An Evaluation of Regulatory Bodies in Developing a Viable and Sustainable Capital Market (a Case Study of Nigeria Stock Exchange)

An Evaluation of Regulatory Bodies in Developing a Viable and Sustainable Capital Market (a Case Study of Nigeria Stock Exchange)


An Evaluation of Regulatory Bodies in Developing a Viable and Sustainable Capital Market (a Case Study of Nigeria Stock Exchange)


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The Exchange started operation in 1960 with 19 securities listed for trading. Today, April 2008, there are 217 securities listed on the Exchange. The total market capitalization as at December 2008 stood at N9.5 trillion about ($80 billion). All listings are included in the only index, the Nigerian Stock Exchange All share index. The Exchange maintains an all share index formulated on 3rd January 1984. It opened at 100. Only common stocks (ordinary shares) are included in the computation of the index is value relative and is computed daily. As at December 2008 the all share index of NSE stood above 54,000.

Transactions on the Exchange are regulated by the Nigerian Stock Exchange, as a self regulatory organization and the Securities and Exchange Commission (SEC). Recent laws given by SEC to guide the market is that any public offer should be 80% underwritten and the absorption of funds for over subscribed public offers should not exceed 25%. About three million individual investors and a host of institutional investors use the facilities of the Stock Exchange.
CLEARING, DELIVERY & SETTLEMENT: Clearing, Settlement and Delivery of transaction on the Exchange are done electronically by the central securities clearing system limited (CSCS) a subsidiary of the stock exchange. The CSCS Limited (the clearing house) was incorporated in 1992 as part of the effort to make the Nigeria stock market more efficient and investor-friendly. Apart from clearing, settlement and delivery the CSCS offered custodian services.

STOCK MARKET REGISLATIONS: Transaction in the Stock market are guided by the following legislations among others:

  1. Investment and Securities Decree No. 45 1999
  2. Companies and Allied Matters Decree 1990
  3. Nigerian Investment Promotion Commission Decree 1995

INTERNATIONALIZATION OF THE STOCK MARKET: Following the deregulation of the capital market in 1993, the Federal Government in 1995 internationalized the capital market, with the abrogation of laws that constrained foreign participation in the Nigerian capital market.

Consequent upon the abrogation of the Exchange Control Act 1962 and the Nigeria Enterprise Promotion Decree 1989 foreigners can now participate in the Nigerian capital market both as operators and investors. Also there are no limits any more to the percentage of foreign holding in any company registered in the country except for the banks which the Central Bank has put a peg of maximum of 10%. Ahead of this development, the Exchange has since June 2, 1987 linked up with the Reuters Electronic Contributor System. The online global dissemination of stock market information – trading statistics, all share index, company investment ratios and company news (financial statement and corporate action).

In November, 1996 the Exchange launched its internet system (CAPNET) as one of the infrastructural support for meeting the challenges of internationalization and achieving an enhanced service delivery. The Internet system facilities communication among local and international participants in the market, as subscribers to the system include Stockbrokers, Quoted companies, Issuing houses etc, who now use the facility to receive and send e-mail, globally and locally. But more importantly they can through this medium access key market information – trading statistic (current and historical) corporate trading results.

A general overview of the market as presented by the Director General, NSE, Prof. Ndi Okereke Onyilike at the business luncheon / public lecture organized by Island Club, Lagos on December 6th 2007 is summarized below:

  1. 1946 – First Bond issued by the colonial administration
  2. 1960 – Lagos Stock Exchanged established
  3. 1977 – Indigenization law enacted – boosted number of listed companies
  4. 1979 – The Securities and Exchange Commission was established
  5. 1984 – NSE all share Index established
  6. 1992 – The Central Securities Clearing system was established
  7. 1999 – The Automated Trading System commenced
  8. 2000 – The index crossed the 9,000 mark
  9. 2006 – Over N1.40 trillion was raised from the Nigerian capital market

By December 2007 the NSE had approved in excess of N1.9 trillion in new issues for the year. The NSE is an affiliate member of the federation of International Stock Exchange (FIBV). It is also an observer at meetings of International Organization of Securities Commission (IOSCO) and a foundation member of the African Stock Exchange Association (ASEA).




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