THE ROLE OF STOCK MARKET IN THE GROWTH OF THE NIGERIAN ECONOMY

THE ROLE OF STOCK MARKET IN THE GROWTH OF THE NIGERIAN ECONOMY

CHAPTER ONE

1.1 BACKGROUND TO THE STUDY

Primarily, a stock market is the place where companies can raise money to make their businesses bigger and better. Companies raise money by selling shares or stocks to investors. At the same time, the stock market gives investors an opportunity to invest in these companies and benefit from any profit they can make.

A stock market can also be called a capital or securities market as it encompasses the stock exchange, the branches, and the stockbrokers. An organized securities market requires a securities exchange, a securities commission or other regulatory agency, and intermediaries such as dealers, brokers, securities
analysts, etc. Virtually all costs are borne by those who benefit. The intermediaries receive their fees from the issuers or investors to whom they provide a service. The stock market is usually funded through fees paid by investors and issuers; even the expenses of the securities commission may be partially paid
for by registration fees rather than being a major burden on the government budget. Companies which go public are subject to continuous cost of providing financial information, transferring shares, paying dividends, and other aspects of shareholder relations.
The stock market is the aspect of the financial system which mobilizes and channels long term funds for economic growth. The stock market embraces
trading in both new issues (primary) and old issues of stocks (secondary). Securities are primarily of 2 types: debt and equity.
Debt securities include federal government development stock (GDS), industrial loans, preference stocks, bonds etc, while equity securities mainly concern
ordinary stocks which impose higher liabilities on the holders. Portfolio investment in the capital market deals with an institutional arrangement involving
the Securities and Exchange Commission (SEC), the Nigerian Stock Exchange (NSE), the operators, and the investors.

THE ROLE OF STOCK MARKET IN THE GROWTH OF THE NIGERIAN ECONOMY