The capital market is not really a market in the traditional sense but a process or a network of the institutions that perform functions that are described as capital market activities. It is a process through which the long term finds are procured under the intermediation of banks and non-banks financial institutions. The financial products sourced from the capital market includes ordinary share capital which covers new issues/rights issues, preference capital, bonds and debentures, and other long term securities.
The performance of the Nigeria capital market has over the years been more of a fluctuating experience, which though is not uncommon with events in the operation of the capital market worldwide. The market is also generally referred to as the secondary market where seasoned securities are traded, very much linked to the secondary market is the primary market which is responsible for the placement of new issues contributed directly towards increasing loanable finds and allocating these between productive economic units. The stock market is relied upon on a barometer for measuring changes in general economic activities using a stock market index.
Quoted securities have the advantage of relatively, high liquidity as they can be bought and sold through the exchange at relatively short notice. The stock market is usually accessible to all categories of livestock small or big, government, institutions and individuals. The role of the stock market is a direct function of the extent of usage and of its inter-relationship with other sector of the economy.
The opening of the Lagos stock exchange in 1960 marked the birth of the Nigeria capital market. The reasons for promoting active capital market in developing countries includes:-
- The mobilization of savings from numerous economic units for economic growth and development.
- The encouragement of a more efficient allocation of new investment through the pricing mechanism.
- The provision of an alternative source of find other than taxation for government.
- The breading of ownership base or assets and the creation of a healthy private sector.
- The provision of sufficient liquidity for any investor, group of investors.
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