Chapter One

INTRODUCTION

1.1     Background of the Study

          Before I proceed, I will like to explain what stock exchange is all about. Stock exchange is a specialized place or market that is meant for the buying and selling of securities and the securities are stocks and shares, which shows ownership of interest in debentures, business and government bonds.

          Far back late fifties when it became so obvious that Nigerians were going to be independent as a country, including the commercial growth and other activities then. Some important personalities together with some foreigners particularly those British who were managing British interest, start knowing the important for the establishment of an institution to be used as an avenue for growth, mobilization and the development of local capital formation in Nigeria.

          Recently, all the growth needed by those foreign investors were obtained from local banks and every little attention was paid to make sure that local market obtained it long term financing, this desire for the central market in the appointment by the Federal Minister for Industry in May, 1958, of a committee to advise federal government on ways and means of setting up a stock market in a country.

          Really, the stock exchange started under the act of 1961 and came into operation from Small Office provided by the Central Bank of Nigeria for business growth and national economy at large.

1.2     Statement of the Problems

          The basic problems facing the stock exchange in Nigeria is high level of illiteracy among the Nigeria, especially at rural areas of the country and other developing countries of the world.

          The military people didn’t know the importance of the roles involved in the market, hence they left it under the care of some greedy individuals.

          Secondly, the local markets, unlike urban areas like Abuja, Port-Harcourt, Lagos, etc. makes it possible for the rural dwellers who were also having the intension of investing but feels he or she is not making an opportunity around them, hence it reduces the development of the market.

          Political instability is also a setback in market, since business or investment can only take place in an environment that is conducive for every individual. For example, if we draw our minds back, we can remember what happened in June 12, when it was still General I. B. Babangida’s regime, in fact he created some set of political problems, because of the instability in politics. Many persons or organizations winded up their investment or business because of this crisis.

          These factors explained above in fact rendered the stock exchange as an impact in real economic sector not to perform it uses in the role and development of economy.

1.3     Objective of the Study

          The main objectives of the study are:

1.           It helps in the economic development and growth of the nations, both in underdeveloped, developing and developed countries of the world.

2.           From the set of investment and capital movement in Nigeria, the market have tried in this much, but its important roles, development must be seen to be spread far and wide of the country for security, development.

3.           For the stock exchange to be able to carry out these functions, they must be present throughout Nigeria, but it is unfortunate that Nigeria have experience in it security exchange development in the urban centers to the total neglect of the rural areas.

4.           The role of security market economic development is basically the same in the states of the nation.

5.           The most popular difference that may exist arises from both geographical and physical location and background of the people. This should be based on the premises so that some explanations would be made to some specific problems.

1.4     Significance of Study

The significance of the study is to assist in developing a strong base of the domestic long term and short term saving. During this period, economic recessing and especially this that we are witnessing a relaxed foreign shareholder of existing companies in other to admit further foreign capital in the economy.

          It also increases the achievement of the Nigerian stock exchange together with socio economic aspiration of the country.

          It is a fact that most Nigerians don’t know the operation of the stock exchange and this therefore, makes the study important because the researcher’s interest to make sure the research on the impact of stock exchange on the real economic sector is achieved.

1.5     Scope of the Study

          The researcher on the impact of stock exchange on the economic sector, which involves the growth of the economic and development has tried to make sure this work is accomplished.

          Stock exchange is market for buy and selling of second hand securities. The stock exchange serves as a medium for the dissemination of information to industrialist, investors.

          Stock exchange assists government in implementing its monetary policies, by making market available for the sale of gilt-edged (government securities). Stock exchange assist government in raising money, by ensuring that its members exhibit highest standard of behavior and that they are persons of good reputation, also the stock exchange protects investors from any form of fraud.

          And the fact since its establishment in the year 1960 under name Lagos stock exchange as at then, which has successfully been in operation up till date while others have gone into liquidation it has attached some importance to our life. And for the success of their research work, the researcher has gone far and wide to get fact on the impact of stock exchange on real economic sector, as a place meant for the buying of securities e.g. bonds, shares, etc. The researcher was so lucky to move around after using Benue as a case study in other to obtain relevant information on the impact of our economic growth.

1.6     Research Questions

The following research questions will guide the study:

1.                 To what level can the impact of stock exchange on the real economic sector in Benue State improve the economic growth and development?

2.                 How the impact of stock exchange on the real economic sector affects the country?

3.                 In what ways can the impact of stock exchange on the real economic sector improve the standard of living of the people?

1.7     Operational Definition of Terms

          The definition of terms below attracts more explanation and as such is been defined by the researcher.

i.                   Stock Exchange: Stock exchange is defined as specialized market for the buying and selling of securities e.g. bonds, shares, debentures.

ii.                 A Market: A market is a place where goods and service are bought and sold in a given place.

iii.              Bull: Bulls is the name given to speculators who buy securities at lower price with the intension of reselling them at higher prices before the payment of the securities is due.

iv.              Bears: The bear specializes in the sale of securities which he does not possess.

v.                 Stags: This is a term used to refer to a speculative who deals only in new shares and stocks in large quantity with speculation that the price of the shares will rise to a premium above the offer price before the date he is supposed to pay for them.

vi.              Stock Brokers: These are dealers in shares and stocks who act as agents on behalf of members of the public who want to buy or sell securities. The stockbroker looks for buyers for members of the public who want to sell securities and sellers for those wishing to buy securities. They are paid commission known as brokerage for their services.