange embark on a programme of

establishing smaller exchanges which would cover the whole

country. In any case, the government accepted the principle of

decentralization but opted for a National Stock Exchange with

branches in different strategic parts of the country.

After all the necessary protocols, including amendment to its

operation characters, the Lagos Stock Exchange was in 1977,

with branches initially in Lagos, Kaduna, Port Harcourt with

Onitsha and Ibadan coming on board in 1990.

2.2.2 LEGAL FRAME WORK FOR THE NSE

39

The Lagos Stock Exchange commenced operation on June 5, 1961

as a private outfit, however, this was inappropriate for an

organization of such nature it seemed desirable to grant it

for their protection under the law and place it under a

certain level of centre by the government. This crystallized

into the passing of the Lagos State Exchange Act asserted by

the Governor General on behalf of the Queen of England on June

6, 1961. This Act gave the Stock Exchange the legal backing to

operate:

* One of the provision of the Act (section 3) was that, the

business of buying and selling listed (quoted) securities

to only individuals and firms which were duly registered

as violation of the section.

* Other sections were equally pervasive. The Lagos Stock

Exchange Act remained the operative law for a while

before the capital issues decree of 1973 and the

Securities and Exchange Commission Degree of 1979 was

promulgated. This Decree (now acts) still remains

40

operative and relevant today as laws backing the

operations of the NSE.

2.2.3 ORGANISATION AND GROWTH OF THE NSE

Over the years, NSE have grown from strength to strength even

though the stakeholders in the exchange do not seem to agree

that the NSE is performing up to fill capacity. The Nigerian

Stock Exchange parades companies from virtually all sectors of

the economy and the Government as well. The Nigerian Stock

Exchange is highly organized, as not everyone can gain access

to the floor of the exchange. It organizes examinations for

prospective jobbers and it is done with high level of

professionalism and integrity.

As for organization, the NSE has six branches well scattered

round the geo-political zones of the national level. The daily

operations of the NSE are runned by a counsel. The counsel is

made up of respectable and dignified persons in the society,

from the counsel the Director General or Chief Executive

41

Officer of the stock exchange is elected. The Chief Executive

Officer is basically responsible for overseeing the smooth

operations of trading activities of the NSE. The Chief

Executive Officer (2012), of the NSE is Mr. Oscar Onyema. The

NSE also has a President drawn from respected members of the

NSE. Unlike the chief executive officer, the president is not

an administrative head, the president acts as the chairman of

the council and is responsible for the necessary policy

formulation affecting the NSE. The president has a definite

term of two (2) years of one tenure only. The current

president of the NSE is Alhaji Aliko Dangote.

With the current capitalization of the NSE, it can be seem

that it has grown tremendously as more companies and

successive government have found the need for more

capitalization which the NSE can provide.

A clearer picture of the growth of NSE can be seen in the

value of transactions:

42

Table 2.1

No. of Date Security Deal Volume Value ASI

Oct.24 2012 102 5262 247915911 2703949640

Oct.26 2012 100 4234 269382148 3109483038

Nov.5 2012 98 3995 218960356 1535189556

Nov.12 2012 97 4075 255331047 1914362766

Nov.19 2012 84 3421 179851195 1141613289

Nov.26 2012 91 3739 164151012 1635488443

Dec.2 2012

-

3556 229001417 1.720b

26671.7

Dec.12 2012

-

4602 378871559 2.608b 27050.19

Market capitalization #8.643 trillion as at Dec.12 2012.

Overall market performance gauges NSE, ASI, Market

Capitalization each earned 67 basic point amid increase in

total deal of 0.28%, 26.49%, to 18,947 deals and #11.24b

respectively.

43

Appreciated 2.43% to 116.84 points . #22.66 in the margin

loans.

* Table 2.1 Value of transactions in NSE (OCTOBER TO

DECEMBER,2012)(Guardian Newspaper and Business day Newspaper )

2.3 OVERVIEW OF THE NSE II – ROLES AND FUNCTIONS

This is the second (2nd) part of an in depth discussion of

the NSE. The Lagos Stock Exchange Act of 1961, as we as the

other enabling Acts basically the NSE with its

responsibilities are, the performance of its responsibilities

the NSE is able to meet, the expectations of all stakeholders

in capital market and its own aspiration. The Act also helps

the NSE in properly conducting its operations as well be seen

in this section.

2.3.1 FUNCTION AND ROLE OF THE NSE

On establishment in 1961, The Lagos Stock Exchange was charged

with the responsibility of :

44

• Providing appropriate machinery to facilitate offering of

stock and shares to the general public.

• Promoting and increasing participation by the public in

the economy.

• Encouraging the investment of saving as soon as it is

cleared.

• Ensuring that shares are readily available.

Presently, the NSE has other functions which it performs

and include the following:

• Provision of a form for buying and selling of stock and

shares and for granting quotation for new ones.

• Provision of opportunities for raising new shares capital

by quoted companies.

• Provision of machinery for mobilizing private and public

savings and making them available for provision

investment through stock and shares.

45

• Through its roles and regulations and operations codes

and practices, it is designed to be safe guarded from

shady practices and dealings in a quoted securities.

• It acts or is expected to act as a channel for foreign

investment in the economy.

• It facilitates dealings in government securities.

• It promotes mobilization of development finances for the

government.

The NSE also performs the following administrative functions:

* Listing of companies' to be traded on the stock exchange.

* Supervision of listed forms compliance with listing

requirements and assuring that required reports are

obtained when due.

* Reviewing and addressing those rights of shareholders and

response to investors and brokers complaints, concerning

earnings report, individual distribution.

46

* Running the trading floors of the exchange and ensuring

that they are conducted according to exchange procedures.

As a purely capitalist institution, the NSE plays the

following roles:

< Mobilization of capital for pursuance of economic

expansion and for creation of goods and services for the

satisfaction and well being of the general citizenry.

< It acts as an instrument for measuring and ascertaining

the symptoms of an impending economic boom or recession

before it actually occurs.

< Creation of where the enormous capital, required to

operate the huge individual and commercial corporations

of today, can be raised in such large amounts and at such

competitive role that no institution in a capitalist

system can match.

< Efficient allocation of the available capital funds to

the diverse users in the economy.

47

2.3.2 OPERATION OF THE NIGERIAN STOCK EXCHANGE (NSE)

Operationally, the NSE can be categorized into two broad

earnings namely:

* Primary Market

* Secondary Market

• PRIMARY MARKET: This is a market for new issues of

securities. It is a platform where a company can raise money

for investing or if quoted companies can make new moves for

expansion and modernization, such offer can take the following

forms:

*OFFER FOR SUBSCRIPTION: These are direct issues to the carry

the supposition that the company is a public one and the

proceeds of the issue go to the company to finance expansion

and modernization.

*OFFER FOR SALE: A public offer of shares on a company by

existing shareholders proceeds, of which go to the vendor in

this process. This could include the listing of the entire

capital of the company. This is common under the privatization48

program of the Federal Government, where amount received from

sale of government in the Bureau of Public Enterprise and

National Council for privatization.

*RIGHTS ISSUE: This is an offer made to existing shareholders

to buy more shares at concessionary prices based on their

holding in the company. It is a common method used by quoted

companies to generate additional funds.

• SECONDARY MARKET: This is a market for existing

securities. It is based on some of the generally accepted

criteria or performance in the context of stock markets in

developing economy which include the following:

< Capital mobilization

< Accessibility of savers and users of the fund.

< Allocation efficiency.

< Investor protection.

2.4. CAPITAL MOBILIZATION

Primarily, a stock market is established to serve as a value

for the mobilization of funds. The degree to which the49

exchange has aided this process will form the basis for

evaluation. The contribution of the stock exchange to capital

formation during the first 20 years of its existence was

minimized mainly because of the prevailing low interest rate

regime which made the money more attractive than the capital

market.

However, with the introduction of Structural Adjustment

Programme (SAP) in 1986 and the adoption of certain

deregulation policies, the stock exchange has become a

reliable option for capital formation with the increase in the

lending rates, many companies have found solace in the stock

market. More recently, the value of capital issue has been on

the increase and there are strong indications that this trend

will continue for a period in the future.

2.4.1 ACCESSIBILITY TO SAVERS AND USERS OF THE FUNDS

The operational policies, organizational structure and

linkages contribute to determine how effective it can be in

the performance of that function. For the stock exchange to

50

mobilize savings effectively and channelling, such savings to

the most deserving sectors, which enhance national integration

and unity, it has to develop suitable strategies for giving

access to savers and users of the funds spread across the

length and breadth of the country.

The NSE has not achieved much in fact, with regard to its

functions, the level of awareness among citizen as well as

inadequate investment incentives. However, this can be

corrected by the government by enabling the NSE create more

branches for more access and provide necessary infrastructure.

2.4.2 ALLOCATION EFFICIENCY

The stock exchange valuation of market securities should

reflect the market's collective judgment of the relative worth

of the securities vis-a-vis other available options of volume

of savings to those companies which provide the highest

prospective rate of return.

51

Consequently, the price mechanism of the stock exchange

reflects the wide societal needs. Factors which influence the

allocation of an exchange include the following:

a. Depth of the market.

b. Extent of freedom from restrictions.

c. Quality of information.

d. Degree of investor rationality.

It is obvious that, the NSE is not yet able to perform its

capital allocation function efficiently, due to the relatively

low level of .size of the market also poses a problem in

efficiently allocating capital.

2.4.3 INVESTORS PROTECTION

It is very much relevant that the investor is protected from

risk and uncertainties that are attached with investing. The

exchange is expected to make full disclosure periodically to

all participants in the market. Generally, the NSE protect the

investors in areas such as:

i. Pricing of new security.

52

ii. Incentives to listing.

The stock exchange maintains and enforces its listing

requirement and general undertaking, signed by quoted

companies, to ensure the protection of investing public and

sustained confidence being the bedrock of any stock market. It

is safe to say that the NSE has been very competent in

protecting all its investors in the stock market. Give it a

respectable status, investors are very confident in investing

in the NSE.

2.5 FLOUR MILLS AND THE NIGERIAN STOCK EXCHANGE

The capital market has been of immense importance to the

Nigerian economy in recent years. It has provided an organized

market for trading of securities, raising of funds to meet

capital project float of companies etc.

The government has also put in place, regulatory authorities

to guide its operations against fraudulent practices and

brokers that engage in day to day activities with the market.

It is also worth stating that, both the capital market and the

53

money market are very vital for sustaining the growth and

development of any economy.

It is in this vein that, companies like Flour Mills of Nigeria

Plc are major players in the Nigerian Capital Market. The

exchange has proved to preside a sport ground for its share

prices to be appropriately bargained and determined. Looking

at the year 2010, considering the fact the exchange received

one of its most remarkable growths being the second largest

flour milling site in the world, the Flour Mill of Nigeria Plc

also share in the stock exchange benefits.

During that year, the company successfully raised N37.5

billion in the Nigerian Capital Market via Corporate Bond,

thereby improving the level of confidence investors have in

the company. This was eminent in its price-earning ratio for

2011.

The marked improvement and growth in the share prices of Flour

Mills of Nigeria could be accounted for by the remarkable

54

performance it achieved in carrying out its business during

the year and the favourable impact the capital market had on

the company. It didn't only record improvement in share prices

but also did it declare dividends of increased share for its

shareholders and also declared a bonus for them all.

It can thus be seen that, the capital market plays a very

significant role on business performance of companies in

Nigeria.

55

CHAPTER THREE

3.0 RESEARCH METHODOLOGY

This chapter sets out the method, procedures and processes

that have been adopted in carrying out this study.

It shows the population sample, sampling techniques as well as

the data gathering and analysis procedures. The validity and

reliability of the research instrument in use, will also be

dealt with in this chapter.

3.1 RESEARCH DESIGN

Research design refers to the outline or general arrangement

to the research, from which information can be obtained. It

would provide the procedural outline for the conduct of any

given investigation.

The research design would be adopted for this project. It

involves the observation of the sample elements or variable

without any attempt to influence the variables.56

3.2 POPULATION OF THE STUDY

Population as used in this research study, implies the group

which the researcher has focused on to study, for its

effective conduct. The researcher has chosen all brokers

financial analysts and staff of Flour Mills of Nigeria Plc as

the population of this study. The population of Flour Mills of

Nigeria is 1,150, it would not be totally accessible for the

purpose of this research, so 200 has been selected as sample

of the population.

The selection of the population was based on the population

that will project true representation of the entire universe.

Also, that the selected sample will truly represent the

activities of the population.

3.3 SAMPLING TECHNIQUES AND SAMPLE SIZE

A sample is defined as a subset population. This simply means

a sub-group drawn from the target population. The researcher

has found it necessary to choose a sample population to be 57

used, due to the fact that, the entire population cannot be

used because it is large.

The stratified sample technique was adopted in the study.

This retails the division of the sample population into strata

or sub-groups, based on educational qualification and expenses

in stock exchange matters, for the purpose of obtaining a

lighter degree of representation and unbiasness. Simple random

sampling method was then used to select 200 people.

3.4 RESEARCH INSTRUMENT

The research instrument is the instrument for data collection

by the researcher. Since the researcher has adopted a survey

design method for the research, the instrument has to do with

the application of the stated research theories. The

questionnaire would be the research instrument for this study.

The researcher has carefully designed a standard research

instrument to be distributed to the sample population. Simple

58

random sampling methods have been employed to ensure the

reduction of sampling errors to the barest minimum.

The questionnaire was prepared based on some logical

assumptions such as the literacy levels of all respondents and

their level of awareness about the subject matter. The

questionnaires will be divided into two (2) main sections.

3.5 VALIDATION AND RELIABILITY OF RESEARCH INSTRUMENT

The validation of the research instrument (questionnaire)

simply means the appropriateness of an instrument in measuring

Reliability of a research instrument is the consistency of the

instrument measuring its variable. The questionnaire used for

this study contains all relevant aspects of the subject that

should be in it. The layout of the questionnaire is of high

standard. The questionnaire have content contract and

production validity. The questionnaire used as the conduct of

the study will give consistent result for similar topic

59

therefore it is dependable and stable in measurement and can

be regarded as a valuable research instrument.

3.6 METHOD OF DATA COLLECTION

The administration of the questionnaire would be done through

physical contact and would be collected after a maximum period

of one week to allow for reasonable responses by the

respondents.

The researcher would also collect the data by Physical contact

when filling of the questionnaire has been completed. The

physical method of data collection is to allow for personal

guidance so the sample unit might not get confused.

3.7 DATA ANALYSIS TECHNIQUE

As stated earlier the questionnaire would be divided into two

sections. The data collected from both sections would be

analyzed using tables and percentage.

60

61

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.0 INTRODUCTION

This chapter deals with the presentation of the data collected

from the respondents in the selected firm, Flour Mills of

Nigeria, as well as the results. It showed the analysis of

data collected through questionnaire. Two hundred

questionnaires were administered to brokers financial analysis

and staff Flour Mills of Nigeria, PLC.

62

4.1 ANALYSIS OF PERSONNAL DATA

Table 1.

Description of personal information of respondents presage variable in percentages.

CATEGORY BROKERS FINANCIALANALYSTS

STAFF OF FLOUR MILLS.

SEX MaleFemale

23.5% 10.5%

41% 25%

AGE

20-29 years 30-39 years 40-49 years 50 and above

- - 16.5% 7%

7.5% 30% 26% 13%

MARITAL STATUS

SINGLE MARRIED

5% 21.5%

27.5% 46%

EDUCATIONAL QUALIFICATION

OND BSC/BED/BA/HND MSC/MA/PED Professional Qualification

- 6.5% 14% 7.5%

18.5% 25% 13.5% 15%

WORKING EXPERENCE

Under 1 year 1-5 years 6-10 years 11-15 years 16 and above

1.5% 6% 4.5% 7% 5.5%

15% 13.5% 17.5% 19.5% 10%

63

According to Table 1, the variables used were sex, age,

marital status, educational respondents were male while ten

point five (10.5%) of them were female which is for brokers

financial analysts. Forty-one percent (41%) of the respondent

were male while twenty-five (25%) female which is for all the

staff of Flour Mills of Nigeria.

The second item was the age category, under the age of 20-29

years were seven point five (7.5%), 30-39 years thirty percent

(30%) were both from the staff of Flour Mills of Nigeria. 40-

49 years were sixteen point five (16.5%) for the brokers

financial analysts while twenty-six percent (26%) were for the

staff of Flour Mills of Nigeria. 50 years and above, thirteen

percent (13%) for staff Flour Mills of Nigeria while seven

(7%) for the brokers financial analysts.

The third item was the marital status. Five (5%) were singles,

twenty-one point five (21.5%) were married of those who fall

under the brokers financial analysts. Twenty-seven point five

64

(27.5%) were singles, forty-six (46%) were married of those

who fall under the staff of Flour Mills of Nigeria.

The fourth item was the educational qualification. Eighteen

point five (18.5%) were OND holders from those of the staff of

Flour Mills of Nigeria. Six point five (6.5%) and twenty-five

(25%) were B.SC/BED/BA/HND holders of which fall under brokers

financial analyst and staff of Flour Mills of Nigeria

respectively. Fourteen (14%) and thirteen point five (13.5%)

were MSC/MA/PED holders of which fall under brokers financial

analysts and staff of Flour Mills of Nigeria respectively.

Seven point five (7.5%) and fifteen (15%) were professionally

qualified of which fall under the brokers financial analysts

and staff of Flour Mills of Nigeria respectively.

The fifth item was the working experience under One year, One

point five (1.5%) and fifteen (15%) for brokers financial

analysts and staff of Flour Mills of Nigeria respectively have

worked for the company. Six percent (6%) and thirteen point

five (13.5%) for brokers financial analyst and staff of Flour

65

Mills of Nigeria respectively were in the range of 1-5 years.

Four point five (4.5%) and seventeen point five (17.5%) for

brokers financial analyst and staff of Flour Mills of Nigeria

respectively were in the range of 6-10 years. Seven percent

(7%) and nineteen point five (19.5%) for brokers financial

analyst and staff of Flour Mills of Nigeria respectively were

in the range of 11-15 years. Five point five percent (5.5%)

and ten percent (10%) for brokers financial analyst and staff

of Flour Mills of Nigeria respectively were in the range of 16

and above.

4.2 TESTING OF HYPOTHESES

HYPOTHESIS 1

In order to test the first hypothesis which says that ‘ the

activities of the Nigerian stock exchange have not had any

impact on business performance in the Nigerian economy OR the

activities of the Nigerian stock exchange have had a

significant impact on business performance in the Nigerian

economy.’ The data collected from the five statements on the

66

questionnaire were computed with frequency and presented in

the Table II below:

S/N STATEMENTS

AGREED % DISAGREED %

1 The Nigerian Stock Exchange

operation impact heavily on the

performances of business

organization.

157 78.5 43 21.5

2 The going concern status of any

business is dependent on its

relationship agreed.

132 66 68 34

3 The Nigerian stock exchange serves

its financial intermediation role

effectively.

179 89.5 21 10.5

4 The Nigerian Stock Exchange has

made meaningful effort on the

various ways of creating

activities.

185 92.5 15 7.5

5 Nigerian Stock Exchange has helped189 94.5 11 5.5

67

and contributed a lot to the

Nigerian Business Sector.

TOTAL 842 84.2 158 15.8

FINDINGS

From the table II above, it was revealed that (84.2%) of the

responses were positive, while (15.8%) negative. Therefore,

hypothesis (Hi) of the activities of the Nigerian Stock

Exchange have had a significant impact on business performance

in the Nigerian economy was accepted.

DISCUSSION OF FINDINGS

The first statement which says ‘the Nigerian Stock Exchange

operation impact heavily on performances of business

organization’ was supported by 157 (78.5%) respondents while

43 (21.5%) respondents were of negative disposition. The is

because most of them do believe that the NSE helps business

organization to review, and address the right of shareholders

and respond to investors and brokers complaints, concerning

68

earnings report, individual distribution etc, hence its

importance to the business organization.

The second statement which says, ‘the going concern status of

any business is dependent on its relationship agreed’ was

supported by 132 (66%) respondents while 68 (34%) respondents

were of negative disposition. This is because most of them

believe that through its roles and regulation and operations

codes and practices, it is designed to be safe-guarded from

shady practices and dealings in a quoted security.

The third statement which says, ‘the Nigerian Stock Exchange

serves its financial intermediation role effectively’ was

supported by 177(89.5%) respondents while 21(10.5%)

respondents were of negative disposition. This is because most

of them believe that, the NSE runs the trading floors of the

exchange and ensuring that they are conducted according to

exchange procedures, so its role is effective on the business

performance in the Nigerian economy.

69

The forth statement which says, ‘the Nigerian Stock Exchange

has made meaningful effort on the various ways of creating

activities,’ was supported by 185 (92.5%) respondents while

15(7.5%) respondents were of negative disposition. This is

because most of them do believe that the NSE creates enormous

capital required to operate the huge individual and commercial

corporation of today that can be raised in such large amount

and at such competitive role that no institution in a

capitalist system can match.

The fifth statement which says ‘Nigerian stock exchange has

helped and contributed a lot to the Nigerian Business sector,’

was supported by 189 (94.5%) respondent while 11 (5.5%)

respondents were of negative disposition. This is because most

of them believe that the NSE acts as an instrument for

measuring and ascertaining the symptoms of an impending

economic boom or recession before it actually occurs.

To test the second hypothesis which says that, ‘the business

culture of the average Nigerian entrepreneur doesn’t have any

70

relationship with its dealing with the exchange OR the

business culture of the average Nigerian entrepreneur has a

relationship with his dealing with the exchange’ the data

collected from the five statements on the on the questionnaire

were computed with the frequency and presented in the Table

III below:

S/N STATEMENTS AGREED %DISAGREED %

6.The Nigerian Stock Exchange is

well patronized by private

business organization.

163 81.5 37 18.5

7.Most business organization find

the listing requirement of the

Nigerian Stock Exchange very

harsh.

84 54 92 46

8.The Banking sector would be

more useful than the stock

exchange to enhance business

performance.

84 42 116 58

9.Business performance can be

adequately measured by company

share prices.

140 70 60 30

71

10.The enabling laws and policies

that regulate the operation of

the Nigerian Stock Exchange

protest against small business

organization.

136 68 64 32

TOTAL 631 63.1 369 36.9

FINDINGS

From the Table III above, it was revealed that (63.1%) of the

responses were positive, while (36.9%) negative. Therefore,

hypothesis (Hi) of 2 which says ‘the business culture of the

average Nigerian entrepreneur has a relationship with his

dealing with the exchange’, was accepted.

DISCUSSION OF FINDINGS

The sixth statement which says, ‘the Nigerian stock exchange

is well patronized by private business organization was

supported by 163(81.5%) respondents while 37(18.5%)

72

respondents of negative disposition. This is because most of

them do believe that NSE provides a form for buying and

selling of stock and share for granting quotation for new

ones.

The seventh statement which says, ‘most business organizations

find the listing requirement of the Nigerian Stock Exchange

very harsh,’ was supported by 108(54%) respondents while

92(46%) respondents were of negative disposition. This is

because most of them do believe that before the NSE will list

a company to trade with the stock exchange, it must meet all

the requirements which some companies considers harsh as they

fall below the standard.

The eighth statement which says, ‘the banking sector would be

more useful than the stock exchange to enhance business

performance’, was supported by 84(42%) respondents while

116(58%) respondents were negative disposition. This is

because most of them do believe that banking sector gives

higher rates on interest to those who collect loan, which

73

makes it difficult to pay back with its principal while the

NSE helps business performance by helping them to sell shares

to increase their capital base.

The ninth statement which says, ‘business performance can be

adequately measured by company share prices’, was supported by

140(70%) respondents while 60(30%) respondents were of

negative disposition. This is because most of them believe

that the NSE makes provision of opportunities for raising new

shares capital by quoted companies.

The tenth statement while says, ‘the enabling laws and

policies that regulate the operation of the Nigerian Stock

Exchange protest against small business organization’, was

supported by 136(68%) respondents while 64(32%) respondents

were of negative disposition. This is because most of them

believe that NSE supervises listed forms compliance with the

listing requirements are assured that required reports are

obtained as at when due.

74

To test the third hypothesis which says that ‘the government

does not have any role in ensuring the exchange impact on

business performance and business activities OR the government

has a role to play in ensuring the exchange impact on business

performance and business activities’.

The data collected from the four statements on the

questionnaire were computed with frequency and presented in

Table IV below:

S/N STATEMENTS AGREED % DISAGREED % 11 Business performance is better

enhanced through the money

market than the capital market.

43

21.5 157 78.5

12 The Nigerian capital market has

played its role of capital

formation and allocation

efficiently.

177 88.5 23 11.5

13 Other metric exits to

adequately measure business

162 81 38 19

75

performance.

14 Education can enlighten

investors on the various

inherent advantages of the

stock exchange.

191 95.5 9 4.5

TOTAL 573 71.6 227 28.4

FINDINGS

From the Table III above, it was revealed that (71.6%) of the

responses were positive, while (28.4%) negative. Therefore,

hypothesis (Hi) of 3 which says, the government has a role to

play in ensuring the exchange impact on business performance

and business activities was accepted.

DISCUSSION OF FINDINGS

The eleventh statement which says that, ‘business performance

is better enhance through the capital market’, was supported

by 43(21.5%) respondents while 157(78.5%) respondents were of

negative disposition. This is because most of them believe

76

that the NSE facilitates dealings in government securities

through the capital market.

The twelfth statement which says that the Nigerian Capital

market has played its role of capital formation and allocation

efficiently, was supported by 177 (88.5%) respondent while 23

(11.5%) respondent were of negative disposition. This is

because most of them believe that through the Nigerian Capital

Market the NSE promotes mobilization of development finances

for the government.

The thirteenth statement which says, other metric exists to

adequately measure business performance, was supported by 162

(81%) respondents while 38 (19%) respondent were of negative

disposition. This is because most of them believe that, other

metric like ratio, market capitalization, government stock and

value of transactions are important capital market variables

that are capable of influencing economic growth to adequately

measure business performance helps NSE in the creation of

enormous capital, required to operate the huge individual and

77

commercial corporations of today, can be raised in such large

amount and at such competitive role that, no institution in a

capitalist system can match.

The fourteenth statement which says, Education can enlighten

investors on the various inherent advantages of the stock

exchange, was supported by 191 (95.5%) respondent while

9(4.5%) respondents were of negative disposition. This is

because most of them believe that through education, the NSE

mobilizes capital for pursuance of economic expansion and for

creation of goods and service for the satisfaction and well

being of the general citizenry.

To test the fourth hypothesis which says that, “The current

economic conditions do not have any effect on the operations

of the stock exchange OR The current economic conditions have

an effect on the operations of the stock exchange”. The data

collected from the four statements on the questionnaire were

computed with frequency and presented in Table V below:

78

S/N STATEMENTS AGREED % DISAGREED %15 The computerization of the

Nigerian Stock Exchange has help

it carry out its operation more

effectively.

200 100 - -

16 Business organization largely

patronizes the bonds and

derivatives markets of the

Nigeria capital market.

158 79 42 21

17 Mobilizing capital funds from

the Nigerian Capital Market is

an exercise in nullity

71 35.5 129

64.5

18 The manufacturing sector has

benefited most from the 185

15 7.5

79

operation of the Nigerian Stock

Exchange.

92.5

TOTAL 614

76.8

186 23.2

FINDINGS

From the table V above, it was revealed that (76.8%) of the

responses were positive, while (23.3%) negative. Therefore,

hypothesis (H1) of 4 which says, “the current economic

conditions have effect on the operations of the stock

exchange”, was accepted.

DISCUSSION OF FUNDINGS

The fifteenth statement which says that, ‘The computerization

of the Nigerian Stock Exchange has helped it carry out its

operation more effectively,’ was supported by 200 (100%)

respondents while none were of negative disposition. This is

because most of them believe that, NSE provides appropriate

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machinery example, computer, to facilitate offering of stock

and shares to the general public.

The sixteenth statement which says that, Business Organization

largely patronizes the bonds and derivatives market of the

Nigerian Capital Market, was supported by 158 (79%)

respondents while 42 (21%) respondent were of negative

disposition. This is because most of them believe that, the

Nigeria Capital Market act as a medium for broadening

ownership base of business especially private companies.

The seventeenth statement which says that, Mobilizing Capital

Funds from the Nigerian capital Market is an exercise in

nullity,’ was supported by 71 (35.5%) respondents while 129

(64.5%) respondents were of negative disposition. This is

because most of them believe that, the Nigerian Capital Market

efficiently allocates the available capital funds to the

diverse users in the economy.

81

The eighteenth statement which says that, The manufacturing

sector has benefited most from the operations of the Nigerian

Stock Exchange, ‘was supported by 185 (92.2%) respondents

while 15 (7.5%) respondents were of negative disposition. This

is because most of them believe that, the NSE mobilizes

capital for pursuance of economic expansion and for creation

of goods and services for the satisfaction and well being of

the general citizenry.

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CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 SUMMARY

In measuring the impact of the Nigerian Stock Exchange on

Business performance, this research work developed four (4)

hypotheses while four (4) statements were raised on the last

two hypotheses. Under each hypothesis, two hypotheses were

raised H0 and H1. The (H1) hypothesis was accepted on all four

hypotheses, although not all agree with all the statements

while (H0) was accepted.

Essentially, two hundred (200) questionnaires were distributed

to all staff of Flour Mills of Nigeria Plc. A percentage

method was used in collating the data or responses of the

respondents.

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It was observed that, the Nigerian Stock Exchange utilizes its

functions efficiently on Business Organization to improve its

performance in the Nigerian Economy.

5.2 CONCLUSION

The study reveals that the capital market impact on economic

growth via market capitalization, value of transaction and

total listing of equity and government stock. As it was

observed, market capitalization, government stock and value of

transactions are capable o f influencing economic growth.

Hence, the capital market remain one of the mainstream in

every economy that has the power to influence or impact

economic growth. Therefore, the organized private sector is to

invest in it.

The government is therefore advised to put up measures to stem

up investors’ confidence and activities in the market and more

foreign investors should be encouraged to participate in the

market for improvement in the declining market capitalization,

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so that, it could contribute significantly to the Nigerian

economic growth.

5.3 RECOMMENDATIONS

In order for the Nigerian Stock Exchange to be the pivotal

force of business performance in the Nigeria economic growth

and development, the following recommendations are put

forward:

First, there should be improvement in the declining market

capitalization by encouraging more foreign investors to

participate in the market, maintain state of the art

technology like automated trading and settlement practice,

electronic fund clearance and eliminate physical transfer of

shares.

There is also need to restore confidence to the market by

regulatory authorities through ensuring transparency and fair

trading transaction and dealing in the stock exchange. It must

85

also address the reported case of abuse and sharing practices

by some companies in the market.

Since the total listing is significantly low, there should be

increase in the total member listed companies to ensure stable

macroeconomic environment in order to encourage foreign

Multinational Companies (MNCs) or their subsidiaries to be

listed on the Nigerian Stock Exchange, relax the listing

requirements to the first tier market and ensure tax

rationalization in the capital market to encourage quotation

and public interest in shareholdings.

Lastly, to boost the value of transactions in the Nigerian

Capital Market, there is need for availability of more

investment instruments such as derivatives, convertibles,

future and swaps options in the market.

Given the present political dispensation, all the tiers of

government should be encouraged to fund their realistic

developmental programme through the capital market via the

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Nigerian Stock Exchange. This will serve as a leeway to

freeing the resources that may be used in other sphere of the

economy

87

REFERENCES

Business Day Newspaper (2011).

Ebini .O.E. (2005): The Impact of Capital Market in

Financing Small and Medium Scale Enterprise Development

in Nigeria.

Flour Mills of Nigeria Plc. (2009): Annual Report and

Accounts.

Golden Penny Special 50th Anniversary Edition

Guardian Newspaper (2011).

Nigerian Stock Exchange Fact Book (1977- 1996)

Nwankwo .G.D (1997): Money and Capital Market in Nigeria

today. (University of

Lagos Press: pages 44-47).

88

Nwenko .G.O (1992): The Nigerian Financial System. (Macmillan

Publishers: page 141-144).

Oladejo .K (2004): The role of Stock Exchange in the Capital

Market. (A paper presented at a workshop organized by

SEC.

Oni .S. (1998): Relevance of the Nigerian Stock Exchange in

the economy. (A lecture presented at the Accounting

Student Association Department Conference, University of

Lagos).

APPENDIX ONE

QUESTIONNAIRE

Department of Business Education,

Faculty of Art and Social Science,

University of Lagos,

Akoka, Lagos.

Dear Respondent,

THE IMPACT OF THE NIGERIAN STOCK EXCHANGE ON BUSINESS

89

PERFORMANCE

I am a final year student of the above named department,

writing project as part of the requirement for the award of

B.Sc. Ed degree.

The title of the project is " The impact of the Nigeria Stock

Exchange on Business Performance".

While I am counting on your unbiased response, be rest assured

that any information given will be strictly confidential.

Yours Faithfully,

Akpaghoro Ethel .O.

90

QUESTIONNAIRE

THE IMPACT OF THE NIGERIAN STOCK EXCHANGE ON BUSINESS

PERFORMANCE. (A CASE STUDY OF FLOUR MILLS NIGERIA PLC).

INSTRUCTION:

(1) Please respond to all section in this questionnaire.

(2) Do not hesitate to ask for further explanation as may be

required.

(3) Respond to each category by ticking against your answer.

SECTION A

(i) SEX: Male Female

(ii) AGE: 20-29yrs 30-39yrs

40-49yrs 50 and above

(iii) MARITAL STATUS: Single Married

(iv) EDUCATIONAL QUALIFICATION: OND

B.SC/B.ED/BA/HND MSC/MA/PED91

Professional Qualification

(v) WORKING EXPERIENCE: Under a year 1-5yrs

6-10yrs 11-15yrs 16 and above

SECTION B

INSTRUCTION: Please tick the appropriate column which

correctly expresses your view about each of the statement

below

KEYS: A- Agreed, UN- Undecided, D- Disagree

S/N A UD D

(1)

The Nigerian Stock Exchange is well patronizes by

private business Organization.

(2) The Nigerian Stock Exchange operation impact

heavily on performance of business organization (3) The going concern status of any business is

dependent on its

relationship agreed.(4) Most business organization finds the listing

requirement of

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the Nigerian Stock Exchange very harsh.

(5) The computerization of the Nigerian Stock Exchange

has helped it carry out is operation effectively.(6) Business organization largely patronizes the bonds

and derivatives market of the Nigerian Capital

Market.

(7) Business performance is better enhanced through the

money market than the capital market(8) The Nigerian Stock Exchange serves its financial

intermediation role effectively.

(9) The banking sector would be more useful than the

stock exchange to enhance business performance.

(10) The Nigerian Capital Market has played its role of

capital formation and allocation efficiently.

(11) Business performance can be adequately measured by

company share prices.

(12) Other metric exists to adequately measure business

performance.

(13) The enabling laws and policies that regulate the

operation of the Nigerian Stock Exchange protest

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against small business organization.

(14) Mobilizing capital funds from the Nigerian Capital

Market is

an exercise in nullity.

(15) Education can enlighten investors on the various

inherent advantages of the stock exchange.

(16) The Nigerian Stock Exchange has made meaningful

effort on the various ways creating activities.

(17) Nigerian Stock Exchange has helped and contributed

a lot to the Nigerian Business sector.

(18) The manufacturing sector has benefited most from

the operations of the Nigerian Stock Exchange.

94